Inside This Issue
1. Guidance as to Employee Handbooks Issued by NLRB General Counsel
2. Can an Employee be Terminated for Taking Both FMLA Leave and Unexcused Absences?
3. Under the Illinois Human Rights Act and the ADA, Disability Coverage is Different
4. Discrimination Claims Under the Illinois Human Rights Act (“IHRA”)
Guidance as to Employee Handbooks Issued by NLRB General Counsel
Finally, on June 6, 2018, the General Counsel of the National Labor Relations Board issued a memorandum providing guidance on how employer rules should be interpreted following the Board’s December 2017 holding in Boeing.
Under the new guidance standard, there will be three categories of work rules: (1) rules that are generally lawful to maintain; (2) rules warranting individualized scrutiny; and (3) rules that are unlawful to maintain.
Category 1: Rules That Are Generally Lawful To Maintain
The types of rules in this category are generally lawful. Some Category 1 lawful rules are:
A. Civility Rules
The Board has placed this type of rule in Category 1. The following examples are lawful:
- “Behavior that is rude, condescending or otherwise socially unacceptable” is prohibited.
- Employees may not make “negative or disparaging comments about the . . . professional capabilities of an employee”
- “Disparaging . . . the company’s . . . employees” is prohibited.
- Rude, discourteous or unbusiness like behavior is forbidden.
B. No-Photography Rules and No-Recording Rules
Some lawful rules:
- “[U]se of [camera-enabled devices] to capture images or video is prohibited.”
- Employees may not “record conversations, phone calls, images or company meetings with any recording device” without prior approval.
C. Rules Against Insubordination, Non-cooperation, or On-the-job Conduct that Adversely Affects Operations
Some examples of lawful rules are:
- “Being uncooperative with supervisors . . . or otherwise engaging in conduct that does not support the [Employer’s] goals and objectives”
- “Insubordination to a manager or lack of . . . cooperation with fellow employees or guests” is prohibited.
D. Disruptive Behavior Rules
Some examples of such rules that are lawful include:
- “Boisterous and other disruptive conduct.”
- Creating a disturbance on Company premises or creating discord with clients or fellow employees.
E. Rules Protecting Confidential, Proprietary, and Customer Information or Documents
Certain types of confidentiality rules also belong in Category 1 and are lawful, such as:
- “[I]nformation concerning customers . . . shall not be disclosed, directly or indirectly” or “used in any way.”
- Do not disclose confidential financial data, or other non-public proprietary company information. Do not share confidential information
regarding business partners, vendor, or customers.
- No unauthorized disclosure of business secrets or other confidential information.
F. Rules against Defamation or Misrepresentation
Examples of such lawful rules are:
- “[M]isrepresenting the company’s products or services or its employees” is prohibited.
- Do not email messages that are defamatory.
G. Rules against Using Employer Logos or Intellectual Property
Examples of such lawful rules are:
- Employees are forbidden from using the Company’s logos for any reason.
- “Do not use any Company logo, trademark, or graphic [without] prior written approval.”
H. Rules Requiring Authorization to Speak for Company
Rules requiring authorization to speak for the company or requiring that only certain persons speak for the company fall into Category 1.
Examples of such rules are:
- The company will respond to media requests for the company’s position only through the designated spokespersons.
- Employees are not authorized to comment for the Employer.
I. Rules Banning Disloyalty, Nepotism, or Self-Enrichment
Examples of lawful rules are:
- Employees may not engage in conduct that is “disloyal . . . competitive, or damaging to the company” such as “illegal acts in restraint of
trade” or “employment with another employer.”
- Employees are banned from activities or investments . . . that compete with the Company, interferes with one’s judgment concerning the
Company’s best interests, or exploits one’s position with the Company for personal gain.
Category 2: Rules Warranting Individualized Scrutiny
Often, the legality of such rules will depend on context. In interpreting the context of rules, the Board has noted that general or conclusory prohibitions do not have to be perfect, and do not have to anticipate and catalogue every instance in which activity covered by the rule might be protected by Section 7.
Some possible examples of Category 2 rules are:
- Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment and do not restrict membership in, or voting for, a
- Confidentiality rules broadly encompassing “employer business” or “employee information”
- Rules regarding disparagement or criticism of the employer (as opposed to civility rules regarding disparagement of employees)
- Rules regulating use of the employer’s name
- Rules generally restricting speaking to the media or third parties
- Rules banning off-duty conduct that might harm the employer
- Rules against making false or inaccurate statements
Category 3: Rules That Are Unlawful To Maintain
Rules in this category are generally unlawful because they would prohibit or limit NLRA-protected conduct such as strikes.
A. Confidentiality Rules Specifically Regarding Wages, Benefits, or Working Conditions
The Board has placed this type of rule in Category 3. The following are examples of some confidentiality rules that would be unlawful:
- Employees are prohibited from disclosing “salaries, contents of employment contracts . . . .”
- Employees shall not disclose “any information pertaining to the wages, commissions, performance, or identity of employees of the
In addition, rules that expressly prohibit discussion of working conditions or other terms of employment should be considered Category 3 rules.
B. Rules Against Joining Outside Organizations or Voting on Matters Concerning Employer
A core aspect of protected concerted activity under the NLRA is that employees may desire to have “outside organizations,” specifically unions.
While the guidance is very helpful, there are gaps even though the guidance is nearly 40 pages long. Employers can never ban strikes, sit-ins, making derogatory remarks during strike or contacting customers or media.
These are complex concepts and a new rule should not be adopted without review with labor and employment counsel.
Can an Employee be Terminated for Taking Both FMLA Leave and Unexcused Absences?
The answer is generally “yes”, but the facts need to be carefully analyzed before making a rash termination. Let us suppose an employee is certified for FMLA leave for cancer and asthma, but the employee incurs a total of 13 intermittent absences in a twelve month period. Some of the absences relate to the employee’s cancer and asthma, but more absences are for various other reasons such as foot pain, stress fracture, sore throat, dizziness, common cold, stomach cramps and upset GI system and diarrhea.
The employer has a policy that an employee is subject to termination when an employee accrues 7 absences in a rolling twelve-month period. The question becomes can the employee be lawfully terminated for the non-FMLA absences, even though others are FMLA related?
In the case of Bertig v. Julia Ribaudo Healthcare, the court answered the employee could be lawfully terminated. Under the employee’s own admissions in a deposition most of employee’s absences during the one year rolling period were unrelated to both asthma and her cancer. Employee admitted employee missed ten days of work which is three more than allowed under the policy.
The decision was made easy since the employer documented each absence with details relating to the reason for the absence. The employer also engaged in an interactive process to sit down with the employee to determine how the employer can help the employee meet the employer’s expectation.
Document, document, and engage in conversations with your employees before pulling the termination trigger.
Under the Illinois Human Rights Act and the ADA, Disability Coverage is Different
A person with a disability under the Americans with Disabilities Act (“ADA”) is defined as a person who has a physical or mental impairment that substantially limits one or more major life activities. A qualified individual with a disability is a person who can perform the essential functions of the job with or without reasonable accommodation.
The Illinois Human Rights Act (“IHRA”) defines “disability” to mean a determinable physical or mental characteristic of a person. . .the history of such a characteristic, or the perception of such characteristic. . .which may result from disease. . .unrelated to the person’s ability to perform the duties of a particular job or position. The IHRA itself makes no mention of essential job functions.
In order to establish a prima facie case of disability discrimination under the IHRA, the claimant must show that: claimant is disabled within the definition of the Act and claimant’s disability is unrelated to claimant’s ability to perform the functions of the job.
It is a complaining party’s burden to prove that claimant is disabled within the meaning of the IHRA. When a complaining party fails to establish that claimant is disabled within the meaning of the IHRA, any alleged discrimination against claimant is irrelevant because claimant is not entitled to protection under the Act.
Discrimination Claims Under the Illinois Human Rights Act (“IHRA”)
As a reminder the IHRA was amended in 2007 which gave claimants a right to file an action in a state circuit court. While there are few decisions interpreting the provision, the question becomes “is the right to sue in circuit court waived if an employee engaged in the charge of discrimination process with the Department of Human Rights?”
In a recent case a claimant filed a charge of discrimination with the Department of Human Rights (“Department”) and, after investigation, the Department found there was no substantial evidence and entered an order dismissing the charge. The procedural history also includes an election by complainant to have the dismissal order reviewed by the Human Rights Commission (Commission). The Commission vacated the dismissal and sent the case back to the Department for further investigation. The Department issued a second notice of dismissal and, again, complainant sought review before the Commission and, again, the Commission sent it back down to the Department, which issued for a third time a notice of dismissal.
Not surprisingly, complainant sued the employer in the state circuit court asserting the same discrimination as before the Department and the Commission. The circuit court dismissed the complaint and an appeal followed. The appellate court found the statutory language allowed the right to file a civil suit in the circuit court for any dismissal order, even a third one.
What is clear is that the 2007 amendment which gave claimants a right to sue in a state circuit court changes the principles of administrative law. The principles of administrative law include a presumption that agency decisions are factually correct unless the record shows it is against the manifest weight of the evidence and avoids the effect of substantial deference by state courts to an agency interpretation.
In conclusion, civil actions are permissible under the Illinois Human Rights Act without regard to past established law.
Inside This Issue
1. Warning: Use of Terms in Want Ads Such as “Recent Graduate” Can Violate ADEA
2. Supreme Court Provides Employers Certainty Regarding The Use of Employment Related Arbitration Agreements
3. Extreme Obesity May Not Qualify As a Disability Under The ADA
4. Illinois Courts Scrutinizing Non-Competes
5. Update to Our February 2018 Newsletter Due to Law Change
Warning: Use of Terms in Want Ads Such as “Recent Graduate” Can Violate ADEA
The Age Discrimination in Employment Act (ADEA) prohibits employment practices that have a disparate impact on qualified applicants over the age of 40. For example, the term “Recent Graduate” raises a flag as to whether the employer’s hiring program has a disparate impact on applicants over 40 years of age.
Similarly, it is risky to advertise for employees with 3 to 7 years’ experience. The term can be construed to eliminate all applicants over 40 years of age who are qualified, but have more than 7 years’ experience.
The 7th Circuit Court of Appeals is particularly sensitive to such disparate treatment claim. But there is a split among the federal Circuit Courts of Appeal. The U.S. Supreme Court may have to decide.
Supreme Court Provides Employers Certainty Regarding The Use of Employment Related Arbitration Agreements
By way of background, the National Labor Relations Board (NLRB) first ruled in 2012 that employers’ use of arbitration agreements to resolve federal workplace laws were unenforceable since the arbitration agreements violated Section 7 rights of employees to engage in “concerted activities.” The arbitration agreements are many times referred to as class-action waiver agreements.
On May 21, 2018, the Supreme Court dealt a blow to the NLRB when the Court ruled that workers do not have an absolute right to sue over alleged violations of federal workplace laws and that an employer’s arbitration rules may require employees to bring their complaints as individuals and not as a part of a group or class. See Epic Systems Corp. v. Lewis.
The decision protects businesses from endless costly litigation and opting for arbitration for such matters as FSLA claims, sexual harassment, pay, pregnancy and racial discrimination claims, as well as other federal employment laws.
Arbitration may be a useful tool for an employer’s risk management assessment of its policies. Employers would be prudent to assess the pros and cons of submitting various types of federal employment claims to binding arbitration taking into consideration whether asking an employee to sign a binding arbitration agreement is unconscionable or as a result of fraud or duress. Stated another way, “one size does not fit all.”
The Epic System’s decision only applies to non-union employees. However, employers and unions are free to negotiate language in collective bargaining agreements which would require union employees to resolve all federal statutory claims through the grievance-arbitration procedure.
Extreme Obesity May Not Qualify As a Disability Under The ADA
In Richardson v. Chicago Transit Authority, the federal district court was confronted with a 594-pound driver who was fired from his job as a bus driver. The court noted:
“It is important to distinguish between conditions that are impairments and physical,
psychological, environmental, cultural and economic characteristics that are not impairments.
The definition of the term ‘impairment’ does not include physical characteristics
such as eye color, hair color, left-handedness or height, weight or muscle tone
that are within ‘normal’ range and are not the result of a
Plaintiff bus driver argued that weight outside the normal range qualifies as an impairment even if it was “not the result of any physiological disorder.” The American with Disabilities Act’s (ADA) definition of an impairment is: “(A) a physical or mental impairment that substantially limits one or more major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment.” 42 U.S.C. Section 12102(1)(A-C).
The federal judge concluded:
“that severe obesity, by itself, fails to constitute a disability under the ADA. Rather, to qualify as a protected physical impairment, claimants under the ADA must show that their severe obesity is caused by an underlying physiological disorder or condition.”
Among other things, the ADA provides that no “covered entity shall discriminate against a qualified individual on the basis of disability.” Plaintiff bus driver alleged the CTA refused to let him return to work because the CTA regarded plaintiff as too obese to work as a bus driver. To win on a “regarded as” claim, a plaintiff must establish that he was discriminated against “because of an actual or perceived physical or mental impairment.” To qualify as “protected physical impairment” under the ADA, claimants must show that their severe obesity is caused by an underlying physiological disorder or condition. Here plaintiff failed to offer any such evidence.
Plaintiff next argued that even if the severe obesity does not qualify by itself, he is entitled to succeed because the CTA perceived him as having a physical impairment on the basis of obesity.
The Equal Employment Opportunity Commission (EEOC) regulations limit the definition of physical impairment to a “physiological disorder and condition” that affects “one or more body systems.”
The court concluded plaintiff has not established a key element of his “regarded as claim” since he has not shown that the CTA regarded him as having a qualifying physical impairment because there is no allegation of a physical impairment within the meaning of the ADA.
Illinois Courts Scrutinizing Non-Competes
It is common for employers to use non-compete agreements in an attempt to keep senior employees from competing against their former employer. In a recent case decided in federal court for the Northern District of Illinois in Medix Staffing Solutions, the court refused to enforce a non-compete agreement against a former director who was responsible for medical sales and recruiting strategies. The former director went to work for a direct competitor of Medix.
The non-compete agreement prohibited the director from being employed or connected in any manner with the operation or business which competes with Medix either directly or indirectly within a 50-mile radius of any office in which the director worked for Medix. The former director successfully argued that the non-compete violated the so-called “janitor rule” since it would preclude him from even performing janitorial services for a competitor.
In an unusual move, the judge dismissed the case at the pleading stage and found the restrictive covenant as a matter of law was patently unreasonable because an employer cannot prevent a former employee from working for a competitor in a non-competitive capacity.
Illinois law permits courts to strike non-competitive provisions of a non-compete agreement called “blue penciling.” The court refused to “blue pencil” some overly broad restrictions in order to save the covenant not to compete.
This case illustrates that non-compete agreements should be narrowly tailored to protect only legitimate business interests of an employer.
You are reminded that there is an Illinois Right To Work Act which prohibits private employers from entering into non-compete agreements with low-wage employees.
Update to Our February 2018 Newsletter Due to Law Change
We reported in the February 2018 Newsletter that the National Labor Relations Board (NLRB) returned to its old standard to determine who is a joint or single employer. On technical grounds (which board members were eligible to vote) the NLRB vacated its December 2017 decision.
In May 2018 the NLRB Chairman, John Ring, stated:
“Whether one business is the joint employer of another business’s employees is one of the most critical issues in labor law today. The current uncertainty over the standard to be applied in determining joint-employer status under the Act undermines employers’ willingness to create jobs and expand business opportunities. In my view, notice-and-comment rulemaking offers the best vehicle to fully consider all views on what the standard ought to be. I am committed to working with my colleagues to issue a proposed rule as soon as possible, and I look forward to hearing from all interested parties on this important issue that affects millions of Americans in virtually every sector of the economy.”
The 2015 rule on joint employer remains in effect which states if an employer reserves the right to exercise control over another employer, the two entities will be treated as joint employers. The NLRB may find a pending case in which it can go back to its December 2017 decision.
Inside This Issue
1. PBGC Issues Guidance to Assist Multiemployer Pension Plans to See Alternate Payment Rules for
Employer Withdrawal Liability
2. Asset Purchasers Beware of Withdrawal Liability Under ERISA
3. 9th Circuit Court of Appeals Rules that a Fresno County School District Violated the Equal Pay Act
4. Under FMLA an Employer Can Deny Leave Based on Tardiness Grounds on Account of Sleep Apnea
5. Insomnia Alone Does Not Establish Violation of Americans with Disabilities Act (ADA)
6. US DOL Clarifies when Interns and Students are Employees Under FLSA
PBGC Issues Guidance to Assist Multiemployer Pension Plans to See Alternate Payment Rules for Employer Withdrawal Liability
The Pension Benefit Guaranty Corporation (“PBGC”) issued guidance to assist multiemployer pension plans that request PBGC review of alternative plan rules for satisfying employer withdrawal liability. The guidance explains PBGC’s review process, the information needed, and factors PBGC considers in reviewing plan proposals.
Under pension law, an employer that withdraws from an underfunded multiemployer plan is responsible for a share of the plan’s unfunded benefit obligations and generally pays withdrawal liability over a period of years. Employer withdrawal liability payments help to compensate plans for the loss of future contributions from the withdrawn employer. Alternative withdrawal liability payment rules differ from the standard statutory payment terms.
Although there are two key aspects of withdrawal liability that are particularly important to distinguish—the method for determining withdrawing employer’s allocable share of the plan’s unfunded vested benefits (“UVBs”), and the payment of an employer withdrawal liability amounts to the plan—the guidance provided under this policy statement applies to the latter. Specifically, this guidance relates to a plan’s proposed adoption of alternative payment amounts and terms and conditions to satisfy withdrawal liability as provided under section 4224.
The proposals can be highly complex, involving analysis of plans’ future cash flows and underfunding under various scenarios. They often involve highly troubled plans and require great care to ensure that the plan participants are not harmed and that the Multiemployer Insurance Program is not put at greater risk.
For proposals to adopt alternative terms and conditions to satisfy withdrawal liability that are intended to extend plan solvency by encouraging the continued commitment of contributing employers to the plan, PBGC finds it helpful to see support for an assertion that: (i) The alternative would retain employers in the plan long-term and secure income that would be otherwise unavailable to the plan, and (ii) absent the alternative, employers would withdraw from the plan or significantly reduce contributions in ways that would undermine plan solvency. PBGC will work with trustees to assess what kind of support a plan would be able to most efficiently provide and what would be most useful for PBGC’s understanding of the proposal.
It is the pension plan that must make a proposal to adopt alternative terms and conditions to satisfy withdrawal liability. Then, if an employer believes it should have an alternate payment plan, it is the employer’s obligation to convince the pension plan trustees to make a proposal to PBGC.
Asset Purchasers Beware of Withdrawal Liability Under ERISA
In a 7th Circuit Court of Appeals decision in Indiana Pension Fund v. ManWeb, the union pension fund sought withdrawal liability from defendants/purchasers of assets from a third party which had previously withdrawn from the plaintiff’s pension fund. The court noted that the purchaser was not aware of the third party’s contingent withdrawal liability at the time of the asset purchase. It is the totality of the circumstances which determines the purchaser’s liability. Here the defendant’s use of third-party’s intangible assets, including its name, goodwill, trademarks, supplier and customer data, trade secrets, telephone number and websites, and its retention of third-party’s principals to promote defendant to third-party’s existing and potential customers sufficiently established requisite continuity of business operations to support imposition of successor liability on defendant. The fact that defendant did not offer industrial refrigeration construction services prior to said asset purchase that had been offered by third party, that 13 of third-party’s employees who joined defendant after asset purchase represented only small fraction of defendant’s employees, and that less than 2 percent of defendant’s projects and revenues came from third-party’s customers after asset purchase, did not require different result.
9th Circuit Court of Appeals Rules that a Fresno County School District Violated the Equal Pay Act
The school district had a policy that a new hire teacher would be paid an added 5% to her previous pay. The Appellate Court reasoned that prior salary alone, or in combination with other factors, cannot justify a wage differential. Allowing pay differences based on previous salaries only perpetuates wage gaps between men and women that are based on discrimination in the job market. This ruling contrasts in part with a 7th Circuit ruling in Illinois which found that it is not a violation of the Equal Pay Act to consider an employee’s wage history so long as sex is not a factor in determining salaries.
Based upon the unique facts situation in the 9th Circuit case, wage history can be used to determine a salary if that wage history shows that the salary was commensurate with the employee’s skills, education etc. But employers should use wage history sparingly, if at all.
Under FMLA an Employer Can Deny Leave Based on Tardiness Grounds on Account of Sleep Apnea
In another 7th Circuit case of Guzman v. Brown, the plaintiff applied for FMLA leave, which was denied by the employer, since plaintiff failed to show that defendant had either actual or constructive notice of the sleep apnea condition.
Plaintiff also made an Americans with Disability claim. Here too, the plaintiff loses because she failed to show that the decision maker was aware of the sleep apnea at the time of the termination. Most importantly, the fact that plaintiff’s sleep apnea was the cause of her tardiness, does not require a different result, since the violation of the workplace rule, even caused by her disability, is no defense to imposition of discipline because of a violation of a rule.
That plaintiff made an accommodation request after the decision to terminate was made, did not excuse plaintiff’s past tardiness which was the basis of the termination.
Insomnia Alone Does Not Establish Violation of Americans with Disabilities Act (ADA)
In January of 2018 the 7th Circuit Court of Appeals decided that under the Americans with Disabilities Act, insomnia condition alone does not establish a violation. In Rodrigo v. Carle Foundation Hospital etc., plaintiff alleged that defendant terminated him from its medical residency program, after plaintiff had failed “Step 3” test for third time, and after defendant had rejected plaintiff’s request to be re-instated to residency program. While plaintiff claimed that his insomnia condition was cause of his failed tests, plaintiff failed to establish that he was a “qualified individual” under ADA, where: (1) years prior to plaintiff being admitted into residency program defendant adopted policy requiring residents to pass Step 3 test before being offered employment contract for third year of residency program; (2) defendant had also adopted policy requiring termination from residency program whenever resident had more than two failures of Step 3 test; and (3) no resident who had failed Step 3 test more than two times had been allowed to continue in residency program while instant policies had been in force.
The requirement that resident pass Step 3 test was essential function of plaintiff’s job at defendant’s hospital, and plaintiff’s failure to establish that he was a qualified individual under ADA also precluded him from establishing retaliation claim based on defendant’s failure to grant him requested reinstatement to residency program.
US DOL Clarifies when Interns and Students are Employees Under FLSA
According to the United States Department of Labor (“US DOL”), Courts have used the “primary beneficiary test” to determine whether an intern or student is, in fact, an employee under the Fair Labor Standards Act (“FLSA”). In short, this test allows courts to examine the “economic reality” of the intern-employer relationship to determine which party is the “primary beneficiary” of the relationship. Courts have identified the following seven factors as part of the test:
1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.
2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.
3. The extent to which the internship is tied to the intern’s formal education program by integrated coursework or the receipt of academic credit.
4. The extent to which the internship accommodates the intern’s academic commitments by corresponding to the academic calendar.
5. The extent to which the internship’s duration is limited to the period in which the internship provides the intern with beneficial learning.
6. The extent to which the intern’s work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.
7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.
Courts have described the “primary beneficiary test” as a flexible test, and no single factor is determinative. Accordingly, whether an intern or student is an employee under the FLSA necessarily depends on the unique circumstances of each case.
If determined the person is an employee, the person is entitled to overtime pay and minimum wage under FLSA.
Inside This Issue
1. Illinois Supreme Court Finds Illinois Anti-Stalking Law Violates Free Speech
2. A Kinder, Gentler NLRB. . .We Will See?
3. Illinois Employers Must Accommodate Religious Clothing and Facial Hair
4. PTSD is Disability
5. 7th Circuit 2017 PTSD Case
6. Return to Work and Fitness for Duty Certification under the FMLA and ADA
7. Amendments to the Illinois LLC Act
Illinois Supreme Court Finds Illinois Anti-Stalking Law Violates Free Speech
In People v. Walter Relerford the court reviewed the Illinois Stalking Statute (720 ILCS 5/12-7.3) and the Cyberstalking Statute (720 ILCS 5/12-7.5). The Stalking Statute essentially prohibits a course of conduct which would place a person in fear for a person’s safety or suffer emotional distress. Examples include following the same person around, making threats of immediate or future bodily harm and/or assault. This law always excluded compliance with worker safety laws, wage and hour laws and lawful picketing.
The Cyberstalking Statute basically prohibits the same conduct, but only by electronic communications. A unanimous Illinois Supreme Court ruled that the First Amendment right of free speech is violated because the laws embrace a vast array of circumstances that limit free speech far beyond the generally understood meaning of stalking. The Court gave by way of examples, business owners complaining at town meetings or council meetings and a host of social interactions that a person might find distressing. The practical effect of this decision is relatively unknown since only certain sections of the law were struck down.
While labor disputes are excluded from the reach of the two statutes, some police departments would occasionally use the statute to remove union representatives who would sit outside of employees’ homes and follow employees to and from jobs creating perceived fear in the employee and his or her family.
A Kinder, Gentler NLRB. . .We Will See?
In a pair of decisions in December 2017, the National Labor Relations Board (“NLRB”) reversed two Obama-era decisions.
Micro Units in NLRB Conducted Employee Elections
It is axiomatic that when a union petitions for an election to certify the union as the exclusive bargaining representative, the smaller the unit, the greater the probability the union will win the election. In an Obama-era NLRB decision in Specialty Health Care the NLRB held that employees presumably shared a community of interest among themselves. For an employer to expand the unit to include more voters under Specialty Health Care, the employer must prove that the employees shared an “overwhelming” community of interest with the described unit.
Then in December 2017 in PCC Structural case, the Trump NLRB in a 3 to 2 decision reversed the “overwhelming” test and returned to the traditional community of interest standards that has been applied throughout most of the history of the NLRB.
If an employer is found to be a joint-employer with a related entity, both the employer and related entity are jointly and severally liable for unfair labor practices of either entity This was known as the Browning Ferris standard.
In 2015, the Obama NLRB said that all that is needed to prove two or more employers are joint-employers is merely having reserved the right of Employer A to exercise control over Employer B.
In December 2017 in a 3 to 2 decision, the Board returned to the pre-Browning Ferris standard that governed joint employer liability. The case that reversed Browning Ferris was handled by Stanley E. Niew of the Law Offices of Stanley E. Niew, P.C.
In all future and pending cases, two or more entities will be deemed joint-employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited in scope or is routine. Accordingly, under the pre-Browning Ferris standard, proof of indirect control, contractually reserved control that has never been exercised, or control that is limited and routine was not sufficient to establish a joint-employer relationship. The majority of NLRB concluded that the reinstated standard adheres to the common law and is supported by the NLRA’s policy promoting stability and predictability in bargaining relationships.
Illinois Employers Must Accommodate Religious Clothing and Facial Hair
The Illinois Human Rights Act was recently amended to make it unlawful for an employer to impose upon a person any term or condition of employment which would require such person to violate or forego a sincerely held practice of his or her religion, such as wearing of attire, clothing, facial hair as required by his or her religion. The new law covers all employment issues including hiring, promotion and transfer.
Like all laws there is an exception for an employer. If an employer makes a bona fide effort and demonstrates that the employer is unable to reasonably accommodate the employee’s or applicant’s religious beliefs, practices without undue hardship when conducting the employer’s business, then it would not be a violation of the Human Rights Act. We will need to see how the Human Rights Commission will handle discrimination charges under the amendment.
The new law does not prohibit restrictions on attire or facial hair to maintain workplace safety or food sanitation.
PTSD is Disability
A large number of former service members are discharged from the military with diagnosed and undiagnosed post- traumatic stress disorder (PTSD). Note that PTSD is not exclusive to former military. PTSD is listed in the definitions in the regulations to the Americans with Disabilities Act (ADA) as substantially limiting brain function. Under the ADA the veteran employee is a qualified individual with a disability. The term qualified individual “means that the individual satisfies the requisite skill, experience, education and other job-related requirements of the employment position such individual holds or desires and, with or without reasonable accommodation, can perform the essential functions of such position.” Particularly challenging for an employer is a veteran with PTSD may struggle with concentration or memory. This disorder may require special accommodations, such as modified break schedule, working from home or dividing large assignments into smaller tasks. Another common limitation is difficulty handling stress. Possible accommodations could include presence of a service dog, allowing phone calls to doctors and others for support and possibly using a mentor to alert the employee that the behavior is unprofessional or inappropriate. Sleep disorder is also a condition with PTSD. Accommodations may include flex starting time, separate schedule or even allowing for a nap. The most challenging limitation for any employer is absenteeism. An accommodation may include working different times and allowing flex time make-up days.
Each employer must be mindful of what is truly an essential job function and can the employer accommodate a veteran/employee to perform with or without an accommodation. The ADA also provides for demonstration of “good faith efforts” to work with the employee “to identify and make reasonable accommodation that would provide such individual with an equally effective opportunity and would not cause an undue hardship on the operation of the business.” Unlike other disabilities, a PTSD sufferer may find himself/herself no longer in need of the protections of the ADA.
7th Circuit 2017 PTSD Case
In Monroe, plaintiff alleged that he was terminated because of a mental disability in violation of Americans with Disability Act (ADA) and the Rehabilitation Act. About 8 of plaintiff’s subordinates complained about a hostile and intimidating treatment by the plaintiff. The employer conducted an investigation during which the plaintiff disclosed a diagnosis of PTSD and depression. At a subsequent meeting to decide what to do with the plaintiff, management discussed whether the PTSD diagnosis was legitimate and management questioned the timing of the diagnosis since it coincided with the employees’ complaints which was suspect. Plaintiff did not produce any documentation for the diagnosis. The defendant employer fired the plaintiff for creating a hostile and intimidating work environment.
The 7th Circuit Court of Appeals held: (1) positive performance evaluations for three years prior to firing was insufficient to show the employer’s asserted reason for termination was pretextual; (2) a misstatement in the employer’s EEO Position Statement regarding how many employees were at a meeting did not establish pretext; (3) employer’s inconsistent statements during discovery about what plaintiff’s supervisors discussed was insufficient to show pretext; (4) because the decision makers discussed the employee’s PTSD during a decision making meeting, did not establish pretext; and (5) the non-disabled employees the plaintiff identified as comparators were not similarly situated to the plaintiff.
Finally, the Court stated that even if the plaintiff’s PTSD caused his hostile behavior, an employer may terminate an employee for inappropriate behavior even when the behavior is caused by the disability.
This case illustrates what is or is not a pretext and further illustrates termination for inappropriate behavior caused by a disability does not violate the ADA.
Return to Work and Fitness for Duty Certification under the FMLA and ADA
Managing employer’s return to work policies after a Family and Medical Leave Act (FMLA) leave is an interactive process between an employer and an employee and is critical in determining whether an employer is legally obligated under the American with Disabilities Act (ADA) to provide an accommodation to the employee.
After FMLA leave related to a serious health condition an employer may require a Fitness for Duty Certification from a health care provider, so long as the notice is provided to the employee at the time the FMLA leave is granted, i.e., certification will be required. Employers should document by outlining the employee’s medical condition and its impact on the employee’s ability to perform the job as outlined in Essential Job Functions as part of a formal job description in order to decide if a reasonable accommodation can be provided so the employee can perform essential job functions.
But see our October 2017 Newsletter discussing Federal Appellate Court ruling in that an extended medical leave is not a reasonable accommodation under the ADA. The Raymond decision is being appealed to the Supreme Court. The Supreme Court is not required to hear the case.
Amendments to the Illinois LLC Act
The Illinois Limited Liability Act (LLC Act) was recently amended to allow members of the limited liability corporation (LLC) to obtain books and records. Generally the operating agreement should govern the process by which members of the LLC can obtain books and records. The recent amendment to the LLC Act allows members to access information even if the operating agreement is silent. The LLC Act requires at a minimum the following records to be maintained: (1) The names and addresses of each member, the amount of money each member contributed, and the date upon which each member joined the LLC; (2) The articles of organization; (3) Copies of any federal, state or local income tax returns for the last three years; and (4) The written operating agreement and any financial statements of the LLC for the past three years.
The above list is a minimum requirement and if a LLC maintains other records a member should be permitted to see those records. More specifically, a member has the right to any information relating to the company’s activities, financial condition and other circumstances of the company’s business.
Disassociated members have the right to inspect LLC books and records only for the period during which time the requester was a member of the LLC. The LLC Act also permits the LLC to modify its operating agreement to limit disclosures among members, managers and the company. A restriction may include requiring a requester to execute a non-disclosure agreement. Finally, correspondence with attorneys may be a record that can be requested under the LLC Act.
Inside This Issue
1. Sexual Harassment Claims in the News
2. Earned Bonuses Over 20 Years Can Entitle an Employee to Continued Bonuses
3. How Successor Employer Can Avoid Violating the National Labor Relations Act
4. Illinois Biometric Information Privacy Act Allows Private Parties to Sue and Get Attorney’s Fees
Sexual Harassment Claims in the News
I am sure that you and most of your employees have read about the sexual harassment claims in the news. This gives employees a heightened awareness of what they may perceive as their newly-found rights and a deep pocket.
Make no mistake, if an employer does not have a written anti-harassment policy which describes the procedure on how to lodge complaints, as well as how the employer will handle such complaints, defense of claims is virtually impossible.
The second prong requires all employers must have an internal policy on how the employer will conduct the investigation, as well as options on how to treat the accuser as well as the accused. Training for managers is also essential.
We have the expertise to develop the anti-harassment policy, the internal investigation procedure, as well as the training. For more information email Stan at: email@example.com
Earned Bonuses Over 20 Years Can Entitle an Employee to Continued Bonuses
Schultze began working for LaSalle Bank, a subsidiary of ABN Amro, in 1983. Schulze was never offered a written employment contract, but promoted many times and became an officer of the company. ABN was eventually sold to Royal Bank of Scotland, while LaSalle was sold to Bank of America. Schulze was the manager of the $21 billion sale to LaSalle and the $93 million sale to ABN. At that time he had a base salary of $300,000 and bonuses topping $1.2 million. The following year Royal Bank asked Schulze to take over as head of ABN without discussion of salary or bonuses. Previous holders of the position Schulze took over ranged earned bonuses between $2-$5 million dollars. When Schulze was terminated he was offered $300,000 as severance without any bonus. Schulze brought suit under the Illinois Wage, Payment and Collection Act, seeking $2.4 million dollars in a bonus. The trial court agreed with Schulze and ABN appealed.
ABN argued that his bonuses were discretionary and, therefore, cannot be recovered. The Appellate Court disagreed in that Schulze was given a bonus by ABN in 2008 and failed to notify Schulze that there would be a change in the longstanding methodology used by ABN to determine bonuses. The court viewed this as an unequivocal comment to pay a bonus. Schulze vs. ABN Amro, Inc., October 2017.
How Successor Employer Can Avoid Violating the National Labor Relations Act
An employer is a successor employer, obligated to recognize and bargain with a union representing the predecessor’s employees when (1) there is a substantial continuity of operations, and (2) a majority of the new employer’s work force, in an appropriate unit, consists of the predecessor’s employees. The essence of successorship, however, is not premised on an identical re-creation of the predecessor’s customers and business, but rather, on the new employer’s conscious decision to maintain generally the same business and to hire a majority of its employees from the predecessor in order to take advantage of the trained work force of its predecessor.
With respect to the issue of substantial continuity between predecessor and successor operations, the Supreme Court has identified the following factors as relevant to the analysis: (1) whether the business of both employers is essentially the same; (2) whether the employees of the new company are doing the same jobs in the same working conditions under the same supervisors; and (3) whether the new entity has the same production process, produces the same products, and basically has the same body of customers. Fall River Dyeing. Most importantly, these factors are to be analyzed from the perspective of the employees, i.e., whether they “understandably view their job situations as essentially unaltered.”
Applying the relevant factors, the National Labor Relations Board (NLRB) found that there was substantial continuity of operations. Employer A and Employer B performed the same general business service: providing school bus transportation for the special education students in the same County. The drivers and monitors were doing the same general job transporting special education students by school bus on a predetermined route. In many cases, pursuant to the county’s request, the drivers were paired with the same monitors, drove similar routes, and transported many of the same students. Accordingly, the drivers and monitors were doing the same job as before and without any hiatus in operations, only now their employer was Employer B not Employer A.
The NLRB found some minor differences between the two operations and terms and conditions of employment. Once found to be a successor under current law, all employers must provide unions with notice and opportunity to bargain prior to the implementation of discharges, demotions and suspensions. Unions are also entitled to information via email such as a list of employees that were terminated, which were retained and all other relevant information.
While successor employers are not bound to the prior CBA, they have a clear duty to bargain.
Illinois Biometric Information Privacy Act Allows Private Parties to Sue and Get Attorney’s Fees
Biometric data is a measurement or copy of a unique physical characteristic of any individual. It can be a fingerprint, retina or iris scan, voiceprints, hand scans, or a facial geometry.
The Illinois Biometric Information Privacy Act (BIPA) is the only one in the nation that allows private parties to sue and has a fee-shifting provision allowing plaintiffs to recover attorney fees.
Biometric data creates security concerns because the data is unique to the individual and cannot be changed like a password. Employers must prevent unauthorized disclosure of biometric data because it can have permanent ramifications on an employee’s privacy. Even more, if an employer has a blanket requirement that employees provide fingerprints or other biometric data, that can open the door to class action lawsuits. Face scans used for facial recognition fall under BIPA’s definition of biometric data which includes “a retina or iris scan, fingerprint, voiceprint, or scan of hand or face geometry.” Illinois law is clear that the employer must obtain permission before collecting the data. It makes good business judgment for employers to disclose they are collecting the biometric data in a pre-employment form.
Technology does exist for employers using biometric data, without storing it, which can minimize the risk or liability under BIPA. Such storage may be expensive but it must be considered against the potential damages which can reach $10 million dollars.
Inside This Issue
1. Federal Appellate Court Rules that Extended Medical Leave Is Not A Reasonable Accommodation under ADA
2. What Is The Scope of Insurance Coverage for Defective Construction Work?
3. Illinois Enacts Law That Bans Non-disparagement Clauses in Contracts
4. Court Holds There is No Mechanic Lien Right in Removable Trade Fixtures No Matter How Large
5. National Labor Relations Board Targets Dress Codes and Already Rescinded Policies
6. Recent Amendments to the Illinois Human Rights Act
Federal Appellate Court Rules that Extended Medical Leave Is Not A Reasonable Accommodation under ADA
The Equal Employment Opportunity Commission (EEOC) has had a standing position that long term leaves must be considered a form of reasonable accommodation under the Americans with Disabilities Act (ADA).
On September 20,2017, the U.S. 7th Circuit Court of Appeals held that employees who need long-term medical leaves cannot work and, thus, are not a “qualified individual” as defined by the ADA.
In this case the plaintiff Raymond was employed as a fabricator of retail display fixtures from 2006 until 2013. Raymond complained about back pain since 2005 but it did not stop him from doing his work. Because of poor work performance Raymond was demoted from operations manager to a second shift lead in June of 2013. Raymond never worked in this new position because he wrenched his back at home and thereafter he requested, and was granted, 12 weeks of leave under the FMLA. On the last day of the approved leave, Raymond underwent back surgery which required a typical recovery time of at least two months. Raymond’s request for an extension of his medical leave was denied by his employer and the employer terminated Raymond at the end of his approved leave. Later Raymond received a doctor’s clearance for light duty with lifting restrictions. However, Raymond never re-applied for his position.
The court reviewed the ADA’s definition of reasonable accommodation which uses the permissive term “may include.” The court went on to state that the base line requirement found in the definition of a qualified individual is concrete: “A reasonable accommodation is one that allows the disabled employee to ‘perform the essential functions of the employment.” Section 42 U.S.C. Section 12111(8).
If the proposed accommodation does not make it possible for an employee to perform his/her job, then the employee is not a “qualified individual” as the term is defined. The court found that long term leave of absence cannot be a reasonable accommodation. “Simply put, an extended leave of absence does not give a disabled individual the means to work; it excuses his not working.”
The court clarified that intermittent time off or short-term leave of absence, even up to a couple weeks may be an appropriate accommodation, similar to a part-time or modified work schedule.
This decision clearly rejected EEOC’s standing position that long-term leave must be considered as a reasonable accommodation. Employers are cautioned not to fire all persons requesting extended FMLA leave without careful consideration of the facts and review with competent labor counsel.
What Is The Scope of Insurance Coverage for Defective Construction Work?
The U.S. 7th Circuit Court of Appeals, construing Illinois law, held that an insurer had coverage obligation resulting from the insured’s faulty work in applying a waterproof sealant that resulted to damage to condominium property.
The amended complaints alleged interior water damage to common elements of the building and to furniture within individual condo units which was caused by the sealant contractor’s defective work.
The first finding by the court was that the condo association lacked standing to recover on behalf of the unit owners. As to the association property, an allegation in the amended complaints was that the sealant contractor failed to properly coat the exterior of the building and such a defect could be “an accident or an occurrence” under a commercial general liability policy and gave rise to a duty to defend since “occurrence” was further defined “continuous or repeated exposure to conditions.”
The court went on to say that there was coverage for the contractor’s work on the building because the underlying amended complaints alleged damage caused by the contractor went beyond the contractor’s own work or product. The court concluded there was coverage and a duty to defend as a result of allegations of negligence and lack of any allegation seeking damages stemming from the sealant contractor’s work.Stated differently, the duty to defend is triggered by allegations that the defective work performed by the sealant contractor caused damage beyond the scope of the named insured’s work.
Illinois Enacts Law That Bans Non-disparagement Clauses in Contracts
The law states:
Non-disparagement clauses in consumer contracts.
(a) A contract or a proposed contract for the sale or lease of consumer merchandise or services may not include a provision waiving the consumer’s right to make any statement regarding the seller or lessor or the employees or agents of the seller or lessor or concerning the merchandise or services.
(b) It is an unlawful practice to threaten or to seek to enforce a provision made unlawful under this Section or to otherwise penalize a consumer for making any statement protected under this Section.
(c) Any waiver of the provisions of this Section is contrary to public policy and is void and unenforceable.
(d) This Section may not be construed to prohibit or limit a person or business that hosts online consumer reviews or comments from removing a statement that is otherwise unlawful to remove.
The law is effective on January 1, 2018.
Court Holds There is No Mechanic Lien Right in Removable Trade Fixtures No Matter How Large
The Illinois Mechanic’s Lien Act generally permits liens on property where the owner receives a benefit and where the furnishing of labor and materials increases the condition or value of the property.
In a recent case, the owners of the property entered into a wind park easement with GSG, a developer of wind energy. The easement allowed GSG to develop a wind energy conversion system on the owner’s property and in exchange GSG paid the owner $7500.00 a month rent. The recorded easement provided that all the property installed by GSG would remain the property of GSG and GSG property could be removed upon three months’ notice to the owner. GSG could also terminate the easement upon the same notice and could dismantle and remove all of GSG’s improvements, fixtures and property.
GSG subcontracted for the construction of the tower and foundation with AUI. AUI was unpaid and filed a Mechanic’s Lien. The question for the court was whether AUI’s work was lienable or was it a removable trade fixture.
The court considered three factors: the nature of the equipment’s attachment to the property; the equipment’s adaptation to and necessity for the purpose to which the property is devoted; and whether it was intended that the equipment should be considered part of the property. Intent became the preeminent factor based on the language in the easement. Despite a $600,000.00 cost to remove the tower, the court ruled the tower was a removable fixture and AUI was left without any lien rights.
National Labor Relations Board Targets Dress Codes and Already Rescinded Policies
A car dealership had a dress code that banned “pins, insignias and message clothing” which, in itself, is an unfair labor practice since employees might interpret this rule as infringing on their right to unionize or engage in other concerted activities. The National Labor Relations Board (NLRB) ordered the employer to issue a notice that the policies were found to be unlawful and advise employees of their Section 7 rights (right to organize and engage in other activities for mutual aid). A federal court of appeals agreed with the NLRB ruling.
The NLRB found a second violation since the dealership failed to properly repudiate the overly restrictive policies in the earlier version of the handbook. The car dealership worked with the NLRB to revise its handbook so it was compliant. Despite the cooperation, the NLRB ruled that an employer should have repudiated the policy in writing to all the employees which it did not do.
Due to the NLRB’s aggressive approach, employers are again reminded to review handbooks and employment policies.
Recent Amendments to the Illinois Human Rights Act
When a charge of discrimination is filed with the Department of Human Rights, there is no longer a requirement to file a response to the charge unless the Department makes a request that the “respondent shall file a response” to the charge. The respondent (the employer) may, however, file a response to the charge, if it elects to do so, within 30 days of receipt of the charge of discrimination. This change was effective September 8, 2017.
The Human Rights Act was also amended to make religious discrimination unlawful. It states:
Religious Discrimination. For any employer to impose upon a person as a condition of obtaining or retaining employment, including opportunities for promotion, advancement, or transfer, any terms or conditions that would require such person to violate or forgo a sincerely held practice of his or her religion including, but not limited to, the wearing of any attire, clothing, or facial hair in accordance with the requirements of his or her religion, unless, after engaging in a bona fide effort, the employer demonstrates that it is unable to reasonably accommodate the employee’s or prospective employee’s sincerely held religious belief, practice, or observance without undue hardship on the conduct of the employer’s business.
Nothing in this Section prohibits an employer from enacting a dress code or grooming policy that may include restrictions on attire, clothing, or facial hair to maintain workplace safety or food sanitation.
The law became effective on August 11, 2017.
Inside This Issue
1. Cook County Finalizes Rules Regarding Earned Sick Leave
2. U.S. Department of Labor Rescinded Its Guidance on Independent Contractors and Joint Employers
3. Employers Should be Aware that Illinois has a Pregnancy Accommodation Act
4. How to Use Letters of Intent in Commercial Real Estate Transactions
5. Seventh Circuit Court of Appeals Clarifies Illinois Vacation Pay
6. Illinois’ One Day Rest in Seven Days Act Interpreted
7. OSHA Again Changes Its Electronic Report Rule
8. USDOL Reinstates Wage and Hour Opinion Letter Process
Cook County Finalizes Rules Regarding Earned Sick Leave
The new Earned Sick Leave law went into effect July 1, 2017. The Cook County Commission on Human Rights has published a model poster which must be posted where covered employees work within the geographic area of Cook County.
A covered employee is one that works at least 80 hours within any 120 day period and performs at least 2 hours of work in Cook County – that includes driving through the County. Employees can earn one hour of sick leave for every 40 hours they work, with a cap of 40 hours paid sick time within a 12 month period. Employees must give seven (7) days’ notice to take the paid leave if reasonably foreseeable.
Employer coverage is only required if you have a place of business in Cook County.
It is not altogether clear how the ordinance will be applied when an employer has multiple locations in and out of the County.
Please note that the City of Chicago has a similar ordinance with some subtle differences and employers must comply with both ordinances.
Both ordinances, employees accrue sick leave at the rate of one hour for every 40 hours worked. Both mandate the employers allow eligible employees to accrue up to 40 hours of paid leave benefits in each 12-month period of employment and the paid leave covers the employees own illness as well as family members.
Employers should review and update their paid sick leave policy.
U.S. Department of Labor Rescinded Its Guidance on Independent Contractors and Joint Employers
The guidance took a wide view of the employment relationship under the Fair Labor Standards Act (FLSA). The rescinded guidance interpreted joint employment status with respect to sharing employees, using third party management companies, staffing agencies and labor providers. It was easy for employers to be found “joint employers” under the guidance. Joint employers are jointly and severally liable for underpayment of wages under FLSA.
The U.S. Department of Labor (USDOL) learned that while the interpretations are rescinded, employer legal obligations under the FLSA have not changed. It seems that the rescission of the interpretation means that the USDOL will not be as harsh on its position for these matters and the USDOL will be guided by the regulations and case law.
Employers Should be Aware that Illinois has a Pregnancy Accommodation Act
The Pregnancy Discrimination Act amended the Illinois Human Rights Act which now makes it a civil rights violation for Illinois employers not to make a reasonable accommodation for any medical or common condition of a job applicant or employee related to pregnancy or childbirth. It is also a violation to deny employment opportunities or benefits or take action against an otherwise qualified applicant or employee based on the need of the employer to make a reasonable accommodation to the known medical or common conditions related to pregnancy.
The standard for employers under the new law is the same for accommodations for persons with disabilities, which is “an undue hardship.” Complaints are made by first filing a charge with the Illinois Department of Human Rights. Remedies include actual damages, back pay, reinstatement, lost benefits, pre-judgment interest, attorneys’ fees and costs and all other relief deemed necessary to make a complainant whole.
How to Use Letters of Intent in Commercial Real Estate Transactions
It is often the practice to prepare a Letter of Intent (LOI) which details some, or even all, of the terms or conditions of a future contract for real estate. Often the LOI may merely narrow the issues for future negotiations.
Buyers and sellers should be aware that LOIs may commit the parties to perform under the LOI. An LOI may be enforceable if the parties intend that the LOI binds them and the LOI sets forth the essential terms of a sale agreement. The LOI must not last more than one year.
The intent to be bound is the most important and cannot be ambiguous about the intent to be bound. Buyers and sellers should be aware that it is fairly simple to prevent enforcement by using words such as “subject to signing a formal agreement.”
The LOI may commit the parties to negotiate in good faith for a complete agreement. Such a clause is generally enforceable.
In summary, set forth all the essential elements of the sales agreement and clearly indicate whether the parties anticipate a formal written agreement or if the LOI is a binding sale agreement.
Seventh Circuit Court of Appeals Clarifies Illinois Vacation Pay
The U.S. Court of Appeals for the 7th Circuit issued a decision interpreting Illinois law regarding vacation pay. The decision makes it clear that there is no requirement in Illinois for employers to provide paid vacation. However, when an employer provides paid vacation, Illinois requires the employer to pay an employee the value of earned but unused vacation time when the employee’s employment ends. That payment is generally required to be made on the next regular pay date following the employee’s termination.
Secondly, Illinois employers can limit vacation benefits to full time employees to the exclusion of part time employees. Lastly, the 7th Circuit addressed forfeiture of vacation benefits. The court gave the following example: “if a full-time employee ceases work in the middle of the year, he receives vacation pay in proportion to how long he has worked that year.” Thus, if an employee works for half of a year, he/she must be paid half the value of vacation pay he/she would have earned working a full year. If the employee works 20% of the year, he/she must be paid 20% of the value of vacation pay he/she would have earned working a full year.
It appears under this case Illinois is permissive in establishing eligibility requirements of vacation policy. Before amending your vacation policy, consult an experienced labor and employment attorney.
Illinois’ One Day Rest in Seven Days Act Interpreted
On July 27, 2017, a Federal district judge interpreting Illinois law made it clear that the One Day Rest In Seven Days is not mandatory. In other words, an employee can voluntarily work seven consecutive days without running afoul of the law. The judge also held that a union labor contract that permitted workers to voluntarily put in seven days in a row is permissible. The way the judge put it, there is “nothing” in the law that “prohibits an employee from voluntarily choosing to forego the 24-hour rest period.”
OSHA Again Changes Its Electronic Report Rule
Initially OSHA issued a press release that the compliance date for requiring most employers to submit their injury and illness data to OSHA electronically was pushed back to December 1, 2017. OSHA announced it launched its website allowing employers to submit their injury and illness reports on August 1, 2017, thus the postponement was rescinded.
USDOL Reinstates Wage and Hour Opinion Letter Process
In 2010 the U.S. Department of Labor (USDOL) abandoned the wage and hour opinion letter process which was in existence for about 70 years.
On June 27, 2017, the USDOL announced that employers and employees can submit questions to the USDOL regarding whether a particular employment practice complies with the law USDOL enforces. The USDOL retains the discretion to respond, but if it does, the guidance can be presented to courts and investigators.
If an employer has a close question as to whether its wage and hour practice complies with the law, it would be good practice to obtain an opinion letter. The submission process is on the USDOL’s website. Consider using competent labor and employment counsel to assist in the drafting.
Inside This Issue
1. So You Think You Can Call the Police Anytime a Union is Misbehaving. . .Think Again
2. No “Good Faith” Defense to OSHA Violation Where There is A History of Disregard for OSHA Rules
3. Retaliation Claim – Family and Medical Leave Act
4. First Illinois Appellate District in Chicago Clarifies Implied Warranty of Habitability Rules
5. Illinois Human Rights Act: Disability Harassment Found to Constitute Unlawful Discrimination
So You Think You Can Call the Police Anytime a Union is Misbehaving. . .Think Again
The National Labor Relation Board (“Board”) recently ruled that subcontractors on multi-employer jobs in the construction industry are not permitted to call the police even when a union is trespassing on a job site. The Board’s logic is the general contractor is in control of the jobsite not the subcontractor so it is in the exclusive purview of the general contractor to call the local police.
Does the rule change if the union is engaging in violence or the destruction of property? Probably yes, since the union and employees are permitted to engage in lawful concerted activities. Violence and destruction of property are not protected concerted activity. In proper circumstances Illinois employers are able to obtain an injunction in a state court against violence, destruction of property and against blocking jobsite egress and ingress. Concerted activity is the right to self-organize, to join or assist a labor organization, to bargain collectively through its chosen representative or to engage in other mutual aid and protection which would include picketing and protesting. In a case decided this month, the Board ruled that employees who were wrongfully laid off could protest outside of a plant as well as on private property.
In the same case the Board ruled that the mere threat of calling the police when there is concerted activity is an unfair labor practice. Similarly, the actual call to the police also constitutes an unfair labor practice. It did not make any difference to the Board that when the police arrived no one was forced to leave or was arrested.
The Board’s view is that minor trespassing may also be lawful. For example, if the job access is along a busy highway, a union may be able to stand or picket on private property.
It would be prudent for general contractors, as well as subcontractors and suppliers, to review their policies to determine if a policy violates the Board rulings.
No “Good Faith” Defense to OSHA Violation Where There is A History of Disregard for OSHA Rules
Last month the 7th U.S. Circuit Court of Appeals rejected an employer’s petition for review of an Occupational Safety and Health Review Commission (“Commission”) decision which found the employer willfully violated OSHA regulations. The Court found the petition as insufficient to warrant review.
The employer was in the business of cleaning truck trailer tanks that haul toxic products such as ink and latex. The OSHA violation came in response to an employee-supervisor who was hospitalized from inhaling fumes after he entered a tank to clear a clogged valve. The supervisor knowingly entered a dirty trailer tank in violation of various employer rules. Although, he followed other employer rules by obtaining an entry permit, attaching himself to a retrieval device, and having a fellow employee stand by to supervise.
An Administrative Law Judge (“ALJ”) found the employer had violated OSHA rules, and the Commission affirmed the ALJ’s findings. The employer filed a petition for review with the 7th Circuit, presenting the following 2 arguments: 1) the accident was caused by “unpreventable employee misconduct;” and 2) there was no proof that any OSHA violation was “willful.”
The Court found that the “unpreventable employee misconduct” argument lacked merit; to establish the OSHA violation all that needed to be shown was that a supervisory employee had knowledge of the violation. Such knowledge can be imputed to the employer. In this case, the injured supervisor had actual knowledge of his own misconduct, so the Commission imputed his knowledge to the employer.
With respect to its second argument, the employer set forth a defense that it had acted in “good faith,” which should have precluded imputing knowledge of the violation to the employer. The employer presented evidence it had rules prohibiting exactly what the supervisor did; employees did not usually violate the rules; it had shown instances of discipline and a lack of recidivism; its wash process eliminated toxic atmospherics; it had continuous testing and forced air ventilation in clean trailer tanks; and it’s written program had been previously reviewed by OSHA and found acceptable.
The Court considered the employer’s evidence but noted, “on the other hand, the facility manager had never disciplined an employee for improperly completing permits or for the violations apparent on the face of the permits. The Commission concluded that [the employer] therefore failed to take actions when violations of safety rules were plain, as would have been required in a good-faith-effort.”
The Court found it was reasonably foreseeable that employees would disregard safety procedures since most of the permits had contained errors or omissions which indicated a pattern of disregard for the rules. The Court concluded the Commission made no error in rejecting that the employer acted in good faith.
Employers would be prudent to examine their procedures to determine if there is a pattern of disregarding OSHA rules.
Retaliation Claim – Family and Medical Leave Act
The U.S. Court of Appeals for the 7th Circuit recently affirmed in part a district court finding of a retaliation claim under the FMLA in the termination of an employee who needed time away from work to care for her autistic son.
Tracy Wink (“Wink”) had been employed by Miller Compressing Co. (“Miller”) for nearly 12 years when she requested intermittent FMLA leave to take care of her autistic son throughout the year. Miller granted Wink’s request in 2011.
In February 2012, Wink’s son was expelled from daycare due to the boy’s aggressive behavior. Wink requested, and Miller agreed, that she be allowed to work from home two days a week in conjunction with using FMLA leave for hours spent taking care of her son. The hybrid arrangement allowed Wink to log her work hours and deduct non-payable FMLA hours spent taking care of her son on the days she worked at home.
However, when Miller experienced financial problems in the summer of 2012, Miller decided none of its employees could work from home. So Miller gave Wink an ultimatum: either work full time in the office, or be considered a “voluntary quit.” Wink showed up on Monday to explain that she hadn’t been able to find day care for son. She subsequently left the office to take care of her son, and her employment was terminated.
The panel for the 7th Circuit stated the FMLA entitled Wink to take leave necessary to take care of her sick child, and that Wink had proved that Miller retaliated against her for asserting her FMLA right. The panel noted that Miller had no compelling reason to fire her, as Wink had been working two days a week from home since February without Miller complaining.
First Illinois Appellate District in Chicago Clarifies Implied Warranty of Habitability Rules
The implied warranty of habitability is a court-created creature of public policy designed to protect purchasers of new homes and condominiums who discover latent defects in their homes or units.
Generally, the claim must be asserted against the builder-vendor, but was expanded in 1983 to permit the implied warranty claim to be asserted against a subcontractor of a builder-vendor where the purchaser had “no recourse” against an “insolvent” general contractor.
In Sienna Court Condo Association v. Champion Aluminum (2017), the First Appellate District clarified a number of issues. In Sienna the court made it clear that design professionals, such as architects and engineers, cannot be sued under the implied warranty. Similarly, anyone who merely supplies materials is not subject to the implied warranty. In other words, the design professional and supplier did not take part in the actual construction nor were they involved in the construction-sale of the real property which is a prerequisite to such a suit.
The Sienna court was faced with the issue that the insolvent builder had insurance which may protect against the claim and that the Plaintiff-homeowner actually recovered over $300,000 from the developer’s warranty fund. The court first addressed whether or not a plaintiff-homeowner can sue the subcontractor where the builder-developer was insolvent but in good standing with limited assets. The court defined “insolvency” as simply meaning liabilities exceeded assets and the builder-developer had stopped paying debts in the ordinary course of business.
The court emphasized that the possibility of “recourse” is not a determining factor in deciding whether the subcontractors are subject to liability. The court rejected the “recourse” test and now the “insolvency” test is the sole test. In other words, potential recovery from insurance policies is not a factor to be considered and the subcontractor can be sued under the implied warranty. With respect to the next question, recovery of any proceeds from an insolvent developer’s warranty fund does not bar a property owner from maintaining a cause of action for the breach of implied warranty of habitability against subcontractors of a developer who participated in the construction of a residence.
The rules explained above only apply to the jurisdiction of the First Illinois Appellate District which covers Cook County. For example, if a homeowner were to litigate the same issues in the Second Appellate District covering the counties of DuPage, Lake, Kane, Kendall, McHenry and other counties extending west to the Mississippi River, the result is likely to be different. The result may also be different if the case were litigated in the Fourth Appellate District which includes most of Central Illinois extending from the border of Indiana to the Mississippi River including the counties of Sangamon, Champaign and Logan. For a complete list of counties check the Illinois Courts’ website.
Illinois Human Rights Act: Disability Harassment Found to Constitute Unlawful Discrimination
The Illinois Second District Appellate Court, in Rozsavolgyi v. City of Aurora, recently held that disability harassment is a cognizable civil rights violation, that a claim for failing to provide a reasonable accommodation for a disability is cognizable as a separate civil rights claim and that the standard of employer liability for coworker harassment applicable to sexual harassment is also applicable to disability harassment.
Patricia Rozsavolgyi worked for the City of Aurora (“the City”) from 1992 to 2012, eventually holding the position of Property Maintenance Compliance Officer. She had a medical history of depression, anxiety, panic attacks and partial hearing loss, which constituted a “disability” under the Illinois Human Rights Act (“the Act”). Ms. Rozsavolgyi claimed that her coworkers intentionally agitated, embarrassed, humiliated, degraded, harassed, discriminated and provoked her by calling her names such as “cuckoo, Shutter’s Island, nuts, crazy, weird, whacko” among other vulgarities, and by leaving offensive notes in her mailbox, spitting on her car window, and creating rumors about her.
Ms. Rozsavolgyi notified the City about the harassment and requested they make a reasonable accommodation to make it stop. She further alleged that the City “failed and refused to take action” which ultimately lead to emotional distress (depression, fatigue, irritability, anxiety, etc.). She claimed that things finally boiled over just prior to her employment being terminated by the City, in a verbal exchange with a coworker where she called the coworker an “idiot.” Her subsequent complaint alleged unlawful termination based on her disability under the Act.
On interlocutory appeal, the Second District answered whether the Act prohibits “disability harassment” as a civil rights violation.
The Act provides that discrimination based on race, religion, national origin, age, sex, and disability, among other traits, is unlawful. However, the only harassment expressly prohibited by the act is sexual harassment.
Ms. Rozsavolgyi argued that even before the 1983 amendment which listed sexual harassment as prohibited under the Act, the Act prohibited sexual harassment as sex discrimination. Therefore, the same reasoning should be applied to disability discrimination, and as such, disability harassment should be found prohibited under the Act.
The Court reasoned that liberal construction of the phrase “terms, privileges, or conditions of employment” to include a prohibition on the creation of hostile work environments based on disability, consistent with the Act’s purpose to protect the right of the disabled to be free from workplace discrimination. Thus, the Court found that the Act prohibits disability harassment. The City has appealed to the Illinois Supreme Court.
Inside This Issue
1. New Illinois Laws Effective January 1, 2017
2. Seventh Circuit Court of Appeals Rules That The Obligation
To Make Contributions Can Survive A De-Certification of a Union
3. NLRB Signals Further Union Favor
4. First District Illinois Appellate Court Upholds Pay-If-Paid Clause
5. New Employee Privacy Laws
New Illinois Laws Effective January 1, 2017
- Senate Bill 3163: Bans any company from asking a worker paid less than $13.50 an hour to sign a non-compete agreement.
- House Bill 6162: Requires employers to give their workers greater flexibility in using their sick time. A company providing sick leave to employees must allow the eligible employees to use up to one-half of their allotted time to attend to medical needs of family members. HB 6162 was further amended by SB 2799 adding stepchildren and domestic partner to list of persons, illnesses which are eligible for leave. It also excludes collective bargaining agreements which may provide differently.
- House Bill 1260: Amends Personal Information Protection Act. Classified online logins, biometric data and health information as protected information. Informs groups how to notify the public of a data breach.
- House Bill 436: Amends the Victims’ Economic Security & Safety Act by mandating that employers provide unpaid work weeks of leave to any employee who is a victim of domestic or sexual violence or has a family member who is such a victim. An employee working for an employer who employs 1-14 persons can be entitled to a total of 4 work weeks leave during any 12-month period. For employers who employ at least 50 employees, such employees are entitled to 12 work weeks leave during a 12-month period. The Bill does not create a right for additional leave that exceeds the unpaid leave allowed under or is in addition to unpaid leave time under the FMLA.
- Senate Bill 2804: Amends the Illinois Wage Assignment Act which allows employees to revoke a wage assignment at any time by submitting a written notice to the creditor.
Seventh Circuit Court of Appeals Rules That The Obligation
To Make Contributions Can Survive A De-Certification of a Union
This case is very fact intensive. The employer, Cleveland Quarry, had a union agreement with the Operating Engineers Local 150, but in 2013 the employees voted in an election supervised by the NLRB to de-certify Local 150 as their collective bargaining representative. Local 150 was de-certified and the employer stopped contributing to the Funds created under the collective bargaining agreement. The Funds brought suit for payment of contributions from the date of the de-certification to the expiration of the collective bargaining agreement. The Union agreement said in part “The employer’s responsibility to make contributions to the welfare plan shall terminate upon the expiration of this agreement.”
Three district courts and the 7th Circuit Court of Appeals ruled in favor of the Plaintiff Funds, because the collective bargaining agreement made the employer’s obligation to contribute to the Funds survive the de-certification of the Union. While the Union could not enforce the collective bargaining agreement, the Funds as third party beneficiaries could collect since the Funds were also entitled to enforce the agreement. The court further noted that there is nothing in ERISA that makes the obligation to contribute depend on the existence of a valid collective bargaining agreement.
Management negotiating teams should be prepared to respond to union proposals that “The employer’s responsibility to make contributions to the welfare plan shall terminate upon the expiration of this agreement.”
NLRB Signals Further Union Favor
On January 30, 2015, the United Government Security Officers of America, Local 365 filed a petition to represent the special police officers employed by Longwood Security Services Inc. An election was conducted pursuant to a stipulated agreement which stated “each party may station an equal number of authorized, non-supervisory employee observers at the polling places to assist in the election.” Most stipulated election agreements contain such language.
However, on the day of the election, the employee designated to be the observer for the Union was not able to attend. A union official asked the Board agent conducting the election if he could substitute in as the observer. The Board agent refused based on the union officials non-employee status. The election resulted in 30-26 vote against the Union.
The NLRB’s case handling manual directs that “a union official should not serve as an observer unless he/she is also an employee of the employer.”
By split decision, the Board recently set aside the election and directed a second election. The majority found that the agent did not follow proper procedure when he learned that the Union intended to use a potentially objectionable observer; the agent should have 1) advised the parties that the election might be set aside if it is later determined that the union official was unreasonable under the circumstances; and 2) allowed the election to proceed with the chosen observers. The Board found that the numerical imbalance in the number of observers was a material breach of the stipulated agreement.
The Dissent would have found that by preventing a high ranking Union official from serving as an observer, the Board agent furthered the important goal of protecting employees’ freedom of choice, while avoiding more substantive problems.
By overlooking its own case handling manual and the “non-employee” language stated in the stipulated election agreement, the NLRB appears to be favoring unions.
First District Illinois Appellate Court Upholds Pay-If-Paid Clause
Since 1985, the enforceability of pay-if-paid clauses have been upheld under A.A. Conte v. Campbell-Lowrie-Lautermilch Corp., the seminal Illinois case on the issue, which held that payment to a subcontractor may be conditioned on the receipt of payment by the general contractor (“GC”), where the agreement provides that the GC’s payment is an “unambiguous condition precedent” to the subcontractor’s payment. Condition precedents are generally disfavored in contract law, as is forfeiture of compensation. This interpretative principle, as well as public policy concerns, has left many waiting for the courts to find such clauses unenforceable.
Pay-if-paid clauses transfer the risk of upstream insolvency to subs down the chain, effectively passing liability of an owner’s non-payment back to each contractor in the amount of their own work, i.e., subcontractors ultimately get stuck with most of the losses. Otherwise, the GC is forced to act as bank and essentially extend credit to the owner; if the GC is not paid by the owner, whether due to a dispute over the work, owner bankruptcy, or any other reason, the GC is still liable for payment to their subcontractors.
In the first published Illinois decision on the topic since 1985, Beal Bank Nevada v. Northside Center THC, LLC, the First District Appellate Court recently held that pay-if-paid clauses remain enforceable in contract if the payment condition is an unambiguous condition precedent to payment. The decision emphasizes not only that unambiguous language is a strict requirement of a pay-if-paid clause, but also the importance of clear language.
Absent plain language in the subcontract, the clause will likely be deemed a pay-when-paid clause, which merely governs the timing of payments rather than the ever more important obligation to pay. Thus, under circumstances such as owner insolvency, whether the GC is liable for payment to the subcontractor depends greatly on whether the pay-if-paid clause is clearly drafted.
A pay-when-paid clause governs the timing of a contractor’s payment obligation. A typical clause might say: “contractor shall pay subcontractor within seven days of contractor’s receipt of payment from the owner.” They do not excuse a contractor’s ultimate liability if it does not receive payment by the owner.
In contrast, a pay-if-paid clause provides that a subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work. A typical clause of this type might say: “Contractors’ receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk.”
GCs and subcontractors alike are encouraged to seek legal assistance when reviewing any contracts that may pose a concern, particularly where an owner has failed to make payment.
New Employee Privacy Laws
According to the newly amended Right to Privacy in the Workplace Act, effective Jan. 1, 2017, Illinois employers may be subject to fines and found guilty of a petty offense for asking, requiring or coercing employees to invite employers to join online groups of which the employee belongs.
In 2013, the Act was amended to prevent employers from requesting employees’ and applicants’ social media passwords on networking sites. Last summer, Governor Rauner approved the House Bill which extends protection beyond passwords, to usernames and personal online accounts, and further adds retaliation provisions.
The 2016 updates, effective January 1, 2017, prohibit employers from the following:
Illinois employers would be prudent to review and update their social media policies in accordance with the newly effective law, particularly those policies regarding employee use of personal accounts while on the job, inadvertent disclosures of personal information, and reporting requirements under the Act.
Inside This Issue
1. Update: Injunction to New OSHA Post-Accident Testing Rules Denied by Federal Judge
2. Judge Enjoins DOL FLSAOvertime Rule
Update: Injunction to New OSHA Post-Accident Testing Rules Denied by Federal Judge
Enforcement of OSHA post-accident drug testing and safety incentive rules had been delayed until December 1, 2016. OSHA agreed to the delay at the request of a federal Judge who was considering a lawsuit requesting injunctive relief from the new rules. The Judge recently issued a decision denying the request for injunctive relief. In light of the decision, OSHA has announced that the new rules will be enforced as of December 1, 2016.
The Judge found that OSHA is merely placing limitations on practices that might discourage the reporting of accidents. Post-accident drug testing and safety incentive programs are not barred by OSHA’s new rules.
The rules require employers to establish reasonable procedures for employees to report work related injuries and illnesses. OSHA will issue citations for failing to provide such a procedure, or providing an unreasonable procedure. OSHA has indicated that requirements for “immediate” and “in person” reporting are unreasonable.
The rules further prohibit retaliation for reporting of work related illness and injury, focusing on three requirements: 1) that the disciplining of employees for safety violations be consistent, regardless of whether violations resulted in injury; 2) that drug testing only occur when there is an objectively reasonable basis for the testing, and should not be implemented where employee impairment could not have contributed to the cause of the injury; and 3) safety incentive programs should not be directly tied to injuries or illness.
For example, raffling off a $500 gift card each month in which no accidents have been reported, and cancelling the raffle for months in which there were accident reported, would violate section 1904.35(b)(1)(iv) because it would constitute adverse action against an employee simply for reporting a work-related injury. Whereas, raffling off a $500 gift card each month in which employees universally complied with all workplace safety rules would not violate the rule. Likewise, rewarding employees for participating in safety training or identifying unsafe working conditions, would not violate the rule.
It is important that employers check that policies and practices concerning drug testing and safety incentives have been reviewed and updated in light of OSHA’s new rules.For a full copy of the new Guidance please contact us.
Judge Enjoins DOL FLSAOvertime Rule
On November 22, 2016, U.S. District Court Judge Amos Mazzant III granted a nationwide preliminary injunction against the U.S. Department of Labor’s overtime rule. State of Nevada v. U.S. Dept. of Labor, No. 4:16-cv-00731-ALM (E.D. Tex. 11/22/2016).
The Court enjoined the rule’s December 1, 2016 implementation that would have changed the salary level to $913 per week for overtime-exempt executive, administrative, and professional white collar workers. That is more than double the amount of the current salary level.
The state plaintiffs had argued that the Department of Labor usurped Congress’ authority in establishing new salary thresholds. Finding that the Department had overstepped its bounds, Judge Amos Mazzant III wrote, “The state plaintiffs have established a prima facie case that the Department’s salary level under the final rule and the automatic updating mechanism are without statutory authority.”
The injunction could leave employers in a state of limbo for weeks, months and perhaps longer as injunctions often do not resolve cases and, instead, lead to lengthy appeals. Here, though, the injunction could spell the quick death to the new rules should the Department choose not to appeal the decision in light of the impending Donald Trump presidency. We will continue to monitor this matter as it develops.The last-minute injunction puts some employers in a difficult position, though — those that already implemented changes in anticipation of the new rules or that informed employees that they will receive salary increases or will be converted to non-exempt status effective December 1, 2016. Issues regarding reversing salary increases, or delaying same, and providing notice to employees, should be dealt with carefully and under advise of legal counsel.
Law Offices of Stanley E. Niew, P.C. and its Staff
Wish you a wonderful Holiday and a New Year of Health, Happiness,Peace and Prosperity!
****BULLETIN – HIGHLY IMPORTANT****
****(PLEASE READ BELOW)****
OSHA Delays Enforcement of New Regulations
For A Second Time
Earlier this year OSHA announced new regulations which limit post-accident drug testing, virtually outlawed all safety related incentive plans and required additional notifications to employees. The regulations were to go into effect on August 10; however, the regulations were delayed to November 1. In response to a federal judge’s request in Texas, OSHA again has agreed to delay enforcement until December 1, 2016.
The portion of the new rules relating to electronic filing of Forms 300, 300A and 301 are not affected by this delay.
We will keep you posted as to any other developments
Inside This Issue
1. “Pay-When-Paid Clause” Versus “Pay-If-Paid Clause”
2. NLRB Revises Damages Available to Discriminatees
3. Sexual Orientation Discrimination Not Prohibited by Title VII
4. Implied In Fact Contracts
“Pay-When-Paid Clause” Versus “Pay-If-Paid Clause”
Under the 1985 case of A.A. Conte, an Appellate Court in the 1st District concluded that the parties’ subcontract “clearly make the receipt of payment from the [property owner] to [the Contractor], the condition precedent to [the Subcontractor’s} payment.” Thus, the concept of “pay when paid clauses” was found to be lawful and enforceable in Illinois.
In the case of Beal Bank Nevada v. Northshore Center, decided on September 30, 2016, the court carved out a distinction between “pay when paid clauses” and “pay if paid clauses.” The Beal Bank court was unwilling to extend the A.A. Conte case “without clear language indicating the parties’ intent that the subcontractor would assume the risk of non-payment by the owner.” A “pay-when-paid clause” governs the timing of the contractor’s payment obligation to the subcontractor within a fixed time, but in contrast a “pay-if-paid clause” provides that a subcontractor will be paid only if the contractor is paid provided the contract has language such as “Contractor’s receipt of payment from the owner is a condition precedent to contractor’s obligation to make payment to the subcontractor; the subcontractor expressly assumes the risk of the owner’s nonpayment and the subcontract price includes the risk." 
The court seems to have relied upon upon language in the subcontract agreement to the effect that “contractor agrees to pay subcontractor within seven days after receipt of payment from the owner.” The court refused to overturn A.A. Conte, but distinguish it on its facts and went on to say there are no “magic words” when making a determination of the parties’ intent from clear and ordinary language in a subcontract agreement. The court indicated it would review such disputes on a “case-by-case” basis.
Under Brown & Kerr v. St. Paul Fire, a Federal court interpreting Illinois law ruled that a “pay when paid clause” did not preclude payment under a surety bond when the subcontractor had satisfactorily performed but was not paid. The Illinois Mechanics’ Lien Act also provides in part, that “[a]ny provision in a contract, agreement or understanding, when payment from a contractor to a subcontractor or supplier is conditioned upon receipt of the payment from any other party including a private or public owner, shall not be a defense by the party responsible for payment to a claim brought… against the party.”
In sum, the Beal Bank case is the law in the 1st Appellate District in Cook County; however, there is no assurance that it will be followed in other Illinois appellate districts.  Contractors and subcontractors are advised to carefully look at their construction agreements under the holding in Beal Bank.
 The Beal Bank court was quoting from a federal case which is not binding on Illinois courts.
 Trial courts in other appellate districts must follow the Beal Bank and A.A. Conte decisions until another appellate court rules differently.
NLRB Revises Damages Available to Discriminatees
In August the National Labor Relations Board (“Board”) overruled its longstanding policy that treated expenses as offsets to interim earnings rather than a make-whole remedy for someone who was unlawfully fired.
By example, Perez worked at a remote location earning $1,000 per month prior to her unlawful discharge. During the month following discharge, Pere spent $500 traveling to different locations looking for work. Perez could only find interim employment in another state that paid $750 per month. Perez moved to the new state to be closer to her new job and was also required to obtain training for her new position, costing her $5,000 and $500, respectively. Under the Board’s traditional approach, Perez would receive compensation for only $1,500 of her $6,000 expenses, far less than make-whole relief. Under King Soopers the make-whole remedy to a discriminatee will now include all search for work costs and interim expenses regardless of whether those expenses exceeded interim earnings.
In another 2016 case the Board ruled in Advo Serv of New Jersey that employers must compensate employees for the adverse tax consequences of receiving lump sum back payment awards.
There are also cases pending before the Board requesting consequential damages as a result of being terminated in violation of the NLRA. A make whole remedy for loss of earnings suffered as a result of unlawfully withheld wage increases requires a payment of interest compounded daily.
These cases illustrate the need for training supervisors and managers on how to avoid committing unfair labor practices. We offer such training programs. To inquire about a training program or schedule a training program, contact our office.
Sexual Orientation Discrimination Not Prohibited by Title VII
In a recent case alleging employment discrimination of a lesbian employee, The 7th U.S. Circuit Court of Appeals found that it was bound by its prior rulings concerning the scope of Title VII of the Civil Rights Act of 1964. The Court opined, “our precedent has been unequivocal in holding that Title VII does not redress sexual orientation discrimination … our holdings reflect the fact that despite multiple efforts, congress has repeatedly rejected legislation that would have extended Title VII to cover sexual orientation.”
The Court went on to note the emerging consensus among judges that sexual orientation discrimination cannot be tolerated. Inasmuch, the 7th Circuit has signaled that such an expansion of protection will require new legislation.
Implied In Fact Contracts
In Trapani Construction v. Elliot Group, an Illinois appellate court ruled that contracts implied in fact arise from promissory expression that show the parties’ intent to be bound as inferred from the facts. Here the Plaintiff was paid in excess of $18 million dollars by Defendant for construction work on other projects performed under unsigned draft contracts. The Defendant cannot deny a contract implied in fact based on the history of working together in the past under the same unsigned contracts.
Inside This Issue
1. Construction Companies Must Assess Risks When Contracting For Labor Only Under New NLRB Decision
2. NLRB Announces New Joint Employer Test
3. Employee Benefits – Breach of Contract vs. Negligent Administration of Employee Benefits
4. Representation Election Highlights NLRB Pro-Union Posture
5. Grieving Parents Now Entitled to Leave Under Illinois Law
Construction Companies Must Assess Risks When Contracting For Labor OnlyUnder New NLRB Decision
In Miller & Anderson, a case decided in July 2016, the National Labor Relations Board (“NLRB”) ruled that “bargaining units that combine employees who are solely employed by a user employer and employees who are jointly employed by that same user-employer and an employer supplying employees to the user employer constitute multi-employer units,” which are appropriate without the consent of either the user-employer or the supplying employer.
What does the decision mean as a practical matter? For example, if Employer A uses a temporary construction service (Employer B) and a union wins an election as to Employer B, the employees of Employer A may be part of the bargaining unit. Thus if the union wins the election, the employees of both Employers A and B may be subject to the election conducted by the NLRB for employees of Employer B. This decision will routinely apply wherever temporary workers are used to supplement a regular workforce.
Another concern that is common in the residential construction industry is for a builder-developer to contract for only labor and to purchase all the materials. Under this decision the supplier of labor can have an election before the NLRB and, if the union wins the election, it may include builder-developer employees who have a community of interest. How this would play out in practical terms is that if the builder-developer has jobsite employees who move cabinets and other materials, those employees would be subject to being included in the unit of the labor supplier. Taking this decision to its extreme, even if the builder-developer had no employees, it could now have a bargaining relationship with the union. This would be particularly true for the labor supplier of carpenters or laborers.
All contractors are encouraged to re-visit their existing practices and contracts to best minimize the risk associated with this decision. Contractors are encouraged to read the next article which also has implications on this decision.
 Employers can challenge the appropriateness of the unit before an election by a unit clarification petition.
 Note that the Laborers Union in this area has taken the position that it will represent carpenter employees in the unit so long as the carpenter employees want to be represented by the Laborers.
NLRB Announces New Joint Employer Test
Joint employer status allows one employer to be found liable for the debts and obligations of another employer under the theory that they are a “joint employer.” In the Browning-Ferris of California decision, the NLRB greatly expanded the definition of a joint employer. The new standard only requires potential control of terms or conditions of employment even if that right is not exercised. Direct and immediate control is no longer the standard for becoming a joint employer.
Contractors are encouraged to look at their contracting arrangements and consider removing any and all control over the operations of another contractor. This is especially important in light of the Miller & Anderson decision in the prior article. While there are no current cases that we could find that would extend these decisions to the Equal Opportunity and Wage and Hour laws, there will likely be a logical extension to these laws.
Restructuring operations and business practices need to be considered in light of the NLRB’s continued assault on what was considered “black-letter” employer-employee law.
Employee Benefits – Breach of Contract vs. Negligent Administration of Employee Benefits
In a recent U.S. District Court case, at issue was the extent to which employee benefits liability coverage exists for the insured for negligent conduct in the administration of an employee benefits program.
The case involved a retired lawyer who alleged violation of the Illinois Wage Collection and Payment Act (“Wage Payment Act”) and Breach of Contract when his former law firm refused payment of $951,000 in accrued vacation time and sick time.
The law firm had claims made coverage from Hartford Casualty Insurance Co. for employee benefit liability based on negligent administration of benefits. Hartford denied the claim and filed a complaint for declaratory judgment, claiming a breach of contract claim is not a negligent act claim, thus barring benefit liability coverage. The district court agreed with Hartford and granted its motion for summary judgment.
The court explained that Hartford’s coverage was on a claims-made basis which provided that Hartford would pay damages for which the insured became liable because of an “employee benefits injury.” It covered the insured’s negligent administration of an employee benefits program which is not a contract claim.
The court found the claim for accrued vacation and sick time was a claim for breach of contract and not a claim for negligent act, and that the claim citing the Wage Payment Act sounds in contract and not negligence. The Court further noted that “[t]he policy provides coverage for negligent errors or omissions only, and does not provide coverage for breach of contract, even when that contract may involve an employee benefit program.”
At first glance, a breach of contract might seem to qualify as negligent administration of employee benefits. The recent holding illustrated the Court’s limited reading of contractual language in an insurance policy. It would be wise to consult with a lawyer if you have any questions regarding the scope of coverage under a company’s insurance policy.
Representation Election Highlights NLRB Pro-Union Posture
In early 2012, the Steelworkers Union sought to represent Intertape Polymer Corp.’s production and maintenance employees. The Board conducted a secret ballot election among Intertape employees and Intertape won by a wide margin of 142 to 97.
The Steelworkers claimed that Intertape interfered with the election by 1) surveilling employees’ union activities, and 2) on 3 occasions a month before the election, removing pro-union literature from the employee break room.
In 2014, a NLRB majority sustained the Steelworkers objections, overturned the election results and ordered a rerun election, ruling that Intertape interfered with the employees ability to exercise their free choice. The dissent noted “it is not possible to conclude that Intertape affected the lopsided outcome of this election by expediting the cleanup of a break room.”
Intertape appealed the Board’s decision to the 4th U.S. Circuit Court of Appeals in September, 2015. The appeals court found that Intertape’s confiscation of material from the break room was illegal, but refused to sustain the NLRB’s finding that any unlawful surveillance occurred. The court remanded the case to the Board to determine if a new election was still needed, based on the appellate court overruling one of the bases for ordering a new election. On remand, the Board again ruled for the Union and required a second election, and remanded the case to the regional director for further proceedings.
This case is another clear indication of the NLRB’s pro-union stance. When confronted with review by the NLRB, employers should bear in mind that the NLRB may not provide them a fair shake.
Grieving Parents Now Entitled to Leave Under Illinois Law
An Illinois law that became effective July 29, 2016 requires employers with 50 or more employees to provide two weeks unpaid bereavement leave to attend a funeral of a child, making arrangements for a funeral or just grieving the death of a child. “Child” is broadly defined as biological, adopted, foster child, stepchild, legal ward or child of a person standing in loco parentis. Employers can request documentation.
Employers should consider amending their leave policies that the bereavement leave should run concurrently with FMLA leave. Since there are no regulations published, we cannot say with certainty if this would be permissible. At this time, no poster is required.
For a copy of the law, email or call us.
Inside This Issue
1. OSHA’S New Regulations Dramatically Affect All Employers’ Safety Policies and Require Some Policies to be Terminated
While Some Must be Re-Written ***HIGHLY IMPORTANT – READ IMMEDIATELY***
2. So You Think You Can Replace Strikers Permanently Under Any Conditions: THINK AGAIN
3. Consider if Your Company is a Joint Employer
4. Single-Employer Doctrine Reaffirmed as Defense by 7th Circuit
***OSHA’S New Regulations Dramatically Affect All Employers’ Safety Policies and Require Some Policies to be Terminated While Some Must be Re-Written***
OSHA DELAYS ENFORCEMENT OF NEW REGULATIONS
*** Following Up on our July Newsletter***
OSHA announced that it is delaying the enforcement of the Regulations which were to become effective August 10, 2016 until November 1, 2016. This was in response to a lawsuit filed in Texas.
The increase in fines, however, remain in effect.
- Stan Niew
OSHA issued new safety regulations which become effective August 10, 2016. The regulations are 72 pages long, single space, three columns to a page with seemingly hundreds of exhibits. The regulations are intended to stop under-reporting of injuries by employees. A summary of the key provisions are outlined below:
1. Post-Accident Drug Testing Now Permissible In Limited Circumstances
Virtually every employer drug tests immediately after an injury. OSHA believes that blanket post-accident testing policies deter proper reporting of injuries.
Post-accident testing is now limited. Under OSHA’s new standard employers need not specifically suspect drug use before testing “but there should be a REASONABLE POSSIBILITY that the drug use by the reporting employee was a CONTRIBUTING FACTOR to the reported injury.” OSHA also believes that drug testing that is designed in a way that it may be perceived as punitive or embarrassing to the employee is likely to deter injury reporting.
A policy that requires immediatereporting of an accident or injury violates the new regulations. Each employer must amend their drug testing policies to provide an employee a reasonable time to report an injury once an employee actually knows of the injury. Drug policies must take into consideration slow growing illnesses.
Every employer must revise their policies to comply with this standard before August 10, 2016. The only exception to the rule is post-accident testing required to comply with State or Federal law.
2. New standards require notification to Employees of their Rights
Effective August 10, 2016 all employers must adopt a policy which informs all employees of their right to report work-related injuries and illness; modify existing policies for reporting work-related injuries to be reasonable and not to deter or discourage employees from reporting injuries; and incorporate in the policy anti-retaliation provision for employees who report work-related injuries and illnesses.
3. Most Safety Related Incentive Plans Unlawful
OSHA takes the position in the new regulations that incentive programs for safety cause employees not to report injuries. OSHA specifically mentions incentive programs that are now unlawful such as:
Safety programs that are permissible:
4. New Reporting Requirements
The new rule requires an electronic reporting of employer records. Companies with 250 or more employees must submit Forms 300, 300A and 301 to OSHA on an annual basis. Companies with 20 or more employees, but less than 250, must electronically file Form 300A annually.
5. Recommended Action
Compliance will not be easy and it will take you and your staff valuable time to comply.
We can assist you in developing such a policy. Just call or email Stan Niew since certain company information is needed.
So You Think You Can Replace Strikers Permanently Under Any Conditions: THINK AGAIN
The law has been clear since the passage of the National Labor Relations Act that employers may permanently replace economic strikers at any time, for any reason.
On May 31, 2016 in a 2 to 1 decision, the National Labor Relations Board (“NLRB”) ruled that economic strikers may not be replaced if there is an “independent, unlawful purpose” for doing so. In the American Baptist Homes case, the NLRB found that the employer was replacing workers “to punish the strikers” and show the union that it should “avoid future strikes.” The NLRB said that these are two independent, unlawful purposes, are now impermissible. The NLRB reasoned that the independent, unlawful purposes were to break union solidarity and punish a majority of the striking workers. Thus, the employer’s motive has become a material factor in determining whether replacing economic strikers amounts to an unfair labor practice.
Hopefully this decision will be appealed and overturned by a federal appellate court.
Now, employers must analyze if there is a business justification for permanently replacing economic strikers. Reasons may include termination from the project, delay damages or loss of future work with the particular client.
Consider if Your Company is a Joint Employer
The National Labor Relations Board (“NLRB”) and the U.S. Department of Labor (“USDOL”) are actively looking to Joint Employer complaints.
Joint Employment – General Principles
A single individual may be simultaneously considered an employee of more than one employer under the Fair Labor Standards Act (“FLSA”). In such cases, the employee’s work for the joint employers is considered as one employment for purposes of the Act. Joint employers are individually and jointly responsible for FLSA compliance, including paying not less than the minimum wage for all hours worked during the workweek and, if applicable, overtime compensation for all hours worked over 40 in the workweek. 29 C.F.R. 791.2(a). A determination of whether joint employment exists must be based upon all the facts of the particular case. For instance, two employers may both supervise the same employee or one may hire and set the pay rates while another has authority to supervise or fire the worker; both scenarios may represent a joint employment relationship.
As a general example, workers sent by a cleaning company to a client-hotel to clean hotel rooms may be jointly employed by both the cleaning company and the hotel. Similarly, a private agency, non-profit organization, or public entity that hires a home care worker to provide services in an individual’s home may be a joint employer with the individual (or family or household member of the individual).
Determining Joint Employment
Joint employment is determined by applying the “economic realities” test, which examines a number of factors to determine whether a worker is economically dependent on a purported employer, thus creating an employment relationship. Factors to consider may include whether a possible employer has the power to direct, control, or supervise the worker(s) or the work performed; whether a possible employer has the power to hire or fire, modify the employment conditions or determine the pay rates or the methods of wage payment for the worker(s); the degree of permanency and duration of the relationship; where the work is performed and whether the tasks performed require special skills; whether the work performed is an integral part of the overall business operation; whether a possible employer undertakes responsibilities in relation to the worker(s) which are commonly performed by employers; whose equipment is used; and who performs payroll and similar functions. Other factors also may be considered and no one factor is controlling. The ultimate question is one of economic dependence.
The NLRB has slightly different standards that will be discussed in our next newsletter.
Single-Employer Doctrine Reaffirmed as Defense by 7th Circuit
The U.S. Court of Appeals for the 7th Circuit recently ruled that a District Court erred in granting summary judgment to a union pension fund seeking fringe benefit contributions under Labor Management Relations Act and ERISA. Plaintiff-union, Chicago Regional Council of Carpenters fringe benefit funds (the “Funds”), alleged the Funds were owed by Schal Bovis, Inc., (defendant-employer) for failure to make fringe benefit payments for construction work performed by non-union labor and by sheet metal workers.
Ultimately, the appeal boiled down to 2 issues regarding 2 separate claims under the collective bargaining agreement (“CBA”). The CBA required the defendant-employer to track hours and pay fringe benefits for “jurisdictional work” performed by non-union subs.
The first claim involved the installation of cabinetry, undisputedly within the Union’s jurisdiction. Defendant contracted a non-union sub, Canac, who in-turn used its union labor-sister company, Qualifit Kitchens, to perform the work. The Court of Appeals held that Canac and Qualifit Kitchens were a single employer under the single-employer doctrine, and thus, the general contractor did not violate the CBA by assigning work to Canac.
However, under the CBA the Union also agreed “not to interfere with the existing practices of other unions affiliated with the building trades.” The second claim involved the jurisdictional work of installing stainless steel kitchen equipment. Defendant subcontracted the work to Edward Don who subcontracted RB Hoods, which was a union signatory with the Sheet Metal Workers. RB Hoods used union labor from the Sheet Metal Workers and paid fringe benefits to the Sheet Metal Workers. The Court of Appeals held that the general contractor’s retention of sheet metal workers to install stainless steel kitchen equipment did not violate the CBA’s provision governing the union’s jurisdiction.
Inside This Issue
1. EEOC Continues to Expand the Boundaries of Title VII
2. USDOL Overtime Rule Change Effective December 1, 2016
3. Can Schoolyard Type Bullying Be Applied to the Workplace?
4. NLRB Carves Out “Shop Talk” Exception to Anti-Harassment Policies
EEOC Continues to Expand the Boundaries of Title VII
Title VII of the Civil Rights Act of 1964 is the federal statute prohibiting discrimination in the workplace. Earlier this year, the Equal Employment Opportunity Commission (EEOC) filed two suits alleging discrimination based on employees’ sexual orientation in violation of Title VII. However, unlike race, gender and other characteristics, sexual orientation is not expressly protected under Title VII. The EEOC posits that such discrimination is nonetheless prohibited by Title VII based on the theory that discriminating against Lesbian Gay Bisexual Transgender (LGBT) employees constitutes sex discrimination.
The EEOC had not previously alleged sexual orientation discrimination in litigation, although its position has been clear for years. The EEOC’s most recent Strategic Enforcement Plan for fiscal years 2013-16 combating discrimination against LGBT individuals is one of its “national priorities.” Additionally, last July the EEOC issued a federal agency sector decision which concluded that sexual orientation discrimination fell within the purview of Title VII. The EEOC reports a 28% increase in sex discrimination charges filed in fiscal years 2014 to 2015.
Illinois is one of 22 states which already prohibits sexual orientation discrimination by state law. However, the EEOC’s recent litigation should warn employers to expressly prohibit sexual orientation and gender identity discrimination in their written policies. Similarly, supervisors should be trained to recognize and deal with comments and situations which could be construed as disparaging to LGBT employees.
USDOL Overtime Rule Change Effective December 1, 2016
The U.S. Department of Labor (USDOL) recently announced that rule changes proposed last year will become effective on December 1, 2016. Since 1940, the USDOL’s regulations have generally required each of three tests to be met for one of the Fair Labor Standards Act’s “white collar” exemptions to apply: (1) the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed; (2) the amount of salary paid must meet a minimum specified amount; and (3) the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations. The new rule includes the following key changes to the current overtime rules, which focus primarily on the compensation levels needed for executive, administrative and professional workers to be exempt:
The USDOL blog provides the following options for employers to consider in light of the new rule:
Can Schoolyard Type Bullying Be Applied to the Workplace?
According to the Workplace Bullying Institute, bullying is defined as:
“Workplace bullying is repeated, health
harming mistreatment of one or more
persons (the targets) by one or more
perpetrators. It is abusive conduct that
is: Threatening, humiliating, or
intimidating, or; work interference-
sabotage which prevents work from
getting done, or; verbal abuse.”
Examples of bullying behavior can include hovering over employees, social isolation, being sworn at, constant blame without facts, micromanaging or unrealistic work deadlines. While the list is not all encompassing, it is designed to provide employers with examples of bullying. Thus far, there is no Illinois Statute or case law which expressly makes bullying illegal harassment. However, other states have adopted anti-bullying statutes which deem bullying as illegal harassment and provide employees damages. Absent the statute, this can be a one-on-one cause of action for intentional infliction of emotional distress. In Illinois such claims may be covered under the Worker’s Compensation Act.
Employers may wish to revise their policies to include bullying as a form of harassment.
NLRB Carves Out “Shop Talk” Exception to Anti-Harassment Policies
Nearly all employers have anti-harassment policies which prohibit profanity in the workplace directed to a fellow employee or a manager. Most of these policies prohibit repeated infliction of verbal abuse, derogatory remarks, insults or physical contact that a person would perceive as threatening.
In a series of cases, the NLRB carved out the “shop talk” exception which permits profanity and shouting in the workplace in limited circumstances. By way of example, two waitresses engaged in a profane shouting match with a third waitress in front of customers and management. In this case the NLRB reversed the employer’s termination of the two waitresses who engaged in the profane shouting match. Similarly, a barista who was off duty became engaged in a heated conversation with a manager making obscene comments in the presence of customers. Again the NLRB reversed the firing of this barista. In another case the NLRB reversed the discipline of employees involved in screaming profanities at each other to managers and to co-workers.
It is very difficult to square these NLRB cases with required anti-harassment policies. The only explanation is managers were involved. Without managers being involved, the results may have been different. The conclusion is employers are cautioned not to fire every abusive employee under a harassment policy without considering the “shop talk” exception. Always check with competent legal counsel.
Inside This Issue
1. Restrictive Covenants Limited
2. Corporate Directors Can Be Held Personally Liable
3. Severance Pay In Turn For Release of Waivable Title VII Claims
4. Same-Sex Marriages Affect Benefits And Obligations
5. Equal Pay Act Expands In 2016
Restrictive Covenants Limited
A financial planner resigned from one company and began working in the same position at another firm. His previous employer filed suit against him and his current employer alleging breach of restrictive covenant. Restrictive covenants attempt to keep former employees from competing against their former employer in their new employment. The former employer asked a DuPage County judge to enter a temporary restraining order (which in essence enforces the restrictive covenant), which was denied. The trial judge said he did not believe the former employer could succeed on the merits absent factual assertions that the financial planner used confidential information, engaged in former client solicitation or rendered financial advice to his former employer’s customers. The trial judge’s opinion was affirmed by the Second Illinois Appellate District.
Note that this case arose under an employment relationship. If the restrictive covenant was part of a sale of a business, the result may be different.
Corporate Directors Can Be Held Personally Liable
A 25 year director and General Counsel of an international products manufacturer for hospitals was found to be individually liable. In this case the Company was subject to the Foreign Capital Practices Act (“FCPA”) which outlaws bribery and demands certain record keeping. The Company previously entered a consent decree admitting they bribed officials in Vietnam, Thailand and Russia and paid $55 million in fines.
Approximately three years after paying the fines the General Counsel noted there was no documentation for Chinese sales so he hired an outside law firm to investigate. The law firm found no evidence of bribery. However the General Counsel was concerned that the lack of record keeping alone violated the FCPA. The General Counsel tried to obtain records from the CEO and CFO without success. The General Counsel suspected that the CEO and CFO were complicit in some bribery and he took the matter to the Company’s Board of Directors audit committee. The audit committee recommended again engaging the outside law firm to investigate. The General Counsel objected to hiring the outside law firm because another finding of improper conduct would demonstrate the Company’s failure to uncover FCPA violations for three years.
Thereafter, the CEO, with the approval of the full Board, fired the General Counsel and he promptly filed a complaint under Sarbanes-Oxley Act which protects whistleblowers. The federal district court noted that there is no case in which the question of whether individual directors can be sued under the whistleblower provisions. The General Counsel was found to be personally liable because he blew the whistle only internally and not to the SEC.
The district court case is now on appeal.
Severance Pay In Turn For Release of Waivable Title VII Claims
The EEOC sued CVS Pharmacy alleging that CVS’ practice of offering terminated employees severance pay in return for release of waivable Title VII claims complied with CVS’ requirement that employees agree not to file EEOC charges in the release and severance agreement was unlawful. According to the EEOC, CVS’ actions served to deter other employees from filing EEOC charges or participating in EEOC proceedings.
The district court dismissed the case because the EEOC failed to make any effort to conciliate the claim prior to bringing the lawsuit. More importantly, the trial court said the EEOC complaint should be dismissed because there is no allegation that CVS engaged in any discriminatory or retaliatory conduct. The Appellate Court agreed and affirmed the trial judge.
Both the EEOC and the NLRB have taken the position that waiving the right to file a charge at either agency is unenforceable. Other litigation is likely.
Same-Sex Marriages Affect Benefits And Obligations
Last June, the U.S. Supreme Court ruled that the fundamental right to marry is guaranteed to same-sex couples by both the Due Process Clause and the Equal Protection Clause of the U. S. Constitution’s 14th Amendment.
Since same-sex marriage is now legal under federal law, many employers are eliminating domestic partner benefits. As a result, same-sex couples must become formally married to obtain the same coverage for a partner. Same-sex spouses will be afforded the federal benefits of COBRA continuation and, in Illinois, the benefits provided under the Illinois Spousal Health Insurance Act.
Same-sex spouses are now also afforded all the social security benefits granted to heterosexual spouses. During a divorce, same-sex spouses may be entitled to these benefits. Likewise, same-sex spouses paying alimony or child support may deduct those amounts on their federal income tax returns.
Additionally, retirement plans now must recognize same-sex spouses for spousal benefits -- as they are generally governed by federal law. Pursuant to IRS and Labor Department guidance, employer sponsored 401(k) and pension plans must include same sex marriages and shall apply benefits retroactively. Same-sex couples should confirm with their spouse that they are the beneficiary of their retirement plans.
Equal Pay Act Expands In 2016
The Illinois Equal Pay Act of 2003 generally prohibits employers from discriminating between employees on the basis of sex. The Act specifically prohibits paying wages at a rate not less than the rate at which employees of the opposite sex are paid for the “same or substantially similar” work on jobs that require equal skill, effort and responsibility under similar conditions.
Effective January 1, 2016, the Act applies to all employers, whereas it previously only applied to employers with four or more employees. The definition of “Employer” is expansive under the Act, and includes “an individual, partnership, corporation, association, business, trust, person, or entity for whom employees are gainfully employed in Illinois.”
Certain exceptions to the equal pay requirement include seniority systems, merit systems, systems that measure earnings by quantity or quality of production, or differential based on any quality other than sex or a factor that would constitute unlawful discrimination under the Illinois Human Rights Act, i.e., race, color, religion, national origin, ancestry, age, order of protection status, marital status, citizenship status, physical or mental disability, military status, sexual orientation, pregnancy, or unfavorable discharge from military service.
The amended Act provides a tiered layer of penalties ranging from $0 to $5000 per violation based on number of employees and previous violations. Further, employees may recover in a civil action the entire amount of the underpayment with interest, costs and reasonable attorney fees.
The Act further provides that it is unlawful for an employer to interfere with, restrain, deny or attempt to deny the exercise of any right, as well as to discharge or discriminate against an individual for inquiring about, disclosing, comparing or otherwise discussing the employee’s wages or the wages of any other employee or aiding or encouraging any person to exercise his or her rights under the Act. In short, employees are free to discuss the issue of wages – their wages and the wages of other employees.
All employers would be prudent to draft job descriptions for employee positions to ensure employers are paying employees wages according to job responsibilities, seniority and applicable exceptions under the Act regardless of sex and the other factors prohibited under the Illinois Human Rights Act.
Inside This Issue
1. How Employers Can Lose an ADEA Claim
2. Reverse Discrimination Suit Theory is Viable Cause of Action
3. To Defeat an Unemployment Insurance Claim an Employer Must Show That it Has a Rule or Policy That Was Violated
4. Illinois Supreme Court Rules That Subcontractors Are Not Covered by Valid Disclaimers of Implied Warranty of Habitability
5. ADA Causation Standard Remains an “Open Question” in the 7th Circuit
6. NLRB Decision Leads to Confusion About Workplace Recording
How Employers Can Lose an ADEA Claim
In Bordelon v. Bd. Of Education of the City of Chicago, the 7th Circuit Court of Appeals affirmed a plaintiff-employee claim for age discrimination under the Age Discrimination in Employment Act (“ADEA”). The plaintiff-employee alleged that the defendant-employer influenced a decision maker to not renew plaintiff’s contract as principal of grade school on account of his age. The decision maker based his decision to not renew plaintiff’s contract on low test scores of students and disciplinary problems.
The plaintiff-employee failed to demonstrate that defendant’s reasons for non-renewal were "not worthy of belief.” The Appellate Court did not sustain plaintiff’s claim even though the plaintiff’s supervisor said to “give it up.” This alone was not evidence of age discrimination since the supervisor did not mention age.
Plaintiff’s witnesses’ general observations that the supervisor wanted someone younger and that the supervisor gave less support to other school principals did not give rise to intentional discrimination.
Reverse Discrimination Suit Theory is Viable Cause of Action
In Deets v. Massman Construction Co., the U.S. Dist. Ct. S.D. Illinois ruled in favor of defendant-employer and granted summary judgment for the employer. The 7th Circuit Court of Appeals reversed the district court. The plaintiff-employee brought a Title VII reverse discrimination case alleging that he was laid off from his construction job on account of his white race. The project superintendent allegedly told plaintiff that reason for layoff was because “[m]y minority numbers aren’t right.” Record showed that defendant hired minority worker to position plaintiff had previously held shortly after plaintiff’s layoff. Although project superintendent denied making such statement, the factual conflict over what would be direct evidence of discrimination could not be resolved on summary judgment motion.
The Appellate Court also found existence of sufficient circumstantial evidence of race discrimination, where, in addition to alleged statement by project superintendent, the record suggested that project superintendent knew at time of plaintiff's layoff that defendant was out of compliance with its minority participation goals.
To Defeat an Unemployment Insurance Claim an Employer Must Show That it Has a Rule or Policy That Was Violated
In Petrovic v. The Department of Employment Security (February 4, 2016, Cook Co.), an employee worked as a tower planner at O’Hare, employed by airline for nearly 24 years when she was terminated. Employer claimed misconduct because employee, upon request from a friend at another airline, arranged for upgrade of passenger from business class to first class and for a bottle of champagne to be delivered to that passenger. IDES denied Plaintiff’s application for unemployment benefits on basis that she was discharged for misconduct.
This case does not involve illegal or intentionally tortious conduct. The Appellate Court required evidence of a deliberate rule violation. The employer failed to offer any evidence of a rule or policy prohibiting employee from the actions taken, and employee testified that special favors of this type had been done previously for customers.
The Illinois Supreme Court ruled the employer failed to meet its burden of proving that Plaintiff was discharged for misconduct under Section 602(A) of the Unemployment Insurance Act.
Illinois Supreme Court Rules That Subcontractors Are Not Covered by Valid Disclaimers of Implied Warranty of Habitability
In Board of Managers of Park Point at Wheeling Condominium Association v. Park Point at Wheeling, LLC, a Condo association filed suit against various parties involved in design, construction and sale of a condo complex completed in 2004. All defendants were alleged to have breached the implied warranty of habitability by incorporating latent defects into units and common elements. The disclaimer met the criteria of an effective disclaimer, in part, because it was brought to each buyer’s attention by being conspicuous in the parties’ contract. The lower courts erred in dismissing counts as to subcontractors who do not come within the scope of the written warranty disclaimer. The lower courts properly dismissed counts as to developer-seller, and as to architect.
The Illinois Supreme Court ruled that the disclaimer of implied warranty of habitability was valid as to the developer since the disclaimer was conspicuous in bold type and buyers’ initialing the clause was unnecessary. The lower courts dismissed the general contractor and the subcontractors from the suit based upon the disclaimer. The Illinois Supreme Court reversed and ruled that since the subcontractors were not specifically mentioned in the disclaimer, the subcontractors are not covered by the disclaimer and remain in the suit brought by the Condo Association.
This decision does not follow any logic. How can the general contractor/developer be dismissed from the suit while the subcontractors remain liable for latent defects? It would be prudent to include subcontractors and suppliers in the disclaimer of implied warranty of habitability.
ADA Causation Standard Remains an “Open Question” in the 7th Circuit
Since 2008, the 7th U.S. Circuit Court of Appeals has yet to answer whether mixed-motive discrimination claims can prevail under the Americans with Disabilities Act (ADA). For the second time last year, in Arroyo v. Volvo Group North America LLC, the Court signaled that they are willing to reconsider that question.
The case dealt with an army reservist who was terminated from Volvo. The employee had taken 900 days of military leave over 6 ½ years. After her second deployment, she was diagnosed with PTSD. Her supervisors granted her a number of workplace accommodations, including time off for therapy, a quiet place to meditate, and a mentor. Nonetheless, she was also late to work 11 times in the months leading up to her termination (usually less than 10 minutes late). Through a string of emails, her supervisors discussed the difficulties posed by her absences and accommodations.
The employee brought discrimination claims under both, the Uniformed Services Employment and Reemployment Rights Act (USERRA) and the ADA. The district court granted summary judgment in favor of Volvo. On appeal, the Appellate Panel concluded that the supervisor’s emails could be interpreted by a reasonable jury to show that Volvo was at least partially motivated by anti-military animus towards the employee, and that a reasonable jury could link this animus to the termination. The Panel found that the employee had presented sufficient evidence to make a prima facie case for discrimination under the “motivating factor” test for a USERRA claim, and that Volvo had not met its burden to show that it would have fired the employee even in the absence of her military service.
Turning to the ADA claim, the Appellate Court highlighted the distinction of a “more exacting” but-for standard under the ADA, although it is an open question whether the but-for standard is still “good law” (although the Court avoided deciding the issue because the emails raised a question of fact under the stricter but-for standard). The Appellate Court stated “it is an open question whether the 2008 amendments to the ADA, which changed the operative causation language from ‘because of’ to ‘on the basis of,’ altered the substantive standard.” This is the third time that the 7th Circuit has signaled that it is willing to reconsider the substantive standard.
NLRB Decision Leads to Confusion About Workplace Recording
In a retreat from earlier rulings, the National Labor Relations Board (“Board”) recently struck down as illegal an employer’s policy that prohibited employees from recording co-workers on the job without management’s approval.
In Whole Foods Market, Inc., the supermarket chain defended two workplace policies that prohibited workplace recording. The rules prohibited recording conversations, phone calls, images, or meetings with any device, including mobile phones, digital cameras and tape recorders. The expressly stated purpose of the rules was to encourage open and honest communication and dialogue among employees.
The United Food and Commercial Workers Union, Local 919 and Workers Organizing Committee of Chicago filed Unfair Labor Practice charges against Whole Foods claiming the policies violated the NLRA. An Administrative Law Judge concluded that Whole Foods’ policy was lawful because recording workplace communications is not a protected right, and such a policy was within Whole Foods’ right to regulate its workplace. The Board disagreed and reversed.
The Board reasoned that employee recording or photographing is protected by the Act if the employees are acting for their “mutual aid and protection” and that Whole Foods’ policies could preclude employees from recording protected employee picketing, documenting unsafe working conditions, publicizing workplace discussions concerning wages, employment terms and conditions.
The dissent noted “I believe employees would reasonably read the rules to safeguard their right to engage in union-related and other protected conversations.” In prior cases the Board has barred unions and employers in collective bargaining from insisting that negotiations be recorded or transcribed verbatim by court reporters. The Board’s decision in Whole Foods seems to be at odds with the principle it bestowed in the collective bargaining context.
NOTE: This decision does not address state laws that bar recordings without agreement of all parties.
These Newsletters are not intended as legal advice since each situation depends specifically on the facts presented. Persons reading these Newsletters should seek competent legal advice with regard to the subjects contained herein before making any employment or other decisions.