Law and the Workplace

Dallas, Texas Enacts Paid Sick Leave Law, But Its Future Remains in Question

The Dallas, Texas City Council has enacted a sick leave ordinance that would require employers to provide eligible employees with paid leave for certain medical and safety-related needs. It remains to be seen, however, whether the ordinance will ultimately take effect.

As we have previously reported, in late 2018, a Texas appellate court ruled that a similar paid sick leave ordinance enacted in Austin violated the Texas Minimum Wage Act and the Texas Constitution and was therefore unenforceable (the decision is now on appeal to the Texas Supreme Court). Given this fact, a legal challenge to the Dallas ordinance—which is modeled on the Austin ordinance—seems quite likely. In addition, lawmakers in the Texas state senate advanced a bill on April 11, 2019 that, if ultimately enacted, would prohibit local jurisdictions from passing laws regulating employment leave for private employers.

Should the Dallas ordinance take effect on schedule, beginning August 1, 2019, employers with more than five employees would be required to provide employees who perform at least 80 hours of work within the City of Dallas with one hour of paid leave for every 30 hours worked in the City, up to 64 hours per year for “medium or large employers” (defined as having more than 15 employees). Employers with 15 or fewer employees would be required to provide up to 48 hours of paid sick leave per year, and employers with five or fewer employees would be exempted from coverage under the law until August 1, 2021.

Eligible employees would accrue and be able to use leave in one hour increments, unless an employer’s written policy provides for a shorter increment. Employees would be permitted to carry over accrued, unused leave into the following year for immediate use (up to the maximum caps described above), though employers could avoid the carryover requirement by “front loading” the maximum annual leave amount at the beginning of each year. Employers would also be permitted to limit employees’ use of paid sick leave to no more than eight days in a year.

Paid leave under the law would be available for absences due to an employee’s or his or her family member’s physical or mental illness, physical injury, health condition, or need for preventive care. Leave could also be used if an employee or family member is a victim of stalking, domestic abuse, or sexual assault, and time off is needed for related medical reasons, to relocate, to obtain services from a victim services organization, and/or to participate in legal proceedings. Employers would be permitted to request documentation of the need for leave where an employee is absent for more than three consecutive work days.

Given the likelihood of a legal challenge, Dallas employers may wish to take a “wait and see” approach to the law before undertaking significant policy changes in response. However, in light of the relatively short window before the August 1, 2019 initial effective date, employers with more than 15 employees are advised, at a minimum, to closely monitor the status of the ordinance and to allow sufficient time to make any necessary changes to their policies and practices should the law take effect on schedule. The Proskauer team is available to advise on best strategies for compliance, given the uncertainty surrounding the law.

We will, of course, continue to monitor this law and report on any further developments.

Westchester County, New York to Require Paid Leave for Victims of Domestic Violence

Leave of absence form

Effective October 30, 2019, Westchester County, NY employers will be required to provide paid leave to employees who are victims of domestic violence or human trafficking.  Leave under the new ordinance will be in addition to paid time off already required to be provided to employees under the Westchester County paid sick leave law, which took effect on April 10, 2019.

Covered Employees and Use of Leave

Under the new law, employees working in Westchester County for more than 90 days in a calendar year will be eligible to use up to 40 hours of paid leave per year for covered purposes relating to the employee being a victim of domestic violence or human trafficking (“safe time”).  Domestic violence also includes certain “family offense matters,” which are defined in detail in the ordinance, but which include criminal acts of harassment, sexual abuse or misconduct, stalking, and identity theft between current or former spouses, parents and children, or members of the same family or household.  Covered employees may use safe time to attend or testify in a criminal or civil court proceeding relating to domestic violence or human trafficking or to relocate to a safe location.

Unlike under the Westchester County paid sick leave law, safe time does not accrue, but rather is available to an eligible employee on an as-needed basis, up to 40 hours per year.  The ordinance does not permit employers to set a minimum daily increment of use, so employees may determine the amount of safe time needed if less than a full day.

Employee Notice and Documentation Requirements

When the need for safe time is foreseeable, employees can be required to make a good faith effort to provide advance notice, as well as to schedule the use of leave in a manner that does not “unduly disrupt” the employer’s operations.  Employers may request reasonable documentation from employees that safe time has been used for a covered purpose, regardless of the duration of the leave.  Reasonable documentation may include a copy of a police report, subpoena, or affidavit from an attorney or victims’ assistance organization.

Confidentiality and Anti-Retaliation

The ordinance requires employers to keep confidential any information about an employee or family member obtained solely for purposes of safe time leave, except if disclosure is required by law or the employee gives written permission for disclosure.  Any “health or safety information” obtained by an employer in this regard must also be maintained on a separate form and in a separate file from other personnel information.

Employers are prohibited from interfering with an employee’s exercise of rights under the ordinance or retaliating against an employee for their use of safe time or attempt to enforce their rights under the law.  Specifically, the law prohibits employers from including safe time as an absence that may lead to or result in discipline, discharge, demotion, or suspension.

Employer Notice Requirements

Employers will be required to provide employees with a copy of the ordinance and “written notice of how the law applies to that employee” within 90 days of the effective date of the law (i.e., January 28, 2020) or upon commencement of employment, whichever is later.  Employers also will be required to display a copy of the ordinance and a poster in a conspicuous area accessible to employees.  It is unclear whether the County plans to issue any form notices to satisfy these requirements.

Remedies Available

Employees claiming a violation of the ordinance may pursue their complaint with the Westchester County Department of Weights and Measures – Consumer Protection or bring a private right of action.  Employees may recover the greater of $250 or three times the wages that should have been paid for each instance of undercompensated safe time taken, and $500 for each instance where employees have been unlawfully denied requested safe time. Other available remedies include reinstatement and back pay, attorneys’ fees, the costs of an administrative hearing, and other monetary and equitable relief.

Seventh Circuit Reaffirms Test for Employee Status

On May 8, 2019, the Seventh Circuit reaffirmed its test for determining employee status under federal anti-discrimination laws, holding that a physician lacked standing to bring Title VII claims against the hospital at which she maintained practice privileges because she was not an employee. Levitin v. Northwest Community Hospital, No. 16-cv-3774.

Plaintiff owned and operated her own private practice, but maintained practice privileges and performed surgeries at the defendant hospital. After a series of complaints, the hospital subjected Plaintiff to a peer-review process, which ultimately led to the termination of her practice privileges. Plaintiff proceeded to file suit, claiming her privileges were terminated in retaliation for her complaint in violation of Title VII. She claimed the hospital effectively employed her because it subjected her to on-call requirements, reporting requirements, supplied her tools to use during surgery, restricted the types of procedures that she could perform, and subjected her to a peer-review process. Plaintiff argued that the peer-review process held her to a higher standard than basic professional or regulatory medical education standards, and thus amounted to sufficient control over her work as a surgeon such that the hospital was her employer.

The U.S. District Court for the Northern District of Illinois granted summary judgment in the hospital’s favor, concluding Plaintiff was not an employee and therefore not subject to Title VII’s protections. The Seventh Circuit affirmed, reaffirming its test for determining employee status under Title VII.

The Seventh Circuit examined the “economic realities of the relationship” by considering the following factors:

(1) the extent of the employer’s control and supervision over the worker, including directions on scheduling and performance of work;
(2) the kind of occupation and nature of skill required, including whether skills are obtained in the workplace;
(3) responsibility for the costs of operation, such as equipment, supplies, fees, licenses, workplace, and maintenance of operations;
(4) the method and form of payment and benefits; and
(5) the length of job commitment and/or expectations.

The Seventh Circuit emphasized the significance of the first factor, stating “‘[t]he employer’s right to control is the most important’ of these factors.”

In reaching its conclusion that Plaintiff did not share an employer-employee relationship with the hospital, the court considered the following facts: the hospital did not provide Plaintiff with employment benefits or pay her professional licensing dues; Plaintiff owned her own medical practice; Plaintiff billed her own patients directly; Plaintiff filed taxes as a self-employed physician; Plaintiff set her own hours; Plaintiff could obtain practice privileges at other hospitals; Plaintiff could use her own staff in surgeries; and Plaintiff made her own treatment decisions for patients. Moreover, the Seventh Circuit noted that even if the peer review proceedings went beyond typical regulatory standards, they did not result in sufficient control over Plaintiff so as to create an employer-employee relationship, in part because Plaintiff ultimately made her own decisions regarding patient care.

This ruling reaffirms the Seventh Circuit’s test regarding the employer-employee relationship, which was first articulated in Knight v. United Farm Bureau Mut. Ins. Co., 950 F.2d 377 (7th Cir. 1991). It also provides clarity and guidance on worker classifications, particularly for healthcare entities.

[Podcast]: Medical Marijuana and the Potential NYC New Law

In this episode of The Proskauer Brief, partners Harris Mufson and Evandro Gigante discuss recently passed legislation by the New York City Council, which would prohibit some employers in NYC from requiring job applicants to submit to drug tests for marijuana use. Specifically, the bill would amend the City’s Fair Chance Act to make it an unlawful discriminatory practice for an employer, including an employment agency or their agents, to require that a prospective employee or an applicant submit to drug testing regarding the presence of marijuana as a condition of employment. That bill, if signed by Mayor de Blasio, would take effect within one year after it becomes law.

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Non-Competes in Washington – Over-Reaching Could Cost Employers

Washington is the most recent state to adopt a law restricting the use of noncompetition agreements. The new law (HB 1450), which was signed by Governor Jay Inslee on May 8, 2019 and is scheduled to go into effect on January 1, 2020, will add unique challenges for employers and further complicate the restrictive covenant landscape across the country. Perhaps the most significant takeaway for employers (particularly those with national workforces) relates to damages in the form of “reasonable attorneys’ fees” and statutory penalties for partial enforcement of the noncompetition covenant. As people in Washington will tell you, this provision could turn a “win” into a “loss” faster than an ill-fated pass by the Seahawks against the Patriots in Super Bowl XLIX.

Prior Notice and Consideration:

  • A noncompetition covenant is void and unenforceable unless the employer discloses the terms in writing to a prospective employee. If the covenant becomes enforceable only at a later date due to changes in the employee’s compensation (see below for compensation thresholds), then the employer must specifically disclose that the covenant may be enforceable in the future.
  • “Independent consideration” must be provided to the employee if the noncompetition covenant is entered into after employment commences. However, the scope of “independent consideration” is not defined in the law.

Compensation Threshold:

  • Like many other states, Washington seeks to limit the use of noncompetition clauses for low-level/low-wage employees. In Washington, noncompetition clauses will be unenforceable against employees earning less than $100,000 in total annualized compensation (not just base salary) or independent contractors earning less than $250,000/year. This arbitrary threshold (which will increase on an annual basis at the rate of inflation), will create enforceability challenges in circumstances involving sales and other employees whose compensation is often tied to incentive compensation and where overall annual compensation fluctuates around the threshold.
  • Employees earning less than two-times the state minimum wage may not be restricted from working an additional job (i.e., for a competitor) so long as the additional job does not raise issues of safety or interfere with the employer’s normal scheduling expectations. The law notes that the ability to hold an additional job “does not alter the obligations” of the employee to the employer, “including the common law duty of loyalty and laws preventing conflicts of interest and any corresponding policies addressing such obligations.” It remains to be seen how courts will interpret this carve-out and the limiting restrictions, and whether, for example, an employee may simultaneously work for competitors so long as they claim to maintain their “loyalty” to both employers.

Termination and Pay to Enforce/Garden Leave:

  • If an employee is terminated as the result of a layoff, the noncompetition covenant is void unless enforcement includes compensation equivalent to the employee’s base salary (not overall compensation) at the time of termination for the period of enforcement less compensation earned through subsequent employment.

Time Period:

  • Noncompetition covenants longer than 18 months are presumptively unreasonable and unenforceable.

Choice of Law and Venue:

  • The new law purports to limit the use of out-of-state venue and choice of law provisions. However, in line with similar restrictions codified around the country, the strength of this provision outside of Washington state courts is questionable in light of the Supreme Court’s decision in Atlantic Marine Construction Co., Inc. v. United States District Court for the Western District of Texas, 571 U.S. 49 (2013), which recognized the presumptive enforceability of choice of law and venue provisions.

Penalties, Enforcement and Other Salient Points:

  • If a court or arbitrator reforms, rewrites, modifies, or partially enforces a non-compete clause, then it must require the employer to reimburse the employee for reasonable attorneys’ fees, costs and other expenses, plus damages or a statutory penalty of $5,000. This mandatory penalty provision raises the question of how judges will react in circumstances of clearly bad behavior (e.g., a departing employee misappropriating the former employer’s confidential information) coupled with a non-compete clause that is only slightly overbroad given the facts and circumstances of that one employee. Rather than reward a bad actor, perhaps judges sitting in equity will enforce slightly overbroad covenants as written.
  • For all actions or proceedings commenced after January 1, 2020, regardless of when the noncompetition covenant between the parties was entered, the requirements of the new law apply. So, unlike “new laws” passed elsewhere (like Massachusetts), there is no “free pass” given to agreements executed before the new law goes into effect.
  • A cause of action may not be brought regarding a noncompetition covenant signed prior to January 1, 2020 if the noncompetition covenant is not being enforced. This should hopefully prevent a cottage industry of declaratory judgment actions seeking to challenge overbroad restrictions and trigger payment under the law’s penalty provisions.
  • Consistent with news headlines about non-competes across the country, a franchisor may not restrict a franchisee from soliciting or hiring an employee of a franchisee of the same franchisor or any employee of the franchisor.
  • Notably, the new law does not address the use of employee or customer nonsolicitation agreements, or related restrictive covenants.

New Jersey Employees to Be Entitled to Pre-Tax Transportation Fringe Benefits

New Jersey will soon become the first state to require certain employers to offer employees tax-favored transportation benefits.

S.B. 1567, also known as An Act Concerning Pre-Tax Transportation Fringe Benefits (the “Act”), will require New Jersey employers with 20 or more employees to offer employees the opportunity to make pre-tax elections from their gross pay to cover qualifying commuter vehicle and public transit costs.

Employees will be able to use the pre-tax benefits to cover certain costs relating to “alternate means of commuting” (that is, commuting other than by means of single-occupancy vehicles), including transit passes for various forms of public transportation, car and van pools, and qualified parking at “park and ride” transit facilities. For purposes of the Act, “employee” and “employer” are defined as under the state’s unemployment compensation law, though employees covered by a collective bargaining agreement are exempted from coverage.

The Act comes in response to the federal Tax Cuts and Jobs Act of 2017, which eliminated employers’ ability to deduct the cost of providing qualified transportation benefits to employees, thus disincentivizing employers from offering such a benefit (though elections may still be excluded from employees’ wages for federal tax purposes). While New Jersey is the first state to pass legislation aimed at protecting this benefit for employees, some municipalities, including New York City, previously have enacted similar laws.

The Act will require that transit benefit elections be permitted “at the maximum benefit levels” allowable under federal law. For 2019, such maximum benefit is $265 per month, up from $260 per month in 2018.

The Act is effective immediately, though enforcement will not begin until the earlier of March 1, 2020 or the effective date of rules and regulations to be issued by the state Commission of Labor and Workforce Development. Once effective, employers who fail to comply with the requirements of the Act will be assessed a $100-$250 fine for a first-time violation, following a 90-day grace period to cure. After 90 days, covered employers will be subject to a $250 penalty for each additional 30 day period in which they fail to provide the benefit. Employers may also be responsible for costs and interest related to recovery of penalties.

Though the Act is not likely to take effect until next year, employers in New Jersey should begin reviewing their existing benefit plans to prepare for compliance with the new law.