Emerging Employment Law Risk: Preparing Your Financial Services Organization Patricia A. Wise

Niehaus Wise & Kalas, Ltd.

1

Speaker

2

Patty is a labor and employment lawyer and a partner with Niehaus Wise & Kalas. She is certified by the Ohio State Bar Association as a specialist in that area of practice. She was appointed by former EEOC chair to the EEOC Select Task Force on Workplace Harassment and is a member of the SHRM Labor Relations Special Expertise Panel which she co-chaired from 2014-15. Patty carries Martindale-Hubbell’s AV Preeminent rating and has published books on harassment and retaliation.

Patty is a former senior vice president and in-house counsel for a multi-billion dollar bank holding company and has been an adjunct or visiting professor at the University of Toledo College of Law since 1999. In 2014, she was appointed by the Supreme Court of Ohio to serve as a member of the Board of Professional Conduct. She continues to serve many financial institution clients, as well as clients of all sizes in a variety of industries and professions. She is a frequent speaker for state banking associations and serves on the faculty of the Graduate School of Banking at the University of Wisconsin in Madison. She served as special counsel for the Ohio Attorney General from 2003-2007.

Patty Wise Partner Niehaus Wise & Kalas

Disclaimer

The information contained within these training materials is intended to give you a broad overview of the laws governing employment, harassment and discrimination and suggestions for addressing complaints or disciplinary issues.

3

All information, suggestions and ideas are those of the presenter of this program and not your employer. Further, nothing in this presentation is meant to modify or change your employer’s policies or procedures. Any actions should be taken in accordance with the procedures established by your employer or in consultation with your own attorneys.

These materials do not constitute legal advice or create any attorney-client relationship.

4

What’s Happening Now in Wage and Hour Law?

DOL Regulations Re: Exempt Employees

DOJ has requested additional time for briefing until March 2, 2017 Proposed Labor Secretary – Andrew Puzder • Has said “How do you pay somebody $15 an hour to scoop ice cream?

How good could you be at scooping ice cream?” (re: Fight for 15)

• Has also admitted to illegally employing an undocumented worker for several years as a nanny

5

Recent Internal Self-Audit for Misclassification/Exempt Status

• A/C Privilege

• Focus on positions in $23,000 to $48,000 range

• Consider who those employees report to

• Does anyone report to them?

• Primary duties? Time allocated to non-exempt duties? Estimate percentages

• Interview managers to determine/confirm duties

• Consider employee self-evaluation of job duties

• If you are not convinced, DOL won’t be

6

Many of you Recently Engaged in An Internal Self-Audit for Misclassification/Exempt Status

Overtime

• Estimate possible risks of misclassification

• Do they work more than 40 hours? Ever? How often?

• What kinds of records do you have? Are there ways that hours are monitored?

• Should you start recording the hours of certain employees?

• Not ordinarily recommended but unique situation (and now EEOC may require in 2017)

• Be clear that employees should not work “off the clock”

7

Next Step – Are These Employees Actually Working “Overtime?”

Remedial Measures

Reclassification • May need to convert salaried exempt employee to non-exempt employee, eligible for

overtime (hourly wage or salaried) • Consider morale issues • Consider effects on hiring/competition • Update job descriptions • Consider insurance coverage (most FLSA claims excluded from coverage)

8

Increase Salary? Reclassify? Restructure?

No Reclassification

• Consider whether it is possible to eliminate “overtime” hours to reduce risk

• Update job descriptions to emphasize exempt functions as primary job duties

• Reassign menial/non-exempt duties

• Can “ladder” jobs if some in position meet exempt status test and others don’t – push non-exempt duties down, bottom rung of ladder would be non-exempt classification, others exempt

9

If No Reclassification

Following Reclassification

• Do Not Admit that an employee was classified incorrectly!

• Take advantage of potential change and uncertainty in regulations

• Consider whether compensation should be paid for past “overtime” (but try to use changes as justification)

• Don’t try to negotiate a “settlement” or obtain a “release,” not permissible under FLSA

• Law requires court or DOL approval

• Can obtain an “Acknowledgment” that employee has received all wages owed

• Pay back “overtime” unobtrusively (one time, included in pay, result of internal audit, etc.)

• Consult counsel

10

Following Reclassification

Proposed Revisions to EEO-1 Report

• Would include a pay reporting component

• All employers with 100 or more employees would provide data on aggregate pay ranges and hours beginning March 31, 2018

• Aggregate W-2 gross pay (generally in payroll system, maybe not in HRIS system where demographic data is, maybe the two communicate/are compatible)

• Report within each EEO category for 12 pay bands

• Will show statistically significant variations by gender

11

(Comments Closed 8/15/16)

Proposed Revisions (Continued)

• But no explanation of tenure, education, other factors • Revised form changes from 120 cells to 3,360 • Also need to provide number of hours worked (but generally not

recorded for exempt employees) • EEOC projects 6.6 hours per employer on average • Concerns about confidentiality (security) • Aggregate data will be reported (to potential plaintiffs and

plaintiffs’ attorneys)

12

EEOC Reform Act

• Introduced in the Senate

• Would require EEOC to first collect this type of data for federal employees

• Then reduce current caseload from >70,000 to 3,360

ACTING CHAIR VICKI LIPNIC

• Has spoken publicly against this regulation

• Formerly a management-side attorney, R adviser under President Bush (W)

13

(3/16/16)

14

What’s New with the EEOC Enforcement Guidance on Unlawful Harassment?

EEOC Select Task Force on Workplace Harassment

• Commitment by Chair Yang • Comments due March 21, 2017

15

Proposed Enforcement Guidance on Unlawful Harassment

Harassment Policy Guidelines

• Having this policy can provide an employer with a defense in the event of a lawsuit for harassment or discrimination—if you have no other policy, you should have this one!

• Prohibition of all forms of harassment (including same sex, sexual orientation and gender identity and expression)

16

Guidelines

Harassment Policy Guidelines

• Specific reference to and prohibition of sexual harassment • Provide examples • Address email and the Internet • Does not have to have a sexual connotation • Employees of the same or opposite gender

17

Guidelines

Harassment Policy Guidelines

• Specific reference to and prohibition of race/color harassment, including examples

• Examples of the types of single incidents that can create a hostile work environment based on race include:

• An actual or depicted noose or burning cross (or any other manifestation of an actual or threatened racially motivated physical assault)

• A favorable reference to the Ku Klux Klan

18

Guidelines

Harassment Policy Guidelines

• An unambiguous racial epithet such as the “N-word” • A racial comparison to an animal • Compliance Manual of “Race and Color Discrimination,” Section

15, eeoc.gov • Harassment can occur:

• Between employees of the same or different racial, ethnic, or cultural backgrounds

19

Guidelines

Harassment Policy Guidelines

• A harassment and retaliation complaint procedure that notifies an employee as to whom to report a complaint (i.e., Human Resources) and an alternate person(s)

• All Supervisors? • Duty of all employees to report observed behavior • Duty to cooperate in investigations, provide written statement,

truthfulness

20

Guidelines

Harassment Policy Guidelines

• No requirement of victim to confront alleged harasser • Suggestion by HR to write letter

• Preserve confidentiality (to the extent possible as determined by the employer)

• Keep in mind NLRB requirements

• Bank’s discretion as to manner and extent of investigation • Prohibit retaliation, possible discipline or termination

21

Guidelines

22

What’s New with the EEOC Enforcement Guidance on Retaliation and Related Issues?

Retaliation Claims

• EEOC – leading category of charges in 2010-2016 • Courts – largest verdicts • Most difficult to defend against

23

Biggest Liability Risk that Exists Today

Retaliation Claims

• Employee exercises some legally protected right • Through participation or opposition activity

• An adverse action is taken against the employee • The two are connected

• Maybe just because close in time

24

What is a claim of retaliation?

Cat’s Paw Liability

25

Cat’s Paw Liability

Cat’s Paw Liability

• SCOTUS-Staub v. Proctor Hosp. – 2011 – Doctrine Accepted

Application of Doctrine • Hospital system terminated its only black paramedic • Terminated for failure to follow protocol on one occasion and

poor performance on quiz • Medical Director had authority to terminate, and Plaintiff’s

supervisor recommended termination • $500,000 to Plaintiff (reduced to $250,000) (Thompson v.

Memorial Hospital of Carbondale, 7th Circuit, November 3, 2010)

26

Cat’s Paw Liability

• A biased supervisor or manager, who is not a decision maker, acts in a discriminatory, harassing, or retaliatory manner.

• The decision maker, or Human Resources, conducts an independent review, and is unbiased.

• If the non-decision maker’s actions still influenced or “caused” the adverse employment action, there can still be liability.

27

Cat’s Paw Liability

• A cunning monkey persuades a naïve cat to snatch chestnuts from a fire.

• The cat burns her paw. • The monkey eats the chestnuts. • Don’t be cat or a monkey

28

Cats and Monkeys

29

What Is the Status of Protected Characteristics?

Gender Identity or Expression

• A complaint of discrimination based on “gender identity, change of sex, and/or transgender status” is cognizable under Title VII (Macy v. Dept. of Justice 2012)

• The very nature of gender identity is to defy gender stereotypes therefore, discrimination against transgender plaintiffs inherently involves gender discrimination

• EO 13762: LGBT Protections – Applies to federal government contractors after 4/8/15

• Update EEO language to include “Sexual Orientation” and “Gender Identity or Expression,” post updated EEO is the Law poster

• eeoc.gov – Fact Sheet: Bathroom Access Rights for Transgender Employees Under Title VII of the Civil Rights Act of 1964

• osha.gov – A Guide to Restroom Access for Transgender Workers • Trump Administration Reaffirmed EO 13762 (announced Jan. 31, 2017)

30

Disabilities

• Possible extension of FMLA to comply with ADA/ADAAA • EEOC Guidance: Employer-Provided Leave and the Americans

with Disabilities Act (May 9, 2016) • Review every absence-related termination, possibly with

employee, possibly with legal counsel

31

FMLA Leave Implications

• Consider additional amount of time required, definite RTW date, effect on operations, previous accommodations, ability to reinstate without undue hardship

• Does not require indefinite leave • As with every ADAAA issue, requires an interactive process • Employers Guide to the Family and Medical Leave Act

(DOL – published April 25, 2016)

32

Arrest and Conviction Records

• EEOC Enforcement Guidance Issued April 25, 2012 • Red Flag in Investigations and Audits • 92 million Americans have criminal history, mostly for non-

violent offenses • OFCCP – incorporated this Guidance in its Directive of January

29, 2013 • EEOC, Congress, state law trend • Growing number of states, counties and cities that have adopted

this type of legislation, most recently LA on Jan. 22, 2017

33

Arrest and Conviction Records

• Don’t ask about convictions in employment applications, unless criminal history is relevant and questions are limited to convictions related to job duties (red flag in investigations)

• Never use an arrest record to preclude employment, but you may consider conduct underlying the arrest

• No bright line rule for employers generally

34

Best Practices

Arrest and Conviction Records

• Individualized assessment necessary • Consider the nature of the crime, time elapsed since conviction

or conclusion of sentence (age of the offender), and the nature of the job

• Generalized concern about security or customer confidence is not sufficient

• “Best Practices” • Consider asking at Interview Stage – avoids risk as applicant

screening disqualification • Consider eliminating from application form – if it isn’t really a bar,

eliminates “red flag”

35

Arrest and Conviction Records

• Banks – mortgage loan originators, investment advisers, bonding requirements

• 12 USC Section 1829 • Ten-year federally mandated FDIC exclusion for crimes involving

dishonesty, breach of trust, or money laundering • Exclusion Amended on December 18, 2012 to add exception for

de minimus offenses (in keeping with recent legislative and administrative trends)

• Good guideline, unfortunately may become an outside limit

36

Religion

• Requires “reasonable accommodation” unless “undue hardship” • Religious Garb and Grooming in the Workplace: Rights and

Responsibilities EEOC Guidance – published March 6, 2014 (no change in law)

37

Title VII prohibits discrimination on basis of religion

Religion

• Schedule changes, flexibility, remote work, telework • Voluntary substitutions and swaps • Change of job assignments and transfers • Modifying workplace practices, policies and procedures • Dress code • Permitting prayer and proselytizing

38

Examples of Accommodations

Title VII (Civil Rights Act of 1964)

• Religion Defined • Title VII “…all aspects of religious observance and practice, as

well as belief” • EEOC

• Include moral and ethical beliefs sincerely held with the strength of traditional religious views

39

Title VII (Civil Rights Act of 1964)

• The fact that no religious group espouses such beliefs or the fact that the religious group to which the individual belongs may not accept such beliefs is not determinative

• Employee may practice religion in a unique way

40

Assessing Request for Accommodations

• Not required to select employee’s proposed accommodation or the “best” accommodation

• May show “undue hardship” even for reasonable accommodation

41

Dialogue with Employee

42

Will the NLRB Maintain Its Aggressive Stance?

National Labor Relations Act 29 U.S.C. § § 151-169

• Enacted July 6, 1935 • Sec. 7 (§ 157) – Employees shall have the right to self-

organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection…

43

Rights of Employees

National Labor Relations Act 29 U.S.C. § § 151-169

• Sec. 8 (§ 158) (a) – It shall be an unfair labor practice for an employer – (1) to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in section 7…

44

Unfair Labor Practices

NLRB Enforcement

• In recent years, the NLRB has been increasingly aggressive in enforcement, expanding its reach to a variety of handbook policies in non-union workplaces

• They say – more important in these difficult economic times • But some are predicting a more pro-business approach in the

new administration

45

Social Media Cases

• First area of attention • Many of these cases involve unrepresented (non-union)

employees • And most involve issues previously thought to be management

rights • Based on employees’ Section 7 rights to engage in “protected,

concerted activity”

46

47

Protected, Concerted Activity

• What is “Protected, Concerted Activity”? • Is “like” status enough? Yes. • Water cooler on steroids?

• Became a “Protected, Concerted Activity Initiative” • Two or more employees discuss or complain

48

49

NLRB Contact

• Also invites workers to contact the NLRB if they have questions about protected, concerted activity

• Says the Board will investigate

50

Board’s Press Release

• Right to engage in protected, concerted activity is one of the best kept secrets of the NLRA

• More important than ever in these difficult economic times

• Our hope is that workers will understand they have strength in numbers

51

Free Mobile App

• Concerted Activity • Social Media • CONTACT NLRB • Information for closest NLRB office or contact NLRB by phone

with a single tap

52

Free Mobile App for iPhone and Android launched August 30, 2013

Aggressive Outreach

• Much more aggressive • Trying to educate a wider audience of workers, beyond union

members • Cases regarding social media, focusing on employer policies • Now employer policies of all sorts subject to greater scrutiny by

the Board

53

Internal Investigations

• Routine practice when conducting internal investigations to ask the complaining employee and all witnesses to maintain confidentiality

• Ohio Bank Example – Rural Bank, 40 employees, asked for confidentiality in restructuring/ reassignment/transfer

• Several ULPs • 16 months, ultimately dismissed

54

Next Area of Expansion –Internal Investigations

Internal Investigations

• Can compromise witnesses who become aware of issues before they are interviewed

• Could intimidate potential witnesses • Protects victim and the accused

55

Next Area of Expansion –Internal Investigations

Internal Investigations

• NLRB found that seeking confidentiality was an illegal restriction on the rights of employees to discuss workplace issues among themselves

• Employer said it was just a “request,” not a mandatory rule • NLRB still said NO. • (Banner Health Systems – 7/30/12)

56

Next Area of Expansion –Internal Investigations

Internal Investigations

• However, EEOC Enforcement Guidance regarding sexual harassment expressly provides that an employer’s anti-harassment policy and complaint procedure should include “assurance that the employer will protect the confidentiality of harassment complaints to the extent possible.”

57

Next Area of Expansion –Internal Investigations

So, What’s An Employer To Do?

• NLRB said to be justified an employer had to have specific concerns about confidentiality, NOT a generalized concern

• Examples: • Witnesses need protection • Evidence in danger of being destroyed • Testimony in danger of being fabricated • Need to prevent a cover-up

58

Advice to Employers

• Consider each investigation individually • Document, as part of the investigation notes, the specific

reasons in that particular investigation to request confidentiality • Use NLRB examples and any other specifics you have • Complies with NLRB directives and EEOC Guidance

59

Most Active Area – Social Media

• Many, many cases • Three lengthy memos from AGC • Sample policy • Demonstrates unprecedented level of focus and attention of

NLRB enforcement efforts, even though not the law

60

Social Media

• Consider both social media policies and discipline and termination of employees regarding same

• Focus on what is/is not protected, concerted activity

• AGC said – just like “water cooler conversations” in the workplace

• Ignore reality – not limited to the workplace, not limited to employees, may be directed to the world

• Can cause greater harm than workplace conversations

61

Social Media

• Entirely devoted to social media policies • Focus on what is considered overbroad and what is permissible • Focus on “chilling effect” • Very specific

62

May 30, 2012 – Third Report

Social Media

• A policy that encouraged employees to “think carefully about ‘friending’ co-workers”

• Unlawfully overbroad because it would discourage communications among co-workers

63

Example

Social Media

• Found to be lawful • Wal-Mart policy • But still some unresolved issues • Also some specific state law requirements • A helpful beginning

64

Provides a sample policy

Social Media

• First ruling from the Board on social media policy • Provides more guidance • Largely followed AGC pronouncements

65

Costco Wholesale Corp., 358 NLRB No. 106 (September 7, 2012)

Social Media

• Costco had nationwide handbook for its non-union employees • Very large, high profile employer • Organizing drive to unionize Costco facility in Milford,

Conn/UFCW • ULPs filed – alleged policies violated § § 7 and 8

66

Costco Wholesale Corp., 358 NLRB No. 106 (September 7, 2012)

Social Media

• Costco – prohibited on-line comments “that damage the company, defame any individual, or damage any person’s reputation, or violate the policies” in the handbook

• Fairly common, includes defamation • Board said overbroad and unlawful • Chilling effect

67

Costco Wholesale Corp., 358 NLRB No. 106 (September 7, 2012)

Social Media

• Decision included some policy language that would be permissible

• Malicious, abusive, unlawful • Profane language and harassment • Injurious, offensive, threatening, intimidating, coercing, or

interfering with other employees • Sabotage • Sexual or racial harassment

68

Costco Wholesale Corp., 358 NLRB No. 106 (September 7, 2012)

Social Media

• Case also… • Prohibited limitation on discussion of private matters of

employment (FMLA, ADA, WC, etc.) • Prohibited limitations of discussions of “payroll information” • CAN prohibit disclosure of employees’ health information

when accessed in course of job duties, and compilations of payroll data when confidential business information.

69

Costco Wholesale Corp., 358 NLRB No. 106 (September 7, 2012)

Social Media

• Determine what employer is trying to protect – What are goals?

• No way to stop current or former employees from trash-talking

• No reason to try • Also creates culture of suspicion/surveillance

70

Recommendations

Social Media

• Trade secrets, proprietary/confidential information • Harassment and discrimination • Bank security or security controls • Avoiding SEC or FTC violations • Employee safety/threats of violence

• Consider incorporating social media aspects into these policies

71

What are appropriate goals?

Social Media

• Helps employer focus on what is critical • Helps employees understand need for policies • Train employees so they do understand • May require segmented training

72

What are appropriate goals?

Case Studies

• Employee reinstated with back pay following Facebook post – “Bob is such a NASTY M---F--- don’t know how to talk to people!!!! F--- his mother and his entire F--- family!!! What a LOSER!!!! Vote YES for the UNION!!!!!”

• Profanity common (including “F” word), usually unpunished • Policy didn’t prohibit profanity • Encouraged others to vote, two days before election • A Facebook “friend” reported to the HR director

73

Pier Sixty LLC – 3/31/15

Case Studies

• Racist statements shouted to replacement workers • “Hey did you bring enough KFC for everyone?” • “I smell fried chicken and watermelon!” • “Go back to Africa, you bunch of f---ing losers.”

• Employee terminated pursuant to company’s Harassment Policy

• Board ALJ ordered reinstated and backpay for all 3 years

74

Cooper Tire – 6/5/15

Case Studies

• Two employees complaining in restroom • Client should “get in touch with a f---ing client care

specialist and quit wasting my f---ing time” • Supervisor overheard conversation • Sent email to all employees advising that employees

should never discuss compensation in an area where clients or potential clients could overhear and never swear in the bathroom, especially about clients

75

Quicken Loans – 3/17/16

Case Studies

• First employee completely denied incident, then implicated co-worker; fired for dishonesty

• Second employee was disciplined • After a 3-day trial, ALJ found PCA, set aside discipline and

termination and found the new rule illegal • Would “chill” employees because anyone could be a potential

client

76

Quicken Loans – 3/17/16

Case Studies

• Board overturned decades of precedent • Employer-provided email systems may be used to discuss

workplace issues during non-working time • Employers are not required to provide email access • Limited to those employees who have access • Limited to non-working time • Can no longer limit to “business purposes only” • Can prohibit interference with customer service, productivity

• Key Words still – “No Expectation of Privacy”

77

Purple Communications Decision – 12/11/14

Case Studies

• Board ruled for the first time that it is illegal for employers to prohibit audio or video recordings in the workplace without valid legal or business justifications

• States where recording without consent is prohibited • Protection of trade secret, confidential or proprietary information • To protect confidential financial records / patient privacy • Wholesale prohibition not permissible

78

Whole Foods Market, Inc. – 12/24/15

What Should Employers Do?

• Review GC Memo (March 18, 2015) (including Wendy’s policy), targeted policies that “chill” employee rights

• Implement policies, or revise existing policies to address these issues (conduct, harassment, privacy, confidentiality, trade secrets, use of company resources)

• Train employees (may want to consider segmented training for employees with different levels of use, expertise)

• Comply with applicable laws while recruiting, hiring, conducting investigations, and imposing discipline

• Watch…see what changes come with the Administration’s appointment of two new members to fill the current Board vacancies

79

Training Employees in a Rapidly Changing Legal Environment

• Enforcement Guidance on unlawful harassment includes recommendations for training, including civility training and bystander intervention training

• Enforcement Guidance on Retaliation includes a training checklist

• Try to keep up!

80

81

Questions?