The source of the right to compensation bestowed to our citizens at the national level is the 5th Amendment to the U.S. Constitution which provides: “nor shall private property be taken for public use, without just compensation.” In Texas, we have similar language in our State Constitution. Article I, Section 17 of the Texas Constitution provides in pertinent part: “No person’s property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation being made.” To determine “fair compensation” or “just compensation,” there is a simple formula (but complex to apply) – what was the property worth on the open market before the taking as compared to what it is worth on the open market after the taking.
When the Government Decides It Wants Your Property, What Happens?
If the government decides to acquire some part of your property for a public project, it is obligated to make you an offer for the property. To support the offer, the government must procure an independent appraisal that is shared with you. You are initially given thirty days to respond to the offer. If you are unable to come to terms with the government in that period of at least thirty days, the government must give you a “final offer” with another fifteen days to respond. If, in that period, you are still unable to come to terms with the government, the government can file a condemnation lawsuit.
Condemnation suits are civil cases and are typically filed in the county court in the county where the subject property is located. Upon a case being filed, the judge of the court will appoint three “special commissioners” to hear and decide the case. The Special Commissioners schedule a hearing to receive evidence from both the government and the property owner regarding the amount of compensation due. After the Special Commissioners render their award, the government can pay the amount of the award and, at that time, the government gets the right to take possession to the property they are acquiring.
Either the property owner or the government can appeal the award of the Special Commissioners. If either side appeals, the judge of the Court will set the case for a trial. Either side is entitled to a jury trial. If neither side wants a jury trial, it can be tried to the Court.
Important Valuation Issues in the Hospitality Industry
Loss of Parking: A government acquisition that causes a material loss of parking can greatly impact a property. A loss of parking that takes a property out of compliance with code can obviously be very detrimental. However, lost parking, even if it does not take a property out of code compliance, can still have a material impact on the value of the property.
Loss of Circulation/Loss of Fire Lane: A government acquisition may cause renovation of the remaining property such that circulation is lost or hampered or, worse yet, may take a property out of compliance with fire code requirements regarding on site fire lanes. Other onsite improvements may have to be altered to accommodate legally compliant fire lanes.
Denial or Obstruction of Access: A project can impede access on or off the property either temporarily (during the time of construction) or permanently. Loss of driveways or changes in the roadway leading to the property can impact the property’s value.
Interruption of Utilities: A less obvious, but significant, impact on operations are interruption of utilities. A project may cause electric lines, water lines, or sewer lines to be relocated. A property may lose utilities during a relocation. If utility relocation is necessary, it is important to have the work done at a time that minimally disrupts any business on the property.
How to Prepare for a Government Taking
Upon learning of a planned government taking, there are several action items that will help minimize impact and maximize compensation. First, find out as much as you can about the planned project and how it will impact the property. Second, if there are project design changes that will minimize harm to the property, meet with the government’s engineers and planners to see if such changes are feasible. Sometimes a small, relatively insignificant, project change can save very significant property damage. Third, consider whether there are property changes that can be made now that will maximize compensation later. Fourth, find qualified help. Not all appraisers or attorneys are expert in condemnation laws which can, at times, be illogical.
]]>As the United States District Court for the Eastern District of New York noted: “The FDA initiated this review in part because several federal courts had previously requested administrative determinations from the FDA regarding whether food products containing ingredients produced using genetic engineering may be labeled as ‘natural.’” Forsher v. J.M. Smucker Co. (E.D.N.Y. Sept. 30, 2016) The prospect of the FDA developing new guidance, like all pending regulation, is now in doubt, given the Trump administration’s avowed aversion to regulation and its executive order 13371, Reducing Regulation and Controlling Regulatory Costs, stipulating that for every new regulation promulgated, two older regulations should be eliminated. If the FDA declines to define “natural,” states may move to fill the void. In fact, in his 2016 State of the State address, New York Gov. Andrew Cuomo proposed that New York health officials develop their own definitions for terms like “all natural.”
Litigation concerning whether genetically modified foods can be labeled “natural” would presumably be affected by the FDA’s definition. Since this issue has been raised in cases across the country, one should expect to see a decline in litigation on this matter. In fact, according to an article in Time magazine last year, “Based upon statistics from 2013, only 22.1 percent of food products and 34 percent of beverage products marketed that year claimed to be ‘natural,’ which reveals a decrease from 30.4 percent and 45.5 percent respectively only three years prior. Insiders suspect that’s due to legal action or fear of future disputes about misleading labels.” That number can only be expected to decrease in light of the FDA’s current consideration of the term.
Litigation, Naturally
Nevertheless, litigation is prevalent in this area. For example, the plaintiff in the Smucker case alleged that the company’s use of the term on packaging for certain peanut butter spreads is false and in violation of various consumer protection statutes “because some products contain sugar manufactured from genetically modified organisms (GMOs).” In a motion to dismiss, the defendant argued that it complied with the FDA guidelines. In the alternative, the company maintained that the matter should be stayed pursuant to the primary jurisdiction doctrine in light of the FDA’s review of the definition of “natural.” And the court found that a stay was appropriate in light of the FDA’s consideration of the term in order to “allow the FDA the opportunity to take action.”
Similarly, in Kane v. Chobani, the U.S. Court of Appeals for the Ninth Circuit remanded an appeal brought by the plaintiffs after their putative class action, which alleged that Chobani’s labeling and use of the term was in violation of several laws, was dismissed. The Ninth Circuit found it prudent to enter an order staying the matter until the FDA completes its proceedings on the term “natural.”
Other Terms That Don’t Go Down Well
The courts’ decisions to stay matters pending FDA consideration is not a novel concept. Other courts have done the same thing.
Moreover, suits such as these are not limited to the labeling of “natural.” For example, in Garrett et al. v. Bumble Bee Foods LLC, the Superior Court of the State of California, County of Santa Clara, recently began a bench trial on Bumble Bee Foods’ alleged misleading of consumers. Specifically, the plaintiffs allege that the defendant labeled its tuna as an “excellent source” of omega-3 fatty acids. This was, the plaintiffs maintain, problematic, given Bumble Bee Foods’ use of the American Heart Association logo, while omitting that it paid the American Heart Association to review its product.
Similarly, in Wilson v. Frito-Lay North America, Inc., the United States District Court for the Northern District of California lifted a stay previously imposed and permitted the defendant to renew its motion for summary judgment. The basis of the putative class action is rooted in several Frito-Lay snacks labeled “0 grams Trans Fat,” which the plaintiffs contend should have referred them to the back panel for the total fat in the snacks, according to the plaintiffs’ reading of the FDA labeling regulations. The summary judgment motion has not yet been fully briefed, and the hearing is expected to take place on May 4, 2017.
Although the process of evaluating the definition of “natural” began over a year ago, the FDA’s careful consideration should come as no surprise, especially given the effects such a definition would have on the industry. Not only would every manufacturer be required to re-evaluate their labels in order to determine whether or not they are in compliance with new FDA regulations, but also litigation concerning this matter would be significantly affected in several ways. First, the industry can expect to see substantially less litigation stemming from alleged improper/misleading labeling should a definition be established. More specifically, defining the term “natural” will provide both manufacturers and consumers alike clarity and allow for industry-wide consistency. If, however, the FDA adopts an ambiguous definition, consumer litigation could actually be expected to rise in this area.
Insurance for False Labeling Claims
In so far as food and beverage companies are concerned, understanding these potential claims is essential, and understanding the extent to which insurance coverage may protect against potential liability is even more so. First, food and beverage companies should carefully read their insurance policies already in place to determine whether potential misrepresentation claims are covered. Commercial general liability policies that include coverage for “advertising injuries” are often narrow in scope, and may in fact exempt such misrepresentation claims. Second, in procuring future coverage, manufacturers should keep in mind the potential impacts of the FDA’s decision to define “natural” if such labeling applies. Finally, difficult as it may be, companies should look to applicable directors and officers (D&O) policies for potential coverage. While potential misrepresentation claims could be considered “wrongful acts,” D&O policies are often carefully crafted to preclude claims such as these.
Ultimately, procuring broader coverage could be beneficial to food and beverage companies during this time of changing regulation.
Authors
Steven J. Pudell – Managing Shareholder (Newark Branch), Anderson Kill
Christina Yousef – Attorney, Anderson Kill
However, the National Labor Relations Board (NLRB) has taken a surprising position by finding many of these policies and trainings to be in violation of federal labor law. If you are one of the many employers who have courtesy and civility rules or trainings, your business may unfortunately be susceptible to scrutiny by the NLRB.
Background: The NLRA And The Lutheran Heritage Standard
Under Section 7 of the National Labor Relations Act (NLRA), all employees have a right to engage in protected concerted activity, even if they are not unionized. This includes activities performed for their mutual aid or protection, such as discussing the terms and conditions of employment. Under the NLRA, it is an unfair labor practice for you to interfere with, restrain, or coerce employees from exercising their Section 7 rights.
The NLRB’s position on whether an employer’s courtesy and civility rules violate federal labor laws was established in the 2004 case of Martin Luther Mem’l Home, Inc., dba Lutheran Heritage Village-Livonia. This case established the Lutheran Heritage standard, which provides that an employer’s civility rules are unlawful if they restrict activities protected by Section 7 of the NLRA. Even if a rule does not explicitly restrict protected activities, it may still violate the NLRA if the language could be reasonably construed as such, if the rule was promulgated in response to union activity, or if the rule has previously been applied to restrict the exercise of Section 7 rights.
Innocent Civility Rules Can Violate The NLRA
Using the Lutheran Heritage standard, the NLRB recently invalidated a number of rules that had been implemented with the purpose of creating a respectful and well-managed workplace. In these cases, the agency focused on whether an employee “would reasonably construe” the policy as prohibiting protected conduct under Section 7. To employers’ detriment, the NLRB has consistently used a broad interpretation of the NLRA to protect employees’ rights. For example, the current Labor Board believes a policy prohibiting profanity, verbal abuse, or disparagement of the company can violate Section 7 if employees could reasonably construe their protected activity falls under one of those categories.
One such case arose against T-Mobile U.S.A. in 2016, when the NLRB found the following employment policies unlawful:
[The employer] expects all employees to behave in a professional manner that promotes efficiency, productivity, and cooperation… to maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management.To prevent harassment, maintain individual privacy, encourage open communication, and protect confidential information, employees are prohibited from recording people or confidential information using cameras….
If you feel you have not been paid all wages or pay owed to you, believe that an improper deduction was made from your salary, or feel you have been required to miss meal or rest periods, you are required to contact a manager, an HR business partner, or the integrity line.
Even though some of the policies explicitly stated their purpose was to prevent harassment and maintain privacy, the NLRB found that employees could reasonably construe the language to restrict potentially controversial or contentious discussions, including those protected under Section 7, out of fear that the employer would deem the discussions inconsistent with a “positive work environment.” The Board found that the policy pertaining to the use of cameras also violated Section 7 because some photographs and recordings in the workplace may be protected “if employees are acting in concert for their mutual aid and protection.”
The NLRB reached another similar decision in a 2016 case against Casino Pauma in Southern California. Among the rules it found faulty were:
The NLRB Administrative Law Judge took the position that these policies were overly broad and could reasonably be read to restrict the free exercise of employees’ rights under Section 7.
Who To Follow: The NLRB Or The EEOC?
Not only has the NLRB taken a position considered by some to be extreme, its viewpoint conflicts with the recommendations regarding civility training put forth by the Equal Employment Opportunity Commission (EEOC). In June 2016, the EEOC harassment task force issued a report suggesting employers implement workplace civility training to prevent occurrences of harassment. The task force cited various studies finding incivility to be a precursor to workplace harassment and that it may contribute to a hostile work environment.
However, this recommendation runs counter to the NLRB decisions invalidating numerous workplace courtesy and civility rules under its broad interpretation of Section 7. Given this conflict, the report recommends the EEOC and NLRB confer to jointly clarify and harmonize the interplay of the NLRA and federal EEO statutes. Unfortunately, until the agencies reconcile the discrepancies, employers must choose whether they will risk dealing with the NLRB by following the EEOC’s recommendations for preventing harassment, or stay away from workplace civility training and policies altogether.
Next Steps
Given the new tenant in the White House and the shifting composition of the NLRB, there may be a future swing in the Board’s view on workplace civility rules. The NLRB, normally a five-member board, currently has two vacant positions; President Trump nominated two conservative individuals to fill those open seats, and they will soon face a Senate vote. If these two selections are approved, the president will have an opportunity to shift the viewpoint of the Board to create a more even playing field. Once the vacant positions are filled, we may begin to see NLRB decisions that uphold reasonable civility rules.
In the meantime, however, there are some steps you can take to align your policies with the NLRB’s current position. You should review your policies to determine whether revisions are needed to minimize your risk of violating the NLRA while still promoting a lawful workplace. Start with policies that appear vague or overbroad enough that they could be viewed as prohibiting Section 7 activities. You should also keep an eye out for policies that specifically prohibit employees from criticizing your organization or require them to behave professionally in the workplace, as these policies could raise a red flag with the NLRB.
Because employment policies may still present legal concerns even after they are revised, it is always a good idea to discuss any proposed revisions with your legal counsel prior to implementation.
For more information, contact the author at CAlvarez@fisherphillips.com or 916.210.0403.
]]>Earlier this month, the Philadelphia hotel Roosevelt Inn, its corporate parents, its New York management company, and an individual owner/manager of the hotel, were sued for allegedly allowing trafficking of sex involving a minor to take place on the hotel’s premises. The case – the first of its kind invoking Pennsylvania’s recently-amended human trafficking law – raises an abundance of difficult legal and ethical questions regarding hotels’ legal responsibilities for and obligations concerning their guests’ conduct, and how to meet those responsibilities while also respecting guests’ privacy.
The lawsuit alleges that the defendants, “individually and/or by and through their actual or apparent agents, servants and employees,” “knew or had constructive knowledge” that their premises were being used for the sexual exploitation of the plaintiff, identified as “M.B.” The complaint alleges a number of potential indicators for sex trafficking at the hotel, implying that those red flags should have tipped the defendants off to the tragedy of M.B.’s alleged circumstances – indicators such as men lingering in the hall outside the plaintiff’s room, older men accompanying her in the hotel, M.B. being treated aggressively, M.B. exhibiting fear and anxiety, cash payments for her room, regular refusal of housekeeping services, and M.B. having few or no personal belongings in her room and dressing in a “sexually explicit manner.”
The complaint asserts causes of action for negligence, negligent infliction of emotional distress, intentional infliction of emotional distress, and a count styled “Negligence: Violation of Pennsylvania Human Trafficking Law, 18 Pa. C.S.A. § 3001, et. seq.”
Civil liability. The Roosevelt Inn complaint’s reference to the Pennsylvania Human Trafficking Law reportedly represents the first time that that law has been invoked in a civil lawsuit. Although plaintiff M.B. does not directly frame it as a separate cause of action, opting instead to invoke the sex trafficking law generally as a component of a negligence theory, the Pennsylvania law includes a provision that has the potential to create civil exposure for hotels whose premises have been used for prostitution. 18 Pa.C.S. § 3051(a)(2)(i) provides for civil liability for anyone who “profit[s] from” any sex trade act. In the case of a defendant, like a hotel, who “provides goods or services to the general public,” the law would require the plaintiff to prove that the defendant “knowingly markets or provides its goods or services to” a trafficker. 18 Pa.C.S. § 3051(b)(1). A federal law similarly provides for civil liability for “whoever knowingly benefits, financially or by receiving anything of value from participation in a venture which that person knew or should have known was engaged in [human trafficking].” 18 U.S.C. § 1595(a).
Under the federal regime, receiving a financial benefit when one should have known that one’s co-venturer was engaged in trafficking is enough to create exposure. (Under Pennsylvania law, the conduct must be done “knowingly”; which means “aware” that one’s conduct is of a particular nature, that particular circumstances exist, or that “it is practically certain” that one’s conduct will cause a particular result, 18 Pa.C.S. § 302(b)(2)). It seems likely, then, that cognizance of the sorts of red flags listed in the Roosevelt Inn complaint – men lingering in halls, regular refusal of housekeeping services, checking in with few or no personal belongings, etc. – could be sufficient to create civil liability under either Pennsylvania or federal law. Other potential indicators of trafficking identified by the Polaris Project, an anti-human trafficking organization, include:
Criminal liability. Both Pennsylvania and federal law also create the potential for criminal exposure for hotels and their affiliates and employees who do not adequately respond to prostitution on their property. The federal statute makes it a criminal offense to “benefit[ ], financially or by receiving anything of value, from participation in a venture” that harbors a person, knowing or in reckless disregard of the fact that he or she is a victim of sex trafficking. 18 U.S.C. § 1591(a)(2).
The Pennsylvania law is similar, establishing criminal liability for anyone who “knowingly benefits financially or receives anything of value from any act that facilitates” an act of sex trafficking. 18 Pa.C.S. § 3011(b). Pennsylvania law also includes a separate provision that specifically creates criminal liability for any “business entity” that “knowingly aids or participates in any violation of [the sex trafficking law].” 18 Pa.C.S. § 3017(a). Violation of this provision can also lead to penalties of up to $1 million, revocation of the entity’s charter or authority to do business in the state, or forfeiture of assets or restitution. Id.
While hotels may have a duty to prevent any form of human trafficking on their premises, that battle comes with a set of potential risks. Hotels are also under strict legal and ethical privacy obligations, and a misstep in service of even the most well-intentioned anti-trafficking agenda could lead to privacy blunders.
Hotels are at risk for legal action if identifiable information about their guests is distributed inappropriately. In one case that made headlines last year, sportscaster Erin Andrews was awarded a $55 million verdict after she sued a hotel that had revealed to another guest which room was hers, and that guest then surreptitiously filmed her through her door’s peephole. In an effort to avoid those risks, and protect guests’ privacy, hotels may have policies regarding when and how guests’ names and other identifiable information can be used, may seek to limit staff with access to identifiable information about guests to those with a need to know, and may take other reasonable precautions.
Combine these privacy concerns with the fallout from a poorly-executed attempt to react to suspected trafficking on the hotel’s premises, and the risks become clear. A call to law enforcement, even if not overheard, could generate a difficult-to-control flurry of activity involving many people, including staff and non-staff, and potentially even affect other guests. This activity could result in exposure of personal information about the suspect guest, potentially including some of his or her most sensitive information, such as information about visitors to the guest’s room, sexual activity, and the like. Such revelations, if ultimately determined to be unjustified, could lead to serious exposures for the organization. This is particularly so in an age of social media when there is little opportunity to control the rapidity and breadth of the spread of sensitive information. And if information memorializing staff’s suspicions about guests’ conduct is stored electronically, a data breach – a huge and growing issue in the hospitality industry – could be even more devastating for those guests than it otherwise might be.
The best framework for safeguarding against and reacting to sex trafficking while avoiding privacy and other harms is a set of intelligent, well thought-out policies that address both concerns. These policies should be tailored to the particular organization’s size, capacity, and culture. Crucially, the policies must be consistently applied: the appearance that such policies are employed to the benefit or detriment of some guests, but not others, defeats their purpose and creates the potential for liability. Because of the importance of consistent application, good, effective training is a must.
Ultimately, hotels cannot eliminate the risk that their premises will be used for improper purposes, and difficult decisions will need to be made along the way. But careful planning and intelligent before-the-fact decision making can go far to help mitigate the risk.
]]>Historically, the failure of an employer to comply with its employment tax obligations was generally treated as a civil tax problem to be handled by the IRS. A typical payroll tax case involved penalties for the delinquent employer. If the taxes were not paid promptly, responsible individuals would be assessed with the trust fund recovery penalty, which applies to “[a]ny person required to collect, truthfully account for, and pay over any tax imposed by this title who willfully fails to collect such tax, or truthfully account for and pay over such tax, or willfully attempts in any manner to evade or defeat any such tax or the payment thereof.” I.R.C. § 6672(a).
Most employers are aware of the trust fund recovery penalty and the exposure it can create for individual owners and managers of a business. Less well known is the parallel criminal provision of the Internal Revenue Code, which provides that “[a]ny person required under this title to collect, account for, and pay over any tax imposed by this title who willfully fails to collect or truthfully account for and pay over such tax shall, in addition to other penalties provided by law, be guilty of a felony.” I.R.C. § 7202. Although the same conduct that will trigger the trust fund recovery penalty is potentially chargeable under section 7202, criminal prosecutions historically were rare.
The enforcement landscape has changed significantly in recent years. While the IRS still serves as the primary enforcement authority for employment taxes, the Tax Division of the Department of Justice has become more actively involved over the past few years. The Tax Division has identified two factors that drove the change in enforcement policy:
Consequently, the Tax Division has been more active in both criminal and civil employment tax enforcement. Employers should be aware of these trends and should evaluate their compliance with their obligations accordingly.
Increased criminal enforcement. First, there has been an increase in criminal employment tax prosecutions. Some of the cases that have been prosecuted involve egregious behavior, and prosecutions in those situations should come as no surprise. Here are two examples:
But not all of the cases that have been prosecuted involved rogue lawyers or lavish personal expenses. Employers who use tax money to pay creditors due to cash flow problems are potentially exposed to criminal prosecution. Each violation has significant potential consequences:
And some of the cases that the government has pursued have involved relatively modest stakes: In North Carolina, a business owner was prosecuted in a case that involved $75,000 in employment taxes. Historically, a case of that size would almost certainly have been handled as a civil tax matter.
More prosecutions are presumably on the way, as CI, the criminal investigation unit of the IRS, recently indicated that it opened 206 employment tax investigations in 2016.
The lesson is relatively straightforward: All employment tax cases need to be viewed as potential criminal investigations. In that context, employers need to be particularly careful in discussing employment tax issues with their accountant, as their communications may not be privileged:
Increased civil enforcement. Second, civil enforcement actions by the Department of Justice have become more prevalent; of particular note are cases seeking injunctive relief against non-compliant employers:
While less drastic than a criminal prosecution, these civil cases have real teeth: Once an injunction is in place, a violation of any of its requirements can trigger civil or criminal contempt proceedings against the employer, its managers, and its principals. In a speech in November of 2016, the former head of the Tax Division indicated that in the two previous years, fifty-five injunction actions had been filed against employers and forty-seven permanent injunctions had been granted.
Ongoing violations of an injunction can have additional consequences beyond punishment for contempt. In a recent case in Philadelphia, a federal judge modified an existing injunction and directed that a business was shut down and that its principals barred from opening a similar business for ten years. United States v. Baker Funeral Home, Ltd., No. 11-7316, 2016 U.S. Dist. LEXIS 100018, *67-*78 (E.D. Pa. July 13, 2016). On March 9th, the Tax Division issued a press release announcing that a federal judge in the Eastern District of Washington had entered a similar order closing down a dental practice.
State and local tax authorities impose similar withholding requirements on employers, and many of these are modeled on the federal provisions. Federal tax enforcement initiatives have a tendency to trigger similar reactions at the state and local level. As a consequence, the prospect that state or local authorities might pursue criminal prosecution or a civil injunction should also be considered.
For example, on March 9th, Pennsylvania Attorney General Josh Shapiro announced criminal charges against the owner of a pizza shop in York County for failure to pay sales tax and employment tax. Whether this is the start of a trend or simply a case involving a particularly obdurate taxpayer remains to be seen. The Attorney General’s press release does note that cooperation between the Bureau of Criminal Investigation and the Department of Revenue “is important and ongoing.”
For employers, there has never been a worse time to fall behind on employment taxes. That makes it a good time to evaluate whether existing employment tax practices are adequate.
Disclaimer: This post does not offer specific legal advice, nor does it create an attorney-client relationship. You should not reach any legal conclusions based on the information contained in this post without first seeking the advice of counsel.
We’ve all struggled with what to do when we’re given conflicting orders. Grandma says “have some pudding,” and Pink Floyd’s Roger Waters responds, “how can you have any pudding if you don’t eat your meat?!” Employers are increasingly facing similar (though perhaps less-existential) wage-related conflicts.
We’ve recently written about the steady stream of states and localities that have implemented their own minimum-wage laws. These laws, which often create rights and obligations in addition to increased minimum-wage rates, can give some employers heartburn befitting a meal of pot-roast and pudding.
Sure, employers may be required to pay workers more in some places under these laws. But multi-state employers often also have to decide whether to implement varying pay policies that mirror the patchwork of local, state, and federal laws, or to implement blanket nationwide policies that are based upon the highest applicable standards.
Recent tip-credit developments illustrate these points.
Example: Colorado’s New Tip-Ownership Option
These decisions can become even more complicated when provisions intersect. For example, on January 1, 2017, Colorado’s new minimum wage of $9.30 per hour took effect. The state also raised the direct cash wage to at least $6.28 per hour for tipped employees for whom an employer takes the balance as a “tip credit” under state law. (See our previous posts on tip-credits for more information – the details are not as simple as you might assume.)
Presumably as part of a lawmakers’ bargain underlying these changes, Colorado’s legislature also added a provision that supposedly allows employers to claim ownership of an employee’s tips. The employer must display a “conspicuous notice” to the general public stating that all tips are the employer’s property, rather than the employee’s.
We say “supposedly”, because Colorado’s new tip-ownership provision directly conflicts with the U.S. Department of Labor’s current tip-credit regulations under the federal Fair Labor Standards Act. Those regulations prohibit an employer from diverting or asserting control over an employee’s tips for any reason, except:
◊ To the extent necessary to cover a proper credit against its FLSA minimum-wage obligations to the employee; or
◊ To use them in furtherance of a valid tip pool.
Litigation is ongoing as to whether USDOL’s position is valid with respect to employers who take no FLSA tip credit. But at least some courts have backed the USDOL in this respect.
Consequently, Colorado’s new “conspicuous notice” tip-ownership provision will be of no help to employers who are using the FLSA tip-credit for workers in that state. Moreover, even employers who are not taking an FLSA tip-credit for Colorado workers must keep in mind the possibility that eventually a court consensus will emerge to the effect that asserting control over their employees’ tips runs afoul of the FLSA.
The Bottom Line
The Colorado illustration is by no means the only one.
For instance, New Hampshire’s minimum-wage rate is currently the same as the FLSA’s − $7.25 an hour. But that state’s law requires a higher direct-wage for tipped workers − $3.27 an hour − than today’s $2.13-an-hour FLSA figure. An employer of tipped workers in New Hampshire must ensure that the employees’ pay plan properly melds both state and federal obligations.
As another example, California takes a different approach altogether. That state’s law requires employers to pay tipped workers the full state minimum wage, without regard to tips.
Employers must take into account the requirements and restrictions of all jurisdictions in which they employ tipped workers, as well as how these provisions interact with the FLSA’s requirements. Sometimes the correct approach is obvious, but sometimes it is not. Given that many new state and local requirements take effect early in the year, now is a good time for employers to make sure that they are in compliance with all applicable laws.
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]]>New Policymakers, New Policies
With the election of Donald Trump, we expect a decidedly pro-business shift in labor and employment policy. Republicans will gain control of not only the oval office, but also both houses of Congress in 2017. Mr. Trump will likely move quickly to appoint a conservative justice to the Supreme Court to replace Antonin Scalia, and will control federal agencies that govern wage and hour laws, union formation, and other significant employment issues. Notably, two of the five slots on the National Labor Relations Board (NLRB) are currently vacant and another member’s five-year term will expire next December. Mr. Trump will almost certainly fill the two immediate vacancies on the NLRB with Republicans, thus shifting majority control of the agency very early in his presidency.
We will also see the appointment of other key employment policy positions within the federal labor agencies, including the Secretary of Labor, Solicitor of the U.S. Department of Labor, Assistant Secretary for Occupational Safety and Health, and Administrator of the Wage and Hour Division. Just last week it was announced that Mr. Trump had selected Andrew F. Puzder as Secretary of Labor. Mr. Puzder is chief executive of the company that operates the fast food outlets Hardee’s and Carl’s Jr. and an outspoken critic of the worker protections enacted by the Obama administration. During his career, he has opposed efforts to expand eligibility for overtime pay, has resisted significant minimum wage increases, and argued that the Affordable Care Act is responsible for a “restaurant recession.”
Joint Employer Liability Under the Microscope
The sense of unpredictability and anticipation that this election has generated in the business community is perhaps no more pronounced than in the hospitality industry, where recent rulings by the NLRB have upended the traditional hotel franchisor/franchisee model by lowering the bar for a finding of joint-employer liability.
The NLRB’s decision in the Browning-Ferris Industries (BFI) case (currently on appeal) could create myriad issues in the hotel industry, including conflict between franchisors and franchisees over which is liable when lawsuits arise, as well as increased liability when working with contractors. This has been an area of high priority for hotel operators and their legal counsel over the past year, but it is possible that the NLRB and EEOC under a Trump regime will adopt a more franchisor- and employer-friendly stance on the issue.
In its highly controversial BFI decision, the NLRB revised its test for the joint employer doctrine, dramatically easing the criteria for a company to be considered a joint employer. For many decades, the traditional joint employer test focused on governance, wage and supervision decisions, and control. The test excluded “limited and routine” oversight and supervision, because “hiring, firing, discipline, supervision, and direction” were not considered essential or meaningful to the employment relationship. Under the new standard, a finding of joint employment is much broader, and only requires that a business exercise “indirect” (or potential) control over workers. Hence, under the new test, a company may not only be held liable for its own labor violations, but also for those of the other entity.
The recent joint employer rulings affect all companies that outsource any aspect of their business. This includes contractors, suppliers or even outsourced cleaning or IT work. Unfortunately for hoteliers, the appellate court is unlikely to adjudicate the matter before year end, thereby ensuring that joint employment will remain a critical labor issue in the interim.
It remains to be seen how the appeal will play out in the courts, and to what extent the Republican administration will relax this joint employer standard. In its appeal, BFI contends that the NLRB’s new joint employer standard runs counter to the prevailing definition of “employee” under federal law, destabilizes collective bargaining relationships and is “hopelessly vague.”
Hotels and resorts should immediately evaluate the following: 1) Employment Practices Liability Insurance (EPLI) policies, to ensure franchisees are covered; 2) Policies concerning which positions are filled by full-time or part-time employees; 3) Employee benefits, including holiday pay and sick leave; and 4) How work is assigned and job duties are delegated.
Minimum Wage and Overtime Move Front and Center
Employee wages are always a pressure point within the hospitality industry. While some states and municipalities have recently increased the minimum wage, the federal minimum wage remains at $7.25 per hour. While, early in his campaign, Mr. Trump suggested that he would support a federal minimum wage increase to $10 per hour, it is more likely that a Trump administration will choose to leave the issue to state and local legislatures rather than pushing Congress to act at the federal level.
With respect to overtime, earlier this year the U.S. Department of Labor (DOL) published a final rule updating the regulations governing the exemption of executive, administrative, and professional employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). This rule doubles the annual salary threshold that generally determines who qualifies for overtime pay under federal law from $23,660 to $47,476.
This rule dramatically impacts hotels and restaurants with mid-management employees. The rule had been scheduled to go into effect on Dec. 1, 2016, however, in September, 21 states joined together to file a lawsuit alleging that the new overtime regulations are an unconstitutional exercise of power and on November 22, 2016, a Texas federal judge blocked the rule nationwide. As Trump transitions into power it remains relatively unclear what his position will be on the matter. Some have predicted that the Trump administration might reverse course and adopt a more business-friendly approach to the “white collar” employee overtime threshold, while others anticipate that Trump may support the significant extension of overtime pay, as it stands to positively impact many of his core voters.
Conclusion
There are many other employment-related issues triggered by the recent presidential election, but the topics addressed above should be front-of-mind for the hospitality industry. For now, hotel owners, operators and franchisors should watch agency appointments and pending federal lawsuits closely, as they will have a substantial impact on your business.
This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.
]]>The answer is clear: The election results do not suspend or reverse those changes.
The Countdown Continues
By their own terms, the new regulations are scheduled to take effect automatically on December 1, 2016. Mr. Trump does not become President Trump until January 20, 2017. The increased salary-threshold of $913 a week (and other revisions) will have been in place for about 50 days at that point.
Until the incoming administration takes office, the state-of-play remains largely the same as we have discussed in earlier posts (see here and here).
Future Changes?
Whether the regulatory revisions will be cut-back or eliminated in some way in the future is in the realm of speculation at this point.
Of course, one possibility is that, given the multitude of matters that will be competing for his attention, then-President Trump will take no action. It is also conceivable that, as a matter of policy, he will be disinclined to uproot the new regulations.
It is unlikely that President Trump will be in a position simply to reverse the changes immediately upon his inauguration. Moreover, any move to do so will probably result in litigation and yet-more uncertainty.
Perhaps President Trump will direct the U.S. Labor Department to commence a new rulemaking process, subject to notice and comment, with the goals of undoing the earlier revisions, setting lower thresholds for the salary requirement and for the “highly compensated” version of the exemptions, eliminating the three-year “update”, and so on. How long and what form this process would take, and what could or would be done in the meantime, are currently unpredictable.
Maybe President Trump would direct USDOL to adopt a non-enforcement policy with respect to the increased thresholds, pending further action. But even if he does, this would not shield employers from private FLSA lawsuits based upon then-in-effect regulations.
Possibly Congress will pass remedial legislation that President Trump will then sign. Again, though, no one can know at present whether or when this might occur, or what any such legislation might say.
The Bottom Line
Tuesday’s election results have not derailed the exemption changes.
For now, management acts at its peril in assuming that the revised regulations will not go into effect on December 1.
Click here for the original article.
]]>Although the Obama administration’s effort will be largely symbolic, and have no legal effect, it is important as it may be the first in a series of steps to apply pressure to states or employers that allow restrictions on employee competition…
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]]>California’s Compassionate Use Act (CUA) of 1996 decriminalized the use of marijuana for medicinal purposes. However, it did not legalize marijuana. It only shields medical users and caregivers from criminal liability. Recently, Governor Brown signed into law three bills (Assembly Bill 266, Assembly Bill 243, and Senate Bill 643) that comprise the California Medical Marijuana Regulation and Safety Act (MMRSA). While the MMRSA deals with various medical marijuana regulations, it does nothing to impede an employer’s right to maintain a drug free workplace.
At this point, there is no federal or state law prohibiting employers from disciplining or terminating employees for the use of medical marijuana, even when used to treat a disability. In 2008, the California Supreme Court stated, in Ross v. RagingWire Telecommunications, Inc., that the CUA did not address employment rights and duties so an employee fired for his use of medical marijuana could not sue his former employer for disability discrimination or wrongful termination.
Under federal law, the Americans with Disabilities Act (ADA) generally requires that employers provide a reasonable accommodation to a “qualified individual with a disability” (except under undue hardship). However, the ADA does not protect individuals who are using marijuana for medical purposes, even when such use is lawful under state law. Under the ADA, illegal drug use does NOT include use of drugs “taken under supervision by a licensed health care professional, or other uses authorized by the Controlled Substances Act or other provision of Federal law.” Medical marijuana remains illegal under the federal Controlled Substances Act and the ADA specifically precludes any employee or applicant who is engaging in the illegal use of drugs from being considered a qualified individual with a disability.
But, California will have an initiative on the November 2016 ballot for full legalization of marijuana. All indications thus far appear that the initiative will likely pass. Regardless of whether the measure passes or not, the landscape continues to change and it is only a matter of time before the issue of accommodations is re-visited.
Where does that leave employers and how can you prepare?
While California employers cannot refuse to hire or fire individuals based on their usage of medical marijuana, they can require employees to pass a drug test as a pre-employment condition provided all applicants are tested. More importantly, employers can still prohibit employees from possessing or being under the influence of cannabis while at work.
Employers should take a close look at their current zero-tolerance or no drug policy to ensure that it specifically includes medical marijuana and cannabis products in its prohibition of illegal drug use or being under the influence during work hours. While not required, employers may want to consider verbiage that allows for further discussion if there is a condition that may require possible accommodations.
Keep in mind that a reasonable accommodation does not mean that employees have the right to “smoke breaks” or otherwise use or be under the influence of cannabis while at work. Reasonable accommodations could include a modified work schedule or an assessment and re-distribution of work load depending upon the circumstances. Of course, the employee would still need to provide medical documentation that the condition affects one or more life activities.
Of particular interest will be the outcome of a case involving former Kohl’s employee, Justin Shepherd, who was fired after testing positive for medical marijuana consumed off duty. After being injured at work, Shepherd consented to a drug test. Kohl’s terminated Shepherd after he tested positive for trace amounts of marijuana metabolites even after he provided documentation that he was being treated with medical marijuana. Shepherd maintained that his cannabis usage occurred at home four days before his shift.
While Kohl’s had a policy that prohibited employees from possessing or consuming alcohol or illegal drugs, or being intoxicated, it also contained language related to its operations in California and other states with medical marijuana laws. Specifically, the policy stated that “No person will be discriminated against in hiring, termination or in imposing any term or condition of employment or otherwise be penalized based upon either (a) the Person’s status as a registered medical marijuana cardholder; or (b) A registered medical marijuana cardholder’s positive drug test for marijuana components or metabolites.”
Shepherd’s lawsuit claims Kohl’s violated state law prohibiting disability discrimination and that the drug test and consideration of his cannabis use during the termination process violated his rights. In December 2015, Kohl’s successfully moved the case to the US. District Court, Eastern District. A Motion for Summary Judgment has been filed by Kohl’s and is pending. A further Settlement Conference has also been scheduled for mid-August 2016.
Without question, the issues of medical marijuana and the workplace are still developing. Employers should regularly review drug-free workplace policies as the legal landscape continues to evolve. Click here for the original article.
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