A complicated workplace

Employers need to be prepared for new labor and employment laws


President Obama organized his campaign around the promise of bringing change to the U.S. and an end to "business as usual" in Washington, D.C. The labor movement embraced Obama's promises and invested significantly in ensuring his presidency.

During his first 100 days as president, Obama not only kept his promises—he exceeded them. For better or worse, there is no doubt Obama's term will continue to bring dramatic changes to the U.S. workplace, as well as courtrooms tasked with deciding labor and employment matters. Employers must be familiar with existing and potential employment-related legislative and executive initiatives to ensure their workplaces are fully compliant.

Existing legislation

From the successful passage of the Americans with Disabilities Act Amendments Act (ADAAA) of 2008 to the new Family and Medical Leave Act (FMLA) regulations, the labor movement already had begun making significant employee-friendly strides and revolutionizing the U.S. workplace before Obama became president. And employers still are grappling with the significant changes posed by such legislation.

During this delicate adjustment phase, Obama has asked employers to adapt to an even larger change to labor and employment laws—the Lilly Ledbetter Fair Pay Act. The law reverses U.S. Supreme Court precedent by allowing pay discrimination claims arising from discriminatory actions that took place outside the applicable statute of limitations. The employee-friendly Lilly Ledbetter Fair Pay Act drastically increases the likelihood of successful pay discrimination claims and expands employers' exposures to such claims.

Following is a look at how the ADAAA, new FMLA regulations and Lilly Ledbetter Fair Pay Act affect you and your employees.

The ADAAA

Outraged by the alarming number of lower court decisions ruling that numerous conditions were not "disabilities" under the existing Americans with Disabilities Act (ADA) of 1990, Congress enacted the ADAAA, which was signed into law by President George W. Bush Sept. 25, 2008. Since the ADAAA's effective date Jan. 1, the law has changed the treatment of disability claims in the workplace and courtroom. It significantly has broadened the definition of "disability" and lowered the standard for determining whether an impairment substantially limits an individual's major life activities.

Specifically, the ADAAA broadens one of the ADA's three disability definitions—the "regarded as" category, which allows employees to sue their employers based on the theory that they were regarded as disabled. The ADAAA clarifies that an individual can meet the definition of being "regarded as" disabled even if the employer does not perceive the impairment as limiting a major life activity, such as performing manual tasks, seeing and breathing.

Additionally, the ADAAA modifies the requirement that a covered disability must "substantially limit" an employee's major life activities. It lightens the provision by prohibiting consideration of how mitigating measures (such as hearing aids, medications and prosthetic limbs) affect a disability. In addition, it radically expands the definition of "major life activities" to include "major bodily functions," such as immune system, bladder, respiratory and reproductive functions.

The ADAAA also makes it easier for individuals to garner coverage and protection under the ADA. For more information about the ADAAA, see "Redefining disabled," January issue, page 42.

FMLA regulations

In response to the military leave provisions of the National Defense Authorization Act of 2008; several Supreme Court decisions; extensive discussions with various stakeholders (employee- and employer-friendly entities); and 15 years of experience enforcing and administering the FMLA, the U.S. Department of Labor (DOL) drafted new FMLA regulations to clarify existing provisions and alleviate friction between employers and employees resulting from various ambiguities in the FMLA. The new FMLA regulations became effective Jan. 16 and have revolutionized family and medical leave.

The lengthy regulations and commentary (nearly 750 pages) have perplexed employers, employees and legal professionals. The new FMLA regulations affect almost every aspect of the FMLA. Most notably, they dramatically change the definition of "serious health condition"; application of an employer's policies and practices; release of FMLA claims; employer and employee notice requirements; employee eligibility; medical certification; and intermittent leave. Although hailed as neutral and just, many of these changes have presented significant problems for employers attempting to enforce their FMLA policies.

In addition to those changes, the FMLA regulations create an entirely new set of regulations for the Military Family Leave Amendments enacted January 2008. This set of regulations creates two new forms of military family leave entitlements: Military Caregiver Leave and Qualifying Exigency Leave.

Military Caregiver Leave allows an employee to take up to 26 workweeks of leave to care for a covered service member who has a serious injury or illness. The employee must be the covered service member's spouse, child, parent or next of kin. The covered service member must be a member of the Regular Armed Forces, National Guard or National Reserves who is undergoing medical treatment, recuperation or therapy; otherwise in outpatient status; or on the temporary disability retired list.

In contrast, Qualifying Exigency Leave simply provides employees with another qualifying reason to take some or all of their regular 12 workweeks of leave. An employee may take up to 12 workweeks of leave for any "qualifying exigency" if a spouse, parent or child is on active duty or has been notified of an impending call or order to active duty in support of a contingency operation. The family member must be a member of the National Guard or National Reserves or retired member of the Regular Armed Forces. Active members of the Regular Armed Forces are excluded from coverage under Qualifying Exigency Leave because active members' families are accustomed to disruptions in their lives caused by active members' ongoing military service.

Qualifying Exigency Leave may not be taken to make common, routine arrangements related to everyday life. Instead, qualifying exigencies are limited to short-notice deployment; military events and related activities; childcare and school activities; financial and legal arrangements; military-provided counseling; rest and recuperation visits; post-deployment activities; and other activities agreed to by an employer and employee.

Although the FMLA regulations were accompanied by sample forms to clarify new and existing FMLA obligations and rights, employers still are grappling with the significant modifications to "business as usual" in their respective workplaces. For more information about the new FMLA regulations, see "Granting leave," March issue, page 40.

The Lilly Ledbetter Fair Pay Act

In response to the Supreme Court's infamous 2007 decision in Ledbetter v. Goodyear Tire and Rubber Co.—when the court held that the statute of limitations for equal pay claims begins when the discriminatory pay decision is made and not each time the employee receives a paycheck affected by the initial discriminatory pay decision—Congress enacted the Lilly Ledbetter Fair Pay Act. Obama signed it into law Jan. 29.

The law expressly reverses the Supreme Court's decision and subsequent precedent, renewing the statute of limitations for pay discrimination claims with each new paycheck, benefit or other compensation.

The Lilly Ledbetter Fair Pay Act's provisions apply to pay discrimination claims under anti-discrimination laws such as the ADA, Rehabilitation Act, Age Discrimination in Employment Act and Title VII of the Civil Rights Act, covering protected statuses such as race, national origin, religion, age and disability.

The law applies retroactively to pay discrimination claims pending on or after May 28, 2007. As a result of the law's wide application and expansive provisions, employers have scrambled to ensure their compensation policies and litigation strategies are compliant. The Lilly Ledbetter Fair Pay Act is viewed as an enormous victory for employees.

Executive Orders

On Jan. 30—only one day after signing the Lilly Ledbetter Fair Pay Act into law—Obama issued three employee-friendly Executive Orders. Although the orders apply exclusively to federal contractors, they remind private employers about the types of changes they likely will continue to face.

The "Notification of Employee Rights Under Federal Labor Laws" Executive Order states government contractors must post notices advising employees of their right to organize under the National Labor Relations Act. The order also removes Bush's requirement that the notice include language regarding employees' right not to organize and right to protest the unlawful use of nonunion member dues (known as the "Beck rights"). This Executive Order clearly communicates Obama's desire to facilitate and perhaps encourage unionization.

The "Nondisplacement of Qualified Workers Under Service Contracts" Executive Order requires that a predecessor employer's workers who work under government service contracts be hired by the new contractor. There is, however, a limited exception—the new contractor does not have to "automatically" hire all of the predecessor employer's workers if doing so would result in laying off or discharging employees who have worked for the new contractor for at least three months immediately preceding the contract's commencement.

This order eliminates new contractors' right to separately interview and make independent decisions about hiring the predecessor employer's workers. The elimination of a contractor's "employment decision" has been viewed as controversial because it removes employers' right to select and manage their work forces.

The "Economy in Government Contracting" Executive Order prevents federal contractors from being reimbursed for expenses incurred in efforts to influence employees' decisions to form unions or engage in collective bargaining. This means federal contractors will have to pay out of pocket for common anti-union management tools such as preparing and distributing materials, hiring and consulting legal counsel and other consultants, and holding meetings to strategize regarding anti-union efforts. Although Obama's clear goal of eliminating employee bullying and harassment regarding unionization is laudable, the Executive Order's overbroad language has been critiqued as an attempt to silence employers' right to respond to employees' unionization efforts.

Collectively, these three Executive Orders clearly communicate the Obama administration's employee-friendly message. Employers should familiarize themselves with these orders; the Obama administration may seek to implement similar changes in the private sector.

Stimulus law provisions

On Feb. 17, Obama signed the American Recovery and Reinvestment Act of 2009 into law. The act contains two employee-friendly provisions that many employers have overlooked: the COBRA extension provisions and Economic Stimulus Package Whistleblower Protection provisions.

The COBRA extension provisions require an employer subsidy of COBRA premiums for "involuntarily" terminated employees, such as employees who were terminated unilaterally by an employer without the employees' implicit or explicit consent. Employees are only responsible for 35 percent of their COBRA premiums; employers are responsible for the remaining 65 percent. However, the employer will be reimbursed via a payroll tax credit and/or the U.S. Secretary of the Treasury.

This employee-friendly change puts the onus on employers to provide extended COBRA benefits. Nevertheless, many employers agree the COBRA provisions, in tandem with employer reimbursement, are a positive way to address the U.S.' current health care crisis.

The Economic Stimulus Package Whistleblower Protection provisions protect employees from retaliation for reporting their employers' abuse of economic stimulus funds. The protections extend to employees making internal disclosures of abuse, waste or mismanagement of stimulus funds to their managers or other individuals or entities with the authority to investigate. Employees are protected only if they had a reasonable belief the reported conduct was improper.

The whistleblower provisions apply exclusively to private employers who receive stimulus funds. Furthermore, the provisions provide remedies, including back pay, reinstatement, compensatory damages, costs and attorneys' fees. Although these provisions potentially could expose employers to significant liability, many employers have expressed approval of the measure as a way of ensuring fiscal responsibility.

Anticipated legislation

The ADAAA, FMLA regulations and Lilly Ledbetter Fair Pay Act are only the beginning. Employers must be aware of and prepare for significant changes planned for the near future, including the controversial Employee Free Choice Act (EFCA) and other employee-friendly legislation.

EFCA

Perhaps the most controversial pending legislation is the EFCA. The EFCA has undergone various permutations since its initial introduction in 2007; however, the "key changes" proposed remain a top priority not only for unions and other employee-friendly groups but also for the Obama administration. Legislative experts, lobbyists, unions and employers agree on one thing: Some version of the EFCA will become law during Obama's presidency.

The EFCA would amend the National Labor Relations Act (NLRA) in several remarkable ways, including:

  • Eliminating secret-ballot elections. The EFCA would eliminate secret-ballot elections by allowing union certification to be approved solely through the employee card check procedure.
  • Requiring bargaining for an initial contract to begin within 10 days of certification. Furthermore, the EFCA states that if the parties do not reach agreement within 90 days, either side may notify the Federal Mediation and Conciliation Service (FMCS) to request mediation. The FMCS then has 30 days to attempt to bring the parties to agreement.
  • Mandatory binding arbitration. If no agreement is reached, the FMCS is required to refer the parties to mandatory binding arbitration. The arbitrator would have complete power to decide the initial contract's terms, including wages, benefits and working conditions. The decision would be binding for two years unless the parties agree otherwise in writing. Notably, the EFCA does not provide arbitrators with any guidance regarding the applicable procedures when formulating the initial contract, subjects that should be included in the initial contract or factors that should guide the arbitrator's decision regarding the initial contract terms.
  • Stiffer penalties for employer violations of the NLRA. The EFCA would require the National Labor Relations Board (NLRB) to seek injunctive relief against employers for certain alleged NLRA violations and to impose back pay and liquidated damages—referred to as "triple back pay." In fact, the NLRB would be required to impose civil penalties of up to $20,000 per violation. However, the EFCA in no way modifies penalties for union violations of the NLRA.

In summary, the EFCA would make it easier for unions to organize employees, a result that by itself is neither intrinsically negative nor positive for most of the American public. However, it also would require employers to abide by collective-bargaining agreements decided by third-party arbitrators who may know nothing about employers' particular businesses or industries. The law is expected to increase the number of unfair labor practice charges based on increased union and employee protections and would expose employers to possible injunctions and significant monetary damages. Although Congress is widely divided regarding the EFCA's merits, most expect some version of the EFCA will become law. Employers must be prepared to respond when it does.

The RESPECT Act

The Re-Empowerment of Skilled and Professional Employees and Construction Trade Workers Act (RESPECT Act) was introduced in the Senate March 22, 2007. Many of the RESPECT Act's provisions are geared toward overturning previous NLRB decisions holding that certain skilled, professional and construction trade employees are "supervisors"—and thus excluded from NLRA coverage—even though they cannot hire, fire or discipline other employees. These cases held that if employees spend 10 percent or more of their time engaged in supervisory activities, they are considered supervisors and ineligible for union membership.

Section 2(11) of the current NLRA defines "supervisor" as any individual "having authority … to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing, the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment."

The RESPECT Act eliminates the words "assign" and "responsibly direct" from the definition, granting union membership to individuals who only assign or direct work. The law also adds "and for the majority of the individual's worktime" to the definition so individuals must spend a majority (more than 50 percent) of their time performing supervisory duties to be deemed supervisors.

The RESPECT Act drastically reduces the number of employees who are exempt from union membership because of supervisory duties or status. As a result, the law makes it more difficult for an employer to discipline a perceived supervisor for soliciting employee signatures on union authorization cards.

Working Families Flexibility Act

The proposed Working Families Flexibility Act would require employers, including nonunion employers, to negotiate employee requests relating to the number of hours the employee is required to work, as well as when and where the employee is required to work. It states that within 14 days of an employee's request to modify his or her work hours, schedule or location, an employer must meet with the employee; within 14 days of that meeting, the employer must give the employee a written decision.

If the employer rejects the employee's request, the decision must state the grounds for rejection and include the request's identifiable cost; overall financial resources involved; relationship between the facilities (if multiple); request's effect on the employer's ability to meet customer demand; and/or other factors specified by the U.S. Secretary of Labor.

Under the proposed terms, the employee may request reconsideration of the employer's decision. If requested, the employer must schedule another meeting with the employee and his or her representative within 14 days of the request. If the employer's decision to deny the request stands, the employer must provide another written decision within 14 days of that meeting.

The employee retains the right to trigger a federal investigation by DOL. Remedies would include civil fines and—if retaliation is alleged—reinstatement, promotion, back pay, and a change in employment terms and conditions. Through this system of negotiation, this law would limit employers' decision-making authority over employees.

The Arbitration Fairness Act

The Arbitration Fairness Act was introduced in July 2007. It seeks to amend the Federal Arbitration Act to make predispute arbitration agreements involving employment disputes unenforceable. It also would invalidate numerous arbitration clauses in employment agreements and collective bargaining agreements, requiring potentially costly litigation for employers.

The Paycheck Fairness Act

The Paycheck Fairness Act would give the Equal Pay Act more "teeth" by limiting one of the Equal Pay Act's three statutory affirmative defenses for employers, which allows employers to escape liability under the Equal Pay Act by showing the disparity in pay is because of a "reason other than sex." The law would make the defense applicable only if the employer proves the pay differential actually is based on a reason other than an employee's sex and the reason is related to job performance. It also would explicitly prohibit retaliation under the Equal Pay Act and allow for compensatory and punitive damages.

The FOREWARN Act

The Worker Adjustment and Retraining Notification (WARN) Act Amendment, or the FOREWARN Act, would amend the WARN Act in various ways. It would make the WARN Act applicable to employers with 50 or more employees (instead of the current 100 employees). It also would reduce the "mass layoff" threshold to apply to employers with 100 employees (rather than the current 500 employees). Additionally, it would increase from 60 days to 90 days the notice requirement that employers must provide to affected employees and appropriate government officials. Finally, the act would double the amount of back pay entitlement if the required notice is not provided.

ENDA

The Employment Non-Discrimination Act (ENDA) prohibits employment discrimination based on sexual orientation (not gender identity) and would apply to employers, employment agencies and labor organizations. If passed, it would amend Title VII of the Civil Rights Act to include sexual orientation as a protected category.

The Civil Rights Act of 2008

The Civil Rights Act of 2008 provides for sweeping changes to numerous statutes. Most notably, it would lower the burden of proof for an award of attorneys' fees; prohibit arbitration agreements in employment contracts; allow for recovery of expert fees; remove damage caps from Title VII claims; prohibit the denial of back pay to illegal immigrants; expand equal pay claims under the Fair Labor Standards Act (FLSA); permit compensatory and punitive damages for FLSA claims; and make it more difficult for employers to use the "reason other than sex" affirmative defense for Equal Pay Act claims. It is a "catch-all" encompassing the key provisions of other pending employee-friendly legislation.

The Family Friendly Workplace Act

The Family Friendly Workplace Act would amend the FLSA by authorizing private employers to provide compensatory time off to employees at a rate of 1 1/2 hours per hour of employment for which overtime compensation is required. The act places a compensatory time-off accrual cap of 160 hours per employee per year. Employers also would be required to reimburse employees at the end of the year for any unused compensatory time off.

FMLA expansions

Congress currently is reviewing proposed legislation affecting the FMLA. Four of these proposed bills merit special attention:

  • The FMLA Enhancement Act would amend the FMLA to allow employees to take additional "parental involvement leave" to participate in or attend their children's and grandchildren's educational and extracurricular activities.
  • The Family Fairness Act would amend the FMLA to remove the requirement that to become eligible for FMLA leave, an employee must have served at least 1,250 hours during the preceding 12-month period.
  • The Healthy Families Act would expand the FMLA by requiring employers with at least 15 employees to provide a minimum of seven days of paid sick leave to employees who work at least 30 hours per week and a prorated number of days for employees who work less than 30 hours per week.
  • The Family Leave Insurance Act would create an FMLA insurance fund (comprising employer and employee contributions) to provide for paid FMLA leave.

These proposals, along with many others being introduced daily, dramatically would expand FMLA leave rights and obligations. If these amendments pass, employers can expect a significant increase in the number of FMLA leave requests.

Best practices

What should you do to ensure your workplace is prepared for the significant changes heralded by the Obama administration? Consider the following:

  • Develop strong policies that comply with new and anticipated legislation, particularly FMLA and compensation policies.
  • Apply all policies routinely and consistently to avoid discrimination and retaliation claims.
  • Consult with your legal counsel to establish a strategy for successfully navigating the Obama administration's labor and employment agenda.
  • Train supervisors, managers, human resources personnel and other administrators to strategically comply with new and anticipated legislation. Not only is the investment in their education merited, but in these times of continuous change, education is required.

Obama has continued to support increasingly employee-friendly legislation. Passage of the Lilly Ledbetter Fair Pay Act marked the beginning of a new era of employee-friendly legislative initiatives. The proposed legislation previously discussed, particularly the EFCA, promise to dramatically alter the way you manage your workplace. You can expect to see increased employee and union activity and demand on your resources.

Working closely with management, legal counsel and other knowledgeable groups is necessary to prepare your workplace for a new labor and employment landscape. It is imperative you track new legislative initiatives to ensure timely compliance. Change is coming; the question is, will you be prepared?

Jason C. Kim is a partner and Gray A. Mateo is an associate in the labor and employment practice group of the Chicago-based law firm Neal, Gerber & Eisenberg LLP.

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