FIFTH CIRCUIT SERVES RESTAURANT EMPLOYERS A SECOND CHANCE FOR INJUNCTION AGAINST DOL’S NEW “TIP CREDIT” RULE

 

In a win for restaurant employers using “tip credit” to pay employees, the U.S. Court of Appeals for the Fifth Circuit ruled that a Texas District Court erroneously denied a preliminary injunction against enforcement of a rule that causes “irreparable harm” to employers. In the 2-1 opinion, the Fifth Circuit panel reversed the decision against the Restaurant Law Center and Texas Restaurant Association in the groups’ action against the U.S. Department of Labor (DOL), and sent the matter back to the lower court for further proceedings consistent with its ruling.

Generally, employers are required to pay nonexempt workers at least the minimum wage of $7.25 per hour. However, the Fair Labor Standards Act (FLSA) allows an employer to satisfy a portion of its minimum wage obligation to a “tipped employee” by allocating a partial credit, known as a “tip credit,” toward the minimum wage based on the amount of tips an employee receives. This allows the employer to pay a direct cash wage as low as $2.13 per hour, provided they make up the difference with tips earned by and paid to the employee. Tip credit is used extensively in the restaurant and hospitality industries to manage high up-front labor costs. However, proper compliance with tip credit can be complex and mistakes are common.  

In 2021, the Biden Administration’s DOL introduced a new rule that further complicated the use of the tip credit method for employers. Under the “80/20” and “continuous 30-minute” provisions, if an employee spends more than 20% of their time or 30 continuous minutes doing non-tip-producing work, the employer cannot utilize tip credit and is required to pay at least the full minimum wage. DOL makes clear its hostility to the tip credit method of payment and its intent to discourage its use and vigorously investigate any allegations of noncompliance.

In February 2022, the U.S. District Court for the Western District of Texas denied a motion for a preliminary injunction filed by the Restaurant Law Center and Texas Restaurant Association. In its ruling, the District Court did not reach the merits of their claims against the rule, but instead held that Plaintiffs “had failed to show they were irreparably harmed by the costs of complying with the new rule” and found the additional costs of time monitoring and recordkeeping were “purely speculative.” “overstated,” and “unspecific.”

The Fifth Circuit panel majority held that the District Court ignored well-established precedent that “non-recoverable compliance costs for ongoing managements costs to ensure compliance with the 80/20 and continuous 30-minute provisions are usually irreparable harm.” The opinion noted that Plaintiffs’ witnesses testified that managers must incur an additional 8-10 hours of time a week to comply with the rule, and the DOL conceded that compliance costs nationwide would be $177 million annually. 

The majority strongly described the DOL’s arguments that the new rule did not impose new recordkeeping requirements on employers as “meritless.” The court stated:

To claim the tip credit, employers must “ensure that tipped employees are not spending more than 20 percent of their time on directly supporting work, or more than 30 minutes continuously performing such duties.” We cannot fathom how an employer could honor these specific constraints without recording employee time. What if an employer is investigated by the Department or sued by an employee for wrongly claiming the tip credit? Without time records, how could an employer defend itself?

***

In the same vein, the Department also claims that “employers need not engage in ‘minute to minute’ tracking of an employee’s time in order to ensure that they qualify for the tip credit.” No explanation is given (nor can we imagine one) why an employer would not have to track employee minutes to comply with a rule premised on the exact number of consecutive minutes an employee works. The Department also assures us that a “30-minute uninterrupted block of time . . . can be readily distinguished from the work that surrounds it. Maybe so, but that does not remove an employer’s need to account for blocks of employee time, especially if an employer is accused of violating the rule.

Finding that the restaurant Plaintiffs met their burden of showing irreparable harm, the case will return to the the District Court to determine if the Plaintiffs can meet the remaining tests for a preliminary injunction and succeed on the merits of the case.

In October 2022 while the appeal was pending, the case was reassigned from Judge Robert Pitman to Judge David Ezra. Prior to the Fifth Circuit ruling, both the DOL and the restaurant Plaintiffs filed motions for summary judgment which have yet to be ruled upon.

Please contact Mark Fijman or any member of Phelps’ Labor and Employment team if you have questions or need compliance advice or guidance on labor and employment issues in the restaurant or hospitality industry.

“TIP CREDIT” IS A DOUBLE-EDGED KNIFE FOR RESTAURANT EMPLOYERS

In the restaurant business, using the “tip credit” method of paying employees under the Fair Labor Standards Act (“FLSA”) is analogous to a kitchen worker chopping vegetables with an extremely sharp chef’s knife.  If handled properly, it’s an extremely useful tool for restaurants to manage high up-front labor costs.  If handled carelessly, it can result in expensive litigation and high-dollar liability. 

A national steakhouse chain recently agreed to pay $995,000 as part of a settlement to resolve claims it failed to properly pay servers and other employees who received tips. For smaller businesses with less resources, mistakes with tip credit can result in catastrophic liability.  Likewise, the continued use of tip credit by the restaurant industry and other hospitality businesses is under attack by the current U.S. Department of Labor.

The Basics

In most instances, employers are required to pay nonexempt workers at least the minimum wage of $7.25 per hour. However, the FLSA allows an employer to satisfy a portion of its minimum wage obligation to a “tipped employee” by taking a partial credit, known as a “tip credit,” toward the minimum wage based on the amount of tips an employee receives. 29 U.S.C. 203(m)(2)(A). This allows paying a subminimum wage, as low as $2.13 per hour, provided that the employer makes up the difference with tips earned by and paid to the employee. Under the FLSA a “tipped employee” is defined as “any employee engaged in an occupation in which he customarily and regularly receives more than $30 a month in tips.”

Compliance with tip credit can be complex and mistakes are common. Failure to abide by the extremely strict rules can invalidate the employer’s entitlement to the tip credit and make the restaurant liable for unpaid wage claims, liquidated damages and attorneys’ fees.  The basic requirements for restaurants to use the tip credit include:

•    The employer must notify workers in advance that: (a) the employer intends to utilize the tip credit and treat tips as satisfying part of the employer’s minimum wage obligations and (b) if the amount of tips plus hourly wages does not match or exceed the applicable minimum wage, the employer must make up the difference. The FLSA does not require this notice to be in writing, but it is a best practice to do so and have the employee agree by signing a form.

• Tipped employees must retain all tips earned by that employee. The restaurant or managers cannot receive any portion of the tips.

• Only employees who customarily receive tips, such as servers, may be paid utilizing the tip credit. Typically, back-of-house workers, such as cooks and dishwashers, cannot be paid using the tip credit.

• The exception to restaurant employees retaining all tips is if there is a valid tip pooling arrangement where all tips are combined and shared among all tipped employees according to a pre-determined formula. A tip pool will be considered invalid if non-eligible workers or managers are allowed to participate.

Hostility to Tip Credit from the U.S. Department of Labor

Compliance with the tip credit has recently become even more problematic. The Biden Administration’s DOL has reinstated the so-called “80/20” rule. Under the reinstated policy, when tipped employees spend at least 20% of their workweek performing duties that support their occupation but do not directly produce tips, their employers are required to pay them a direct cash wage of at least $7.25/hour for that work, instead of a direct cash wage of $2.13/hour, with the remainder made up by tips. Examples of work that is not tip producing might include a server preparing food for a salad bar or cleaning the kitchen or bathroom or a bartender cleaning the dining room. 

The current DOL has made clear its hostility to the tip credit method of payment and its intent to discourage its use, as well as its intent to vigorously investigate any allegations of noncompliance. For this reason, restaurants should make sure they are meeting all of the requirements and potentially consult with counsel on alternative payment methods.

Mandatory Service Charge v. Tip Credit?

A recent decision by the U.S. Court of Appeals for the Eleventh Circuit illustrates how some restaurants may be moving away from using the tip credit method versus a mandatory customer service charge that would go toward paying employee wages and potentially avoid the headaches of tip credit.  

In Compere v. Nusret Miami, an upscale Miami steakhouse added a mandatory 18% "service charge" to customers' bills. It directly collected these payments and redistributed them to certain employees on a pro rata basis to cover the restaurant’s minimum and overtime wage obligations. Unlike tips, the service charge payments never went directly to the wait staff. Employees sued the restaurant, claiming the service charge was in fact, actually a tip.  

The Eleventh Circuit ruled in the restaurant’s favor, finding that because it was a mandatory charge, unaffected by the customer’s discretion.  However, using this method also carries its own complicated requirements and wage issues, and while common in other countries, American restaurant customers do not generally favor mandatory service charges.

Please contact Mark Fijman  if you have questions or need compliance advice or guidance as to labor and employment issues in the restaurant or hospitality industry. 

Avoid These Employment Law “Kitchen Fires” to Protect Your Restaurant and Your Employees

 

With restaurants struggling to return to normal after more than two years of COVID-19 shutdowns and restrictions and employee shortages, the last thing any restaurant owner wants to deal with is a costly lawsuit brought by a either a current or former employee, or potentially worse, by the Equal employment Opportunity Commission (EEOC) or the U.S. Department of Labor.

In this series of articles, first published  as Phelps Dunbar Employment Law Insights, I outline potential employment law “kitchen fires” that restaurant owners should be aware of, and what steps they need to take to avoid lawsuits and the expense and business disruption they can bring.

According to the EEOC, the restaurant industry is the single largest source of sexual harassment claims in the U.S. And it accounts for more than one-third of all sexual harassment claims from women. Recent surveys show 90% of women and 70% of men working in restaurants have experienced some form of sexual harassment from either managers, co-workers or customers. On a regular basis, well-known restaurant companies and celebrity chefs are being hit with sexual harassment claims as well as high-dollar judgments. Part One of the series covers the laws against sexual harassment in the workplace, how to prevent it in a restaurant environment, and how proper policies and training can protect against liability.

Part Two looks at restaurant liability under the federal Fair Labor Standards Act (FLSA). This is the law that requires employers to pay at least minimum wage and time and a half for all hours worked over 40 in the workweek. The FLSA can be a complicated and confusing law, and it is common for employers to make mistakes. Lack of compliance in a restaurant setting with multiple employees can lead to collective actions, which could potentially bankrupt a business. Part Two also looks at recent changes to the “tip credit” method of paying employees, misclassifying employees as exempt “managers,” liability for employees “working off the clock,” child labor laws, and what to do when faced with a Department of Labor investigation.

Part Three examines the federal statutes against employment discrimination on the basis of race, national origin, sex and age, the risks of liability for “English only” policies, and the legal requirement for restaurants to make reasonable accommodations on the basis of religion and disability.

Part Four looks at other easily overlooked employment law kitchen fires, such as a restaurant’s failure to comply with the federal immigration law by correctly completing Form I-9’s for each employee, the potential liability in conducting background checks on potential employees, and how failing to openly display required employment law posters in your restaurant can be a costly and strategic mistake.

In addition to avoiding expensive legal problems, compliance with relevant employment laws might also help to address the restaurant headache of high employee turnover. This series addresses compliance with federal law, but many states have their own varying employment standards. Where appropriate, restaurants should engage counsel for assistance in complying with federal, state and local laws.

Please contact Mark Fijman or any member of Phelps’ Labor and Employment team if you have questions or need compliance advice or guidance.

EEOC ISSUES UPDATED COVID-19 VACCINATION GUIDANCE TO EMPLOYERS

 

The Equal Employment Opportunity Commission (“EEOC”) has released updated and expanded technical assistance addressing frequently asked questions concerning COVID-19 vaccinations in the employment context, and what is permissible under federal equal employment opportunity (“EEO”) laws, such as the Americans with Disabilities Act (“ADA”) and the Genetic Information Nondiscrimination Act (“GINA”).

The key updates to the technical assistance are summarized below:

• Federal EEO laws do not prevent an employer from requiring all employees physically entering the workplace to be vaccinated for COVID-19, so long as employers comply with the reasonable accommodation provisions of the ADA and Title VII of the Civil Rights Act of 1964 and other EEO considerations. Other laws, not in EEOC’s jurisdiction, may place additional restrictions on employers.  From an EEO perspective, employers should keep in mind that because some individuals or demographic groups may face greater barriers to receiving a COVID-19 vaccination than others, some employees may be more likely to be negatively impacted by a vaccination requirement.
• Federal EEO laws do not prevent or limit employers from offering incentives to employees to voluntarily provide documentation or other confirmation of vaccination obtained from a third party (not the employer) in the community, such as a pharmacy, personal health care provider, or public clinic. If employers choose to obtain vaccination information from their employees, employers must keep vaccination information confidential pursuant to the ADA.
• Employers that are administering vaccines to their employees may offer incentives for employees to be vaccinated, as long as the incentives are not coercive. Because vaccinations require employees to answer pre-vaccination disability-related screening questions, a very large incentive could make employees feel pressured to disclose protected medical information.

The EEOC has also posted a new resource for job applicants and employees, explaining how federal employment discrimination laws protect workers during the pandemic.

DOL Announces Continuing Standard for when “Telemedicine” is Considered an “In-Person” Visit for Establishing a Serious Health Condition Under the FMLA

The U.S. Department of Labor (“DOL”) has released a new Field Assistance Bulletin (“FAB”) to address an issue arising under the Family Medical Leave Act (“FMLA”) in the midst of the continuing COVID-19 pandemic and the shift to telework. 

 The FMLA provides eligible employees of covered employers with unpaid, job-protected leave for specified family and medical reasons, including a “serious medical condition”, the definition of which can include treatment by a healthcare provider. The DOL regulations provide that “[t]reatment by a health care provider means an in-person visit to a health care provider.” In July 2020, in response to the COVID-19 pandemic, and the increased need for social distancing, the DOL announced that a telemedicine visit by video conference would be considered an in-person visit for purposes of the FMLA, through December 31, 2020. 

In the new FAB, the DOL announced this standard will continue into 2021. The Department noted that health care providers are now often using telemedicine to deliver examinations, evaluations, and other healthcare services that would previously have been provided only in an office setting. Given this experience, and continuing the policy adopted in response to the COVID-19 pandemic, WHD will consider a telemedicine visit with a health care provider as an in-person visit provided specified criteria are met. 

To be considered an “in-person” visit, the telemedicine visit must include: 

· an examination, evaluation, or treatment by a health care provider;

· be permitted and accepted by state licensing authorities; and,

· generally, should be performed by videoconference. 

 According to the DOL, communication methods that do not meet these criteria (e.g., a simple telephone call, letter, email, or text message) are insufficient, by themselves, to satisfy the regulatory requirement of an “in-person” visit.

POT ON THE BALLOT COULD PUT EMPLOYER POLICIES OUT OF JOINT AND INTO THE COURTROOM

As this contentious presidential campaign season draws to a close on November 3, 2020, voters in five states also will be casting their ballots on legalization of marijuana. Arizona, Montana, New Jersey and South Dakota will decide whether to approve recreational marijuana, and Mississippi voters will choose whether to approve medical marijuana.

 

 However a recent federal court case in Pennsylvania, demonstrates the pitfalls and legal liabilities that employers can face in a state where marijuana is legal. In Hudnell v. Jefferson University Hospitals, Inc. (E.D. Pa. Sept. 25, 2020), a U.S. District Court allowed an employee fired for testing positive for marijuana to bring a lawsuit against her employer under Pennsylvania’s Medical Marijuana Act (“MMA”). 

 The plaintiff in the case, Donna Hudnell, was hired by Thomas Jefferson University Hospitals (“the Hospital”) as a security analyst in 2016. By 2018, she began experiencing severe back pain that limited her ability to work, walk and sleep. Recreational marijuana is illegal in Pennsylvania, but medical marijuana is legal under the state’s MMA. Patients prescribed medical marijuana are required to be certified by a physician and receive a medical marijuana card. Hudnell’s physician, who also worked at the Hospital, prescribed her medical marijuana to alleviate her back pain. However, her condition worsened and she was approved to work from home in May of 2019.

In October 2019, she asked to return to work and was required under the Hospital’s policies to take a drug test, because she had been out for more than 90 days. She gave the testing nurse copies of all her prescriptions, including her medical marijuana card. The nurse informed Hudnell that the card had expired in August. Hudnell responded she had renewed her card in August but her appointment with her physician for recertification was scheduled for five days later. Her physician at the Hospital re-certified her at that time.

However, the hospital subsequently terminated her under their drug testing policy, because at the time she was tested, and was positive for marijuana use, she did not have a valid and certified medical marijuana card. 

She subsequently sued the Hospital under Title VII of the Civil Rights of 1964, Pennsylvania’s Human Relations Act, and also alleged a claim under Pennsylvania’s MMA. Written into the MMA is a provision that “[n]o employer may discharge, threaten, refuse to hire or otherwise discriminate or retaliate against an employee regarding an employee’s compensation, terms, conditions, location or privileges solely on the basis of such employee’s status as an individual who is certified to use medical marijuana.” 

In regard to Hudnell’s MMA claim, the Hospital asked the court to dismiss the claim on the basis that the MMA did not explicitly provide a private cause of action allowing an employee to file a lawsuit. The Hospital also argued the statute did not apply to her because she did not have a valid medical marijuana card when tested.

 

In ruling against the Hospital and finding Hudnell had a right to sue under the MMA, the federal court determined that there was an implied right of action because, without one, the anti-discrimination provision would have no practical effect, and allowed Hudnell’s litigation against the Hospital to proceed.

The lesson for employers in states that legalize marijuana, is that the language of these statutes can vary widely as to the protections afforded to employees, and employers may have to adjust their policies to comply, including reasonable accommodation under the Americans with Disabilities Act.  Employers may also need to reexamine their drug testing policies and also address safety and discipline issues in regard to employees being under the influence in the workplace.

SUPREME COURT PASSES ON FINDING A "MARIJUANA EXCEPTION" TO THE FLSA

A Colorado employer’s hope of avoiding an employee’s collective action under the Fair Labor Standards Act (“FLSA”) has gone up in smoke at the United States Supreme Court.

The Justices declined to hear the employer’s argument that it should not have to comply with the federal wage and hour law because it was engaged in Colorado’s legal marijuana industry, which remains illegal under federal law.

The case involves Helix TSC, Inc. (“Helix”), which provides armed security guards, inventory control, and compliance services to the state-sanctioned marijuana industry in Colorado. The named Plaintiff, Robert Kenney, worked as a security guard for Helix, and filed suit claiming that the company misclassified him and other employees as exempt, and failed to pay overtime when they worked more than 40 hours in a work week.

In the trial court, Helix filed a Motion to Dismiss on the basis that the federal District Court lacked jurisdiction. Helix argued that because Kenney was employed in the marijuana industry, which is an industry "entirely forbidden" by the Federal Controlled Substances Act, Kenney was not entitled to the protections of the FLSA, and thus, the Court does not have subject matter jurisdiction over Plaintiff's claim. According to Helix, "[t]he protections of federal law ... are simply unavailable to an individual or business choosing to participate in an industry that is criminalized under federal law."

In the District Court’s Opinion denying Helix’s Motion, the Court held that the law was clear that “that employers are not excused from complying with federal laws, such as the FLSA, just because their business practices may violate federal law” and gave the example of finding FLSA violations where an employer employed illegal immigrants, which also was in violation of federal law. Helix then appealed the ruling to the U.S. Court of Appeals for the 10th Circuit.

 The 10th Circuit’s Opinion affirmed the District Court’s decision, and rejected Helix’s “illegality defense”, noting that “just because an Employer is violating one federal law, does not give it license to violate another.”

In its petition to the United States Supreme Court for a writ of certiorari, Helix argued that "the Tenth Circuit's decision confers the same rights on a mule trafficking methamphetamine for a cartel in Oklahoma as it does on a driver ferrying marijuana through the streets of Denver."

However, the Supreme Court was not convinced, and its October 5, 2020 denial of Helix's petition returns the case back to the District Court where Helix will have to defend against Kenney’s claims that he and other similarly situated employees were wrongly treated as exempt under the FLSA and not properly paid overtime.

Tattoos in the U.S. Now Mainstream and Workplace Tattoo Stigma Continues to Fade

According to a recent survey, the United States now holds the bronze medal for the most number of people with tattoos, with 46% of the American population having at least one tattoo.  The U.S. was beaten by Italy, with 48%, followed by Sweden with 47%.  However, according to the survey, Americans top the charts for people with multiple tattoos, men and women get tattoos at the same rate, and that tattoos are more popular among those with higher levels of education. 

What this means for employers, is that there is now an almost 50-50 chance that a job applicant will have one or more tattoos.  Traditionally, tattoos were viewed negatively during the hiring process and were not viewed as an asset in workplace advancement.  As recently as 2016, a survey of Human Resource managers cited tattoos as the third most likely physical attribute that limits career potential, and polling of millennials show that 70% will hide their tattoos in the workplace so as not to negatively impact their employment prospects.  However, a study by researchers from the University of Miami and University of Australia shows that such concerns may have little to no basis

In the study, entitled “Are Tattoos Associated with Employment and Wage Discrimination? Analyzing the Relationships between Body art and Labor Market Outcomes”, the researchers surveyed more than 2000 people in all 50 states, and found the  salaries and wages of tattooed employees were “statistically indistinguishable” from those of their non-tattooed counterparts.  The study suggests that employers recognize that by treating tattoos as a negative factor in hiring and employment decisions, they run the risk of missing out on well-qualified job candidates.  This is borne out in corporate America, where some of the country’s biggest employers are now considered “tattoo friendly”. 

From an employment law standpoint, employers generally retain broad discretion in making employment decisions based on tattoos, and whether having an “inked” employee is suitable to their particular company.  Likewise, tattoos that reflect offensive or discriminatory messages can be the basis for not hiring an applicant.    

However, under certain scenarios, restrictions on tattoos in the workplace could run afoul of Title VII of the Civil Rights Act of 1964 (“Title VII”) and possibly constitute religious discrimination.  A good example of this is the lawsuit that was brought by the Equal Employment Opportunity Commission (“EEOC”)  against the Red Robin Gourmet Burgers chain of restaurants.  In EEOC v. Red Robin Gourmet Burgers, Inc., the EEOC alleged that the company religiously discriminated when they fired an employee for not covering up his tattoos and refusing to accommodate a religious practice.  Red Robin ultimately settled the lawsuit prior to trial for $150,000 and entered into a consent decree with the EEOC.

The case began when Edward Rangel was hired as a server at Red Robin’s Bellevue, Washington restaurant.  In the lawsuit, Rangel asserted he was an adherent of the Kemetic religion, an ancient Egyptian faith.  As part of his religious practice, Rangel went through a rite of passage where he received religious inscriptions in the form of tattoos. The inscriptions, less than a quarter-inch wide and encircling his wrists, are liturgical verses from an Egyptian scripture.  According to the lawsuit, the inscriptions symbolized Rangel’s religious dedication and his religious practices made it a sin to intentionally conceal the religious inscriptions.

Rangel had the tattoos on his wrists when he was hired, and at that time, Red Robin has a dress code that prohibited employees from having visible tattoos.  The EEOC said that although Rangel worked at Red Robin for approximately six months without a complaint from customers, co-workers or his immediate supervisors, a new manager saw the tattoos and fired Rangel for not concealing them.

Rangel claimed he had repeatedly talked with management, giving detailed explanations of his faith and the need for an accommodation. He sought an exemption from the dress code, but Red Robin refused to provide it or any alternatives.  Title VII requires employers to make reasonable accommodations to sincerely held religious beliefs unless it would cause undue hardship to the business.  Throughout the suit Red Robin maintained that allowing any exceptions to its dress code policy would undermine its “wholesome image.”  Before the parties settled, Red Robin’s argument was rejected by the District Court, which held that Red Robin was required to support its undue hardship claim with more than hypothetical hardships based on unproven assumptions.

The lesson to be learned from that case is that Title VII and the EEOC take a very broad view of religion and generally, courts do not want to be placed in the position of deciding what is or is not a bona fide religion or religious practice.  To that extent, tattoos that are part of a religious practice may need to be accommodated.  Accommodations are not required if the employer would suffer undue hardship – that is, “more than de minimis “ or a minimal cost. Whether an accommodation would be an undue hardship is determined on a case-by-case basis, and considers the potential burden on an employer’s business in addition to any monetary costs.   

Purely decorative secular tattoos do not impose a duty of accommodation, and employees are free to make employment decisions on that basis or require employees to cover them up at work.  However, as indicated by the recent study, it appears that tattoos in the workplace are rapidly approaching the point of becoming a non-issue.

NLRB Rules Employers Can Bar Union Solicitation by Nonemployees on Company Property Open to the Public



In the latest in a series of business-friendly decisions, the National Labor Relations Board (NLRB) has ruled that employers may legally bar union solicitation by nonemployees on company property that is otherwise open to the public. [UPMC N.L.R.B., 368 N.L.R.B. No. 2, Opinion 6/14/19.] The NLRB’s 3-1 ruling expressly overturns a nearly 40 year old Board precedent, referred to as the “public space exception”. Under that now reversed precedent, nonemployee union organizers could not be denied access by employers to cafeterias and restaurants open to the public if the organizers used the facility in a manner consistent with its intended use and were not disruptive.   The case began with a 2013 incident in which two union organizers met with six employees in the cafeteria of a Pennsylvania hospital to discuss organizing a union campaign. Union flyers and pins were displayed on the tables at which the union representatives were sitting. The hospital cafeteria was accessible to hospital employees, patients, their families and other visitors. After an employee complained of the union solicitation, hospital security requested to see the identification of the union representatives, and subsequently requested they leave the premises. The two women refused to leave, and the head of security then called 911. Six police officers arrived and escorted the union representatives from the cafeteria. While the hospital cafeteria was open to the public, it had been the hospital’s regular practice to remove nonemployees who were engaged in promotional activity, including soliciting or distributing literature, in or near the cafeteria. Prior to the union incident, the hospital had previously escorted off the property a group soliciting for money, as well as a religious group engaged in solicitation.   In ruling that the hospital did not engage in an unfair labor practice by ejecting the union representatives, the NLRB held that because the hospital uniformly prohibited any groups or individual from soliciting on its property. “[w]e therefore hold that an employer may prohibit nonemployee union representatives from engaging in promotional activity, including solicitation or distribution, in its public cafeteria so long as it applies the practice in a nondiscriminatory manner by prohibiting other nonemployees from engaging in similar activity.”   The decision is being applauded by business groups for giving employers more control over who can access company property. However, the Board’s sole dissenting member has blasted the majority’s decision as inconsistent with Supreme Court precedent, and stating of the hospital’s actions “[i]f this was not [anti-union] discrimination, then it is hard to know what is.”   While this latest decision is welcomed by employers, companies should always proceed cautiously and seek legal counsel before taking actions concerning union activity or any other situations potentially implicating protected concerted activity under the National Labor Relations Act (NLRA).   Other significant ruling by the majority GOP NLRB may be on the horizon. Back in 2014, under the Obama administration, the then Democrat-controlled NLRB issued a controversial ruling that declared employers, generally, cannot prohibit employees from using a company’s e-mail system for union organizing purposes or other activities protected by the NLRA. The current NLRB has sought to revisit that decision, and possibly overturn it, by soliciting public comment.



FOURTH CIRCUIT RULES THAT SPREADING WORKPLACE RUMORS OF “SEX FOR PROMOTIONS” CAN CONSTITUTE SEXUAL HARASSMENT

“No other evil we know is faster than Rumor, thriving on speed and becoming stronger by running.”

     _ Virgil, The Aeneid

 

Back in 19 BC, the ancient Roman poet Virgil noted the destructive nature of rumors.  More recently, in 2019, a federal appeals court has held that rumors can be a potential basis for liability in employment law litigation.

          In a significant decision, the United States Court of Appeals for the Fourth Circuit reversed a lower court and held that false workplace rumors that a female employee had been promoted for having sex with her boss could serve as the basis for sexual harassment and retaliation claims against an employer.  The case also serves as a warning to employers of the costs involved in not effectively addressing such situations.

          In Parker v. Reema Consulting Servs., Inc. (4^th Cir. Feb. 8, 2019), Evangeline Parker worked at her employer’s warehouse facility.  While she began as a low-level clerk, she was promoted six times, ultimately rising to Assistant Operations Manager of the facility.  However, she subsequently learned that a jealous subordinate, whom she had been promoted over, and a higher ranking manager at the warehouse, were actively spreading rumors that her success was the result of her having a sexual relationship with another company official.  As alleged in the lawsuit she later filed, as the rumor spread, Parker “was treated with open resentment and disrespect” from many coworkers, including employees she was responsible for supervising. As she alleged, her “work environment became increasingly hostile.” 

          The manager who was spreading the rumor subsequently confronted Parker and blamed her for “bringing the situation to the workplace” and told her “he could  no longer recommend her for promotions or higher-level tasks because of the rumor” and he “would not allow her to advance any further within the company.”  When Parker subsequently sought to talk to the manager about the situation, the lawsuit alleges the manager lost his temper and began screaming at her.  Parker subsequently filed a sexual harassment complaint against the manager and the subordinate with the company’s Human Resources Manager.  Following the complaint, the manager in question issued written warnings against Parker and she was fired as a result.

          Pursuant to Title VII of the Civil Rights Act of 1964 (“Title VII”), Parker filed a lawsuit alleging a hostile work environment claim based on discrimination because of her sex, as well as a retaliation claim.  However, in January 2018, the federal District court granted the employer’s Motion to Dismiss.  The District Court held she failed to state a sex discrimination claim because “the establishment and circulation of this rumor is not based upon her gender, but rather based upon her alleged conduct.”  She subsequently appealed the decision to the United States Court of Appeals for the Fourth Circuit.

          In reversing the District Court’s decision, the Fourth Circuit held that the lower court was wrong in deciding that the workplace rumor was not based on Parker’s sex:

As alleged, the rumor was that Parker, a female subordinate, had sex with her male superior to obtain promotion, implying that Parker used her womanhood, rather than her merit, to obtain from a man, so seduced, a promotion. She plausibly invokes a deeply rooted perception — one that unfortunately still persists — that generally women, not men, use sex to achieve success. And with this double standard, women, but not men, are susceptible to being labelled as “sluts” or worse, prostitutes selling their bodies for gain.

 

In short, because “traditional negative stereotypes regarding the relationship between the advancement of women in the workplace and their sexual behavior stubbornly persist in our society,” and “these stereotypes may cause superiors and coworkers to treat women in the workplace differently from men,” it is plausibly alleged that Parker suffered harassment because she was a woman.

 

 

In addition to reversing the lower court’s dismissal of Parker’s sex discrimination claim, the Fourth Circuit also reversed the dismissal of her retaliation claim, allowing both claims to proceed to a trial on the merits.

          The lesson from this case is that workplace gossip and rumors are not harmless and can result in potential liability to employers when they involve protected classes under Title VII or other anti-discrimination statutes.  Human Resources should take complaints about such rumors seriously and address them directly.



GOVERNMENT SHUTDOWN RESULTS IN EXTENDED DEADLINE FOR EMPLOYERS TO SUBMIT EEO-1 DATA

 

Due to the recent partial lapse in federal government appropriations, the deadline to submit EEO-1 data will be extended until May 31, 2019. The EEO-1 is an annual federal survey that requires all private employers with 100 or more employees and federal government contractors or first-tier subcontractors with 50 or more employees and a federal contract, sub­contract or purchase order amounting to $50,000 or more to file the EEO-1 report. The survey requires company employment data to be categorized by race/ethnicity, gender and job category. The filing of the EEO-1 report, is required by federal law per Section 709(c), Title VII of the Civil Rights Act of 1964, as amended; and §1602.7–§1602.14, Title 29, Chapter XIV of the Federal Code of Regulations. Details and instructions for EEO-1 filers, including the exact date of the survey opening, will be forthcoming. Filers should refer to the EEO-1 website in the coming weeks for updates on the new schedule.