Law and the Workplace

Second Circuit Addresses Title VII Sexual Orientation Claims And Leaves Door Ajar For Sex Stereotyping Claims

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In a three-member panel decision in Christiansen v. Omnicom Group, Inc., the Second Circuit revived a homosexual employee’s claims under Title VII on the theory of sex discrimination based on sex stereotyping, but stopped short of reconsidering prior Circuit precedent holding that Title VII does not expressly prohibit discrimination on the basis of sexual orientation.

In Christiansen, an openly gay employee alleged in a Complaint that he was subjected to a pattern of harassment by his direct supervisor based on his sexual orientation and “effeminacy.”  A Southern District of New York court granted the employer’s motion to dismiss, finding that the employee’s allegations focused on discrimination stemming from his sexual orientation, rather than gender stereotypes, and thus were “not cognizable” under Second Circuit precedent in Simonton v. Runyon, 232 F.3d 33 (2d Cir. 2000) and Dawson v. Bumble & Bumble, 398 F.3d 211 (2d Cir. 2005).  In both Simonton and Dawson, the Second Circuit held that Title VII does not prohibit discrimination based on sexual orientation.

On appeal, the employee, along with several amici curiae including the Equal Employment Opportunity Commission (“EEOC”), argued that sexual orientation discrimination is sex discrimination under a plain reading of the law and the Second Circuit’s interpretation of Title VII should be expanded to recognize sexual orientation claims.  The employee and amici further argued that the holdings of Simonton and Dawson are incompatible with the EEOC’s broad view that Title VII’s sex discrimination protections encompass discrimination based on sexual orientation.

The Second Circuit panel declined to revisit its prior holdings in Simonton and Dawson, noting that it is “bound by the decisions of prior panels until such time as they are overruled either by an en banc panel of our Court or by the Supreme Court.”  However, the panel reversed the district court’s conclusion that the employee failed to plausibly allege a Title VII claim based on a gender stereotyping theory first adopted by the Supreme Court in Price Waterhouse v. Hopkins, 490 U.S. 228 (1989).  Specifically, the court found that the supervisor’s alleged comments describing the plaintiff/employee as “effeminate” and other alleged conduct, including circulating doctored pictures depicting the employee “in tights and a low-cut shirt prancing around” or superimposed on the body of a female clad in a bikini, were cognizable claims of gender stereotyping under Title VII.

The panel went on clarify that the Simonton and Dawson cases should not be read to foreclose sex stereotyping claims related to sexual orientation, noting that “[w]hile Simonton observed that the gender stereotyping theory articulated in Price Waterhouse ‘would not bootstrap protection for sexual orientation into Title VII because not all homosexual men are stereotypically feminine,’ it acknowledged that, at a minimum, ‘stereotypically feminine’ gay men could pursue a gender stereotyping claim under Title VII (and the same principle would apply to ‘stereotypically masculine’ lesbian women).”  The Christiansen court observed that “gay, lesbian, and bisexual individuals do not have less protection under Price Waterhouse against traditional gender stereotype discrimination than do heterosexual individuals.”

The court did, however, acknowledge that the scope of Title VII protections when it comes to sexual orientation is by no means a settled issue. In a 15-page concurring opinion, Chief Judge Robert A. Katzmann and District Judge Margo K. Brodie (sitting by designation) opined that if the “appropriate occasion” were to present itself, it would “make sense for the Court to revisit” the issue, given the “changing legal landscape” on the matter.  The concurrence also addressed three potential bases for finding that sexual orientation discrimination is prohibited by Title VII’s, including sexual orientation discrimination as: (1) traditional sex discrimination (that is, if an employee had engaged in identical conduct but been of the opposite sex, they would not have been discriminated against); (2) associational sex discrimination, due to the sex of an individual’s “associates” (i.e., sexual partners); and (3) as gender stereotyping based on the stereotype that men should be exclusively attracted to women and vice versa.

As the concurring opinion also notes, “it well may be that the Supreme Court will ultimately address [this issue].” Given that the Second Circuit and other circuits are grappling with the question of whether Title VII prohibits sexual orientation discrimination as a form of sex discrimination, it is likely that the answer will come either from the Supreme Court or through legislative action.  It also bears noting, however, that many state and local laws (including in New York State and New York City) prohibit workplace discrimination based on sexual orientation.

Connecticut Supreme Court Issues Important Clarification For Independent Contractor Test

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On March 21, 2017, the Connecticut Supreme Court issued an important ruling, finding that an individual may be still considered an independent contractor under the state’s Unemployment Insurance Act even if he/she only provides services to one business or entity.  In so doing, the Connecticut Supreme Court reversed a decision by the Unemployment Insurance Board finding certain workers to be employees simply because the putative employer could not show that they performed work for other companies.

Procedural Background

In Southwest Appraisal Group, LLC v. Administrator, Unemployment Compensation Act, the Plaintiff-Appellant, Southwest Appraisal Group, LLC (“Southwest”) operated an automotive appraisal company and exclusively utilized independent contractors as its appraisers.  The Connecticut Unemployment Insurance Administrator audited Southwest in 2011 and determined that certain of the contractors were in fact employees.  The Administrator assessed back taxes against Southwest, who appealed the assessment to the Unemployment Insurance Board.  The Board affirmed the Administrator’s assessment with regard to three individuals.  Southwest appealed the decision to the Connecticut Superior Court.

The ABC Test and the Trial Court’s Decision

In determining whether a worker is an employee or independent contractor for purposes of the Connecticut Unemployment Insurance Act, courts apply a three-prong “ABC test” which examines the following factors in order to determine independent contractor status:

  1. the worker is free from direction and control of the employer;
  2. the services the worker provides are outside the employer’s usual course and/or place of business; and
  3. the worker is customarily engaged in an independently established business of the same nature as the services performed. See CT General Statutes § 31-222 (a)(1)(B)(ii).

In order to be deemed an independent contractor, all three prongs of the ABC test must be met.

The trial court in Southwest determined that, while the appraisers satisfied the first two prongs of the ABC test, they were not “customarily engaged in an independently established business” because they only provided appraisal services for Southwest.  While the appraisers were all free to contract with other entities and owned their own appraisal businesses (with independently-maintained offices, equipment, and business cards) the trial court found that “there is no indication on this record that any of these three businesses would survive without their relationship with the plaintiff.”  According to the lower court, this economic dependency was dispositive to the analysis, as termination of the relationship with Southwest would “result in the unemployment of the putative employees.”

Southwest appealed the decision to the Connecticut Supreme Court.  The sole issue on appeal was whether part C of the ABC test does, in fact, require proof that the workers performed services for third parties other than the putative employer in order for them to be deemed independent contractors.

Analysis and Holding

The Connecticut Supreme Court reversed the trial court’s decision, holding that the trial court placed too much emphasis on breadth of the contractors’ client base. Rather, it held that the crux of the inquiry under part C is whether “the worker is wearing the hat of an employee of the employing company, or is wearing the hat of his own independent enterprise.”  The Court instructed that “part C must be considered in relation to the totality of the circumstances, with that inquiry guided by a multifactor test. . . . [J]ust as the mere freedom to provide services . . . for third parties is not by itself dispositive under part C . . .  whether the individual actually provided services for someone other than the employer is [not] dispositive proof of an employer-employee relationship.’’

The Court then provided a non-exhaustive list of ten factors to consider in “evaluating the totality of the circumstances under part C”:

  1. the existence of state licensure or specialized skills;
  2. whether the putative employee holds himself or herself out as an independent business through the existence of business cards, printed invoices, or advertising;
  3. the existence of a place of business separate from that of the putative employer;
  4. the putative employee’s capital investment in the independent business, such as vehicles and equipment;
  5. whether the putative employee manages risk by handling his or her own liability insurance;
  6. whether services are performed under the individual’s own name as opposed to the putative employer;
  7. whether the putative employee employs or subcontracts others;
  8. whether the putative employee has a saleable business or going concern with the existence of an established clientele;
  9. whether the individual performs services for more than one entity; and
  10. whether the performance of services affects the goodwill of the putative employee rather than the employer.

The Court added that “improper primacy” should not be attributed to “the relative size or success of the putative employee’s otherwise independent business in connection with the totality of the circumstances analysis under part C.”  Such emphasis on that particular factor would unfairly subject the putative employer to “the decisions of the putative employee and an unpredictable hindsight review,” without consideration of ‘‘the intent of the parties, the number of weekly hours the putative employee actually worked for the employer, or whether the putative employee even sought other work in the field.”

Impact

Southwest Appraisal Group, LLC v. Administrator, Unemployment Compensation Act is a welcome development for Connecticut businesses that engage independent contractors, eliminating concern over the inflexible requirement that such workers must provide services for third parties – a fact that, to the extent it is known to the principal, can change over time. Despite this favorable decision, companies should regularly evaluate their relationships with independent contractors under the “totality of the circumstances” test described above, which certainly includes consideration of whether the worker provides services to others. Employers should likewise bear in mind that the Southwest holding only addresses independent contractor classification under Connecticut’s Unemployment Insurance Act. Companies in Connecticut that utilize independent contractors need to be aware that different tests applicable under other statutes and regulations, both state and federal, remain in effect.

 

 

 

 

 

Immigration Fact or Fiction for the U.S. Employer: CBP Searching Electronic Devices – A New Thing?

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There has been heightened interest and concern regarding the potential for U.S. Customs and Border Protection (CBP) to search laptops and smart phones at the port of entry, due to the mention of such searches in one of President Trump’s recent Executive Orders. But, the search of these devices is not new. In fact, this was started in 2008 and is a response to the increasing number of travelers carrying such devices. On March 16, 2017, CBP published an update reiterating their broad and long-held search authority on their website. (See: https://www.cbp.gov/travel/cbp-search-authority).

Can U.S. Customs and Border Protection (CBP) search a U.S. citizen’s personal electronic devices?

FACT:  Yes, CBP has broad authority to search all items arriving to the United States. Specifically, 19 C.F.R. 162.6 states that, “All persons, baggage and merchandise arriving in the Customs territory of the United States from places outside thereof are liable to inspection by a CBP officer.” Unless exempt by diplomatic status, all persons entering the United States, including U.S. citizens, are subject to examination and search by CBP officers. (Seehttps://www.cbp.gov/travel/cbp-search-authority).

This authority is not new and has been used since 2008. CBP is able to review everything brought into the United States to determine whether the individual is eligible for admission to the United States and the purpose of the entry. This includes cell phones and laptops. CBP officers may search these devices on purely a “reasonable” suspicion.

CBP only selects suspicious applicants for admission for secondary inspection.

FALSE: Most individuals pass through the CBP inspection without fanfare. But, CBP officers have discretion to refer travelers for further examination. Although CBP does use information from various systems and specific techniques for selecting passengers for targeted examinations, they also use completely random referrals for a percentage of travelers.

Does CBP know who is arriving in the United States in advance?

FACT: Yes, CBP receives information for air travelers prior to their arrival to the United States. Air carriers transmit passenger information to CBP using the Advance Passenger Information System (APIS). CBP also receives information from the Interagency Border Inspection System) to target travelers for further inspection. IBIS is used by more than 20 federal agencies, including the FBI, IRS, Coast Guard, FAA, Secret Service, and the Department of State to share information. IBIS provides the law enforcement community with access to computer-based enforcement files of common interest, including access to the FBI’s National Crime Information Center (NCIC) and all 50 states via the National Law Enforcement Telecommunications Systems. Access to IBIS is available to computer terminals at air, land and sea ports.

Must I provide passwords to electronic devices and social media accounts?

FACT: Most likely yes. At the port of entry many of your civil protections do not apply. Even less so, for travelers who are not U.S. citizens of Lawful Permanent Residents (green card holders). As such, you should be prepared to be cooperative and hand over electronic devices to the CBP officer for inspection. This includes providing passwords. If a US citizen or green card holder refuses to provide passwords, their electronic devices may be confiscated for an undetermined period of time – but they will be admitted to the U.S. If a foreign national fails to provide passwords, they may be prevented from entering the U.S. altogether.

Can CBP retain my electronic devices?

FACT: Yes, electronic devices including laptops may be retained temporarily by CBP for further inspection. If it is retain, CBP will provide you with Form 6051-D, which is a receipt and a CBP Official who will be the “case officer.”  There is no set time period for CBP to complete the inspection. In some cases, electronics may be held for several weeks. The only requirement is that CBP hold the property for “a reasonable time.” Since that is vague and varies based on circumstances, you should be prepared to be without your property for several days or weeks. CBP will ship the device back to you.

We Summarize Some Recommendations that are being made in the Media and by Companies Due to the Potential for Searches at the Port of Entry:

Because modern life includes storing a great deal of information on our computers and cell phones, travelers can take a few simple steps to protect their information. Notably, this is particularly relevant for business travelers who have a duty to protect their company and client information.

  • Travel only with necessary devices and data. If you do not need a device – leave it at home.
  • Prepare devices for Travel. In cases where a device is needed during travel, there are steps that can be taken to protect your data. Much of the information we use today is not actually stored on our device – but in a cloud. Therefore, “clean” you device prior to travel and remove any information that is not needed for the trip. The cloud will continue to store important information. Meanwhile, having limited information on your device should limit the time CBP needs to spend to inspect it, reducing the risk of CBP retaining it for an extended search.
  • Take a “loaner.” For business travel, many companies or firms can offer a loaner laptop. IT departments regularly erase information from these computers since they are shared within the organization. This loaner can hold only the information needed for the trip.
  • Take a “Memory Stick.” Although memory sticks may seem a bit old fashioned these days, this can be to your advantage when getting through CBP inspections. Is CBP paying that much attention to memory sticks these days, when everyone is traveling with personal devices? Probably not. While CBP is focused on your cell phone with personal data; your company or client’s information on the memory stick may simply go unnoticed. The memory stick is light and easy to travel with, and it shouldn’t take CBP long to review the information should they choose to inspect it.

Lastly, international travelers should be aware that foreign governments are certain to reciprocate. Specifically, U.S. citizens traveling internationally will be subjected to the same digital inspection at foreign ports of entry. Therefore, this is a trend that will not only “stick” it will grow. We will need to be prepared for these intrusions on both ends of an international trip. Therefore, it is even more vital that we prepare our electronic devices for travel, the same way we plan every other aspect of an international trip.

D.C. Universal Paid Family Leave Bill Submitted To Congress, But Changes Are Still Possible

The D.C. Universal Paid Leave Amendment Act of 2016 (the “Act”) has been submitted to Congress for a 30-legislative-day period of review. Presuming that the Act does not get overturned by Congress and the President, it is projected to become law on April 7, 2017. As we previously reported (here and here), the Act provides employees up to eight (8) weeks of paid leave, funded by a new payroll tax of 0.62% imposed on employers. Even if the Act becomes law, under the current version of the Act, employers would not be subject to the new tax until July 1, 2019, and employees would not be able to access the paid leave benefit until July 1, 2020.

Despite the Act’s recent submission to Congress, efforts are afoot to change the Act. Councilmembers Mary Cheh and Jack Evans introduced one such modification on February 21. This new proposed legislation, the Paid Leave Compensation Act of 2017 (B22-130), would provide the same guarantees for time off but would lower the payroll tax from 0.62% to:

  • 0.20% for large employers, defined as employers “with 50 or more employees or whose annual payroll equals $3.5 million or more”; and
  • 0.40% for small employers, defined as employers “with between 5 and 49 employees and whose annual payroll equals less than $3.5 million.”

Large employers would be required to administer the benefits on their own, while the D.C. government would run the program for small employers.

Also on February 21, Councilmembers Jack Evans and Vincent Gray introduced another alternative bill, the Universal Paid Leave Compensation for Workers Amendment Act of 2017 (B22-133). This proposal would eliminate the creation of a government run program, would require all employers to purchase private insurance that would provide employees with pay during covered time off, and would lower the payroll tax to an amount not to exceed 0.10%. In addition, this payroll tax would not apply to small businesses with fewer than 50 employees.

Whether the Act survives Congressional scrutiny, and how and whether these newly introduced bills, and possibly other forthcoming paid family leave proposals, will impact the Act remains unclear.  Stay tuned for future updates, as we continue to monitor this issue.

New York Regulations on Wage Payment Methods Declared Invalid

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As we previously reported, on September 7, 2016, the New York State Department of Labor (“NYSDOL”) published final regulations on the methods by which employees must be paid, including with respect to direct deposit of wages and payroll debit cards.  These regulations–to be codified in 12 NYCRR Part 192–were scheduled to take effect on March 7, 2017.

On February 16, 2017, the New York State Industrial Board of Appeals (the “IBA”)–an independent agency charged with reviewing the validity and reasonableness of NYSDOL rules, regulations, and orders–revoked the regulations, determining that they were “invalid because they exceed [the NYSDOL’s] rulemaking authority.”

The IBA focused on two provisions in the regulations–(1) the requirement that employers provide access to one or more ATMs that offer withdrawals at no cost to employees, and (2) the prohibition on charging employees certain fees related to the use of a payroll debit card.  The IBA held that rulemaking in these areas was the purview of the State’s Department of Financial Services, which regulates banks and financial institutions, and not the NYSDOL.

Employers should bear in mind that Section 192 of the Labor Law continues to govern the direct deposit of wages in New York.  That section prohibits an employer, without the advance written consent of an employee, from directly depositing the employee’s wages in a bank or other financial institution.  (Section 192 does not apply to employees in a bona fide executive, administrative, or professional capacity earning more than 900 per week.)

In addition, the IBA interprets Section 193 of the Labor Law to prohibit an employer from imposing any charge or fee on an employee as a condition of the employee receiving his or her wages.

The NYSDOL has 60 days to appeal the IBA’s decision to the New York State Supreme Court.  Pending the outcome of any such appeal, the future of the 12 NYCRR Part 192 regulations remains uncertain.

Immigration Fact and Fiction for the U.S. Employer: Customs and Border Protection (CBP) When You Depart the United States – Cash in Hand

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Moving forward in our series of separating fact from fiction, we address the question whether Customs and Border Protection (CBP) plays any role when a passenger, even a United States citizen departs the United States.

It is widely known that if an individual brings into the United States currency or negotiable monetary instruments, they must fill out a “Report of International Transportation of Currency and Monetary Instruments”, FinCEN105. CBP agents inspect individuals upon entry into the United States, review their visa eligibility, and confirm full compliance with U.S. customs requirements.

If you were to assume, however, that when departing the United States, there are no limitations or obligation to report currency, you would be wrong!

When departing on an international flight from within the United States, you do not go through an immigration or customs inspection, and you probably could not find a CBP inspector if you looked for him or her. TSA agents inspecting you before you enter the departure area may make you take off your shoes and belt, but they are looking for bombs and dangerous items, not currency or negotiable instruments.  There are no signs or notices, but if you fail to fill out a FinCEN105 and submit it to CBP, you are in violation of the law, and your currency is subject to confiscation.

In fact, CBP agents recently did enter into the departure area at Newark Liberty Airport, and stopped and questioned individuals as to whether they were traveling with currency or negotiable instruments.

On what basis did they select specific travelers to query, and did they have a legal basis to do so, perhaps, unclear, but they did.

So, if you are traveling with currency in excess of $10,000 be prepared to file FinCEN105. Note that persons traveling together do not get a higher limit, i.e. a married couple does not get a $20,000 limit.

Although reporting the currency is a legal requirement, CBP does not make the task easy. You may have to do some hunting to locate a CBP agent. In most airports you will find a CBP officer in the international arrival area, but seek and ye shall find.

In this day and age of heightened enforcement, can we expect additional initiatives by CBP to do inspections or make their presence known in departure areas at international airports. Perhaps they will.  There is even one confirmed report of CBP agents checking customers on a domestic flight, also a context where it is unclear whether CBP agents have the authority to inspect without actual cause.

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