Governor Murphy Signs Pay Equity Bill

The NJ legislature has been busy in recent weeks with new employment laws.  Yesterday, Governor Murphy signed the Diane B. Allen Equal Pay Act, which will go into effect on July 1, 2018.

The law is probably one of the broadest equal pay laws in the country. Unlike most equal pay laws that prohibit pay disparity based on gender, the law prohibits employers from discriminating against employees in compensation based on membership in any protected class.  This means employers might see claims raised based on race, national origin, sexual orientation, etc.

More details about the new law can be found in our alert here.

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Maryland Employers Must Adopt Stricter Sexual Harassment Policies

Maryland’s Disclosing Sexual Harassment in the Workplace Act of 2018, which awaits Gov. Larry Hogan’s signature, imposes stricter waiver and disclosure requirements regarding sexual harassment on Maryland employers beginning on October 1, 2018.  The bill was passed by both houses of the Maryland General Assembly and a Governor’s veto is not anticipated.

The bill impacts Maryland employers in two ways.  First, the bill prevents employers from asking employees to waive their future rights to come forward with sexual harassment complaints and provides that such waivers are void as a matter of public policy.  Second, the bill requires employers with 50 employees or more to disclose: 1) how many settlements the employer has made after a sexual harassment allegation; 2) how many times an employer has settled allegations of sexual harassment made against the same employee; and 3) the number of settlements of sexual harassment complaints that included non-disclosure provisions.  The Maryland Commission on Civil Rights will collect and compile the data and make it publicly available, including the employers’ identities (although not the identities of the alleged harassers or victims).

Maryland employers should  pay close attention to whether any of their contracts, policies, or agreements require employees to waive a future right to assert a sexual harassment claim or complaint.  Any waiver requirements should be eliminated by October 1, 2018, in accordance with the new law.  Additionally, employers subject to the reporting requirement should develop a reliable method of accurately tracking the data required to be disclosed.  This is a good opportunity for employers operating in Maryland to perform a comprehensive review of their sexual harassment policies, make any necessary revisions, and provide training to their managers in an effort to educate their employees as well as reduce the risk of sexual harassment claims being asserted in the future.

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Budget Bill Limits Circumstances Under Which Employers Can Use Tip Pools; Clarifies Damages Due If Employers Improperly Retain Employees Tips

After contentious negotiations and threatened government shutdowns, on March 23, the President signed the 2018 Budget Bill into law.  Of significance here, the bill resolved several longstanding regulatory issues.

The spending bill, includes an amendment to the Fair Labor Standards Act (FLSA), which now prohibits employers—including managers and supervisors—from participating in tip-pooling arrangements, even where the employer does not seek to take the so-called tip credit and pays the employees the regular minimum wage rather than the tip-credit minimum wage, sometimes referred to as the “server’s wage” in the restaurant industry.  In other words, under the new law employers, managers and supervisors can never share in a tip pool and employees can never be required to pay any portion of their tips to employers, managers or supervisors.

The amendment also clarifies two (2) issues which have divided courts regarding the disgorgement of illegally retained tips.  While many courts have long-held that an employer who illegally requires employees to share tip with non-tipped employees (managers, supervisors, back-of-house and/or kitchen staff, etc.) must return all such tips to the employees, not all courts uniformly held as such.  The amendment clarifies that damages resulting from illegal tip pooling include a return of all tips to the employees.  The amendment also clarifies that employees’ damages include liquidated damages on all damages, including the disgorged tips, an issue which had previously divided courts and for which the Department of Labor had not provided guidance previously.

In light of the fervent anti-employee stance that the Department of Labor has taken under the current administration, this certainly must be celebrated as a victory for workers.  Indeed, the law replaces a proposed regulation which garnered much opposition for its pro-wage theft stance and which was recently discovered to have been pushed through the regulatory process based on intentionally incomplete information provided by Secretary of Labor.

Click amendment to the Fair Labor Standards Act to read the full text of the new law.

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Prior Salary No Longer a Defense to Equal Pay Claims?

This week, the 9th Circuit issued a decision that many say represents a sea change in how employers may defend against Equal Pay Claims. The decision in Rizo v. Yovino issued on April 9, 2018 overturned decades of interpretation of the Equal Pay Act and held that prior salary history may not be considered by employers.  However, there is some language in the ruling that appears to muddy the general rule announced by the Court.

Under the Equal Pay Act, it is illegal for employers to pay men and women different salaries for substantially similar work.  However, an employer may defeat an Equal Pay Act claim by proving that there were legitimate, non-discriminatory reasons for the salary differential.  Traditionally, courts have found that one of those legitimate, non-discriminatory reasons might be that the employer based the salary on the compensation the employee received at a prior job.

Indeed, many employers routinely ask what salaries applicants are currently making.  In that way, employers understand applicants’ salary expectations but also have an awareness of where to set the salary being offered to the applicant.

In recent times, some jurisdictions have passed laws prohibiting employers from asking about prior salary history.  The stated reason for these laws is that it perpetuates prior gender pay discrimination.  Basically, if an employee was subjected to a discriminatory wage rate at a prior employer, using that salary at the new employer would set the employee’s salary lower than other employees and, even if the new employer is not overtly acting in a discriminatory manner, would continue the past discriminatory practice.

Right now, the number of jurisdictions with such laws is limited.  However, the Rizo decision may change that.

Rizo, a school teacher, was hired by Fresno County as a math consultant.  Fresno County had a standard operating procedure that set ten salary steps.  When a teacher was hired, salary was set based on taking the teacher’s former salary and adding 5%.  Once the salary was calculated, the teacher was placed in the appropriate step of the pay scale.  After her hire, Rizo discovered that male math consultants had been hired at higher salary steps.  For its part, Fresno County claimed that the use of prior salary was a long-recognized legitimate factor and that if salaries were reviewed as a whole, more women were placed at higher salary steps than men.

The Ninth Circuit heard the case en banc in order to clarify the law as to whether prior salary history alone or in combination with other factors could be a legitimate factor “other than sex” that justified the salary differential.

The Ninth Circuit held that prior salary alone cannot be a legitimate factor other than sex. It then went even further, which caught most people off guard, and said that prior salary is never a legitimate business factor even if taken into consideration with other factors. The Court did say that there might be individualized cases where salary was negotiated and past salary came into play  and that it took no position on whether prior salary could be considered in those cases.

This ruling is contradictory and employers should not consider this language a safe harbor.  Given the other language in the opinion that repeatedly states that asking about prior salary frustrates the entire purposes of the Equal Pay Act and should never be considered, employers should not bank on the fact that there might be some conceivable fact pattern that allows employers to consider prior salary history.  This is true, despite the very valid points brought out in the concurring opinions, that there are times that prior salary history has nothing to do with gender.  For example, prior salary may have been set based on cost of living or demand for particular jobs.

Based on this ruling, the safest course of action would be for employers within the Ninth Circuit to never ask about prior salary history.  However, what happens if the applicant volunteers it while trying to negotiate terms and conditions of the new job?  This decision doesn’t really answer that question.

At this point, there are other circuits that allow for the consideration of prior salary history in combination with other factors.  It will be interesting to see if the Supreme Court decides to take up the split.

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NY’s Women’s Agenda in 2019 Budget Bill Means Big Changes for Employers

Monday, New York’s budget bill for FY 2019 was presented to the Governor for signature.  Buried among the usual budget line items are several provisions that will drastically affect employers.

In what seems to be a direct response to the #metoo movement, the bill sets training requirements, prohibits mandatory arbitration of discrimination claims, and outlaws confidentiality provisions in settlement agreements unless specifically requested by the complainant.

The employment related provisions are set forth in S7507-C.  Here are the highlights (or low lights depending on your point of view):

  • Mandatory Harassment Policies:  All employers must have a policy against harassment that complies with or exceeds the model harassment policy that will be developed by the Division on Human Rights.  At a minimum, the policy must:
    • prohibit sexual harassment consistent with guidance issued by the department in consultation with the division of human rights and provide examples of prohibited conduct that would constitute unlawful sexual harassment;
    • include information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims of sexual harassment and a statement that there may be applicable local laws;
    • include a standard complaint form;
    • include a procedure for the timely and confidential investigation of complaints and ensure due process for all parties;
    • inform employees of their rights of redress and all available forums for adjudicating sexual harassment complaints administratively and judicially;
    • clearly state that sexual harassment is considered a form of employee misconduct and that sanctions will be enforced against individuals engaging in sexual harassment and against supervisory and managerial personnel who knowingly allow such behavior to continue; and
    • clearly state that retaliation against individuals who complain of sexual harassment or who testify or assist in any proceeding under the law is unlawful.
  •  Mandatory Training:  All employers must also provide “interactive” training to their employees.  The Division will also be developing a model training program that must include:
    • an explanation of sexual harassment consistent with guidance issued by the department in consultation with the division of human rights;
    • examples of conduct that would constitute unlawful sexual harassment;
    • information concerning the federal and state statutory provisions concerning sexual harassment and remedies available to victims of sexual harassment;
    • information concerning employees’ rights of redress and all available forums for adjudicating complaints; and
    • address conduct by supervisors and any additional responsibilities for such supervisors.
  • Statements by Public Contractors:  Public contractors submitting a bid for work with the State must include a statement that they have a policy against sexual harassment and that they provide training to employees on that policy.  Public Contractors must generally comply with the policy and mandatory employment training that applies to all employers under new Labor Law §201-g which sets for the policy and training requirements.
  • Prohibition on Mandatory Arbitration Agreements:  No employer may require that a claim of unlawful discrimination or sexual harassment be submitted to mandatory arbitration.  Voluntary arbitration provisions are still okay.  Collective bargaining agreements trump this provision, so if the CBA requires arbitration of discrimination or sexual harassment, then that would not run afoul of the law.  The law only bans this on a prospective basis and the law will not apply to any agreements entered into prior to the effective date of the law.
  • Bar on Most Confidentiality Agreements:  Settlement agreements may not contain confidentiality provisions requiring the complainant to keep the facts of the harassment or discrimination confidential unless the complainant voluntarily agrees to it.  Employers may still put a draft provision in agreements requiring confidentiality for the complainant to review.  The complainant must be given 21 days to review the provision. If the complainant accepts the provision, there must be a separate writing stating that.  Complainants must also have 7 days to revoke their acceptance of the agreement.
  • Provides Protection (and a Cause of Action) for Non-Employees:  the bill makes clear that an employer may be held liable if one of its employees sexually harasses a contractor, subcontractor, vendor, consultant or other non-employee providing services to the employer.

These provisions will go into effect 180 days after the law is enacted.  We assume that the forthcoming regulations may clarify certain aspects of the law such as how frequently harassment training must occur.  We will keep you updated when the regulations are issued.

In the meantime, employers should begin assessing their harassment policies and training programs.  Employers should also review settlement agreements and employment agreements for compliance with the law.

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