Earlier this year, the U.S. Supreme Court issued its landmark decision in Wal-Mart Stores, Inc. v. Dukes. The decision blocked one of the largest class action lawsuits ever, involving 1.5 million female Wal-Mart employees. The nation’s high court ruled that that the large class of employees from stores nationwide did not share common questions that could be resolved in a single class action suit.

Now, a federal appeals court in San Francisco has applied the Dukes ruling to block a class action lawsuit filed by female Costco employees. The case is Ellis v. Costco Wholesale Corp.

The facts are similar to Dukes. Three female employees alleged Costco discriminated against women by refusing to promote them to high-level management positions, general manager and assistant general manager, in Costco stores. These employees sought to expand their discrimination lawsuit by bringing a class action on behalf of a group of female Costco employees nationwide.

The lower court allowed the class action lawsuit to proceed. Costco challenged that ruling, arguing that the employees were unable to show common questions of law and fact that applied to the large nationwide class and that the lower court was wrong in light of the U.S. Supreme Court’s decision in Dukes.

The Ninth Circuit agreed with Costco, and overruled the lower court. The Ninth Circuit said that the lower court needed to engage in the “rigorous analysis” required under Dukes to determine if there were common questions of law and fact among the large class of employees. The Ninth Circuit sent the case back to the lower court to apply the correct standard articulated by the high court in Dukes.

To proceed as a class, the plaintiffs must show that they can somehow connect the many individual promotional decisions that were made: Was there a common pattern or practice that could affect the class as a whole? Was the entire class subject to the same allegedly discriminatory practice?

This case shows the impact of the Dukes decision on employers, especially those with multi-state locations. Employees who want to bring large class action discrimination lawsuit may not be able to withstand the required rigorous analysis to proceed as a class.

Employees bringing smaller class action claims based on a local or regional practice may find it easier to proceed. Again, the issue will be whether there is any “glue” to hold together the claims. Companies may see a shift back to individual discrimination lawsuits, instead of the class action.

Copyright: HRC/CalChamber

The date has finally arrived. The California Supreme Court set oral argument in Brinker v. Superior Court for November 8, 2011. Once the oral argument occurs, the justices can take up to 90 days to give a written opinion in the case.

This means we could have a decision by early February 2012, if not sooner.

Employers have been anticipating a decision in this case for three years now. The key issue before the court is: What does the word “provide” mean? Does it mean employers are required to merely make meal and rest periods available? Or does it mean employers must make sure that employees take them? Other issues before the court include the timing of meal and rest periods.

While we have been waiting for a Brinker ruling, California courts of appeal continued to rule that employers do not have to force employees to take meal periods, but only make them available for employees to take. These decisions have been placed on hold until the Supreme Court resolves the Brinker issues.

Despite these decisions, until Brinker is decided, employers must continue to make sure that their employees take these breaks.

Stay tuned …

Copyright: HRC/CalChamber

California Gov. Jerry Brown had until midnight October 9, 2011, to sign or veto bills before him.? He used every last minute, signing bills right up to the deadline.

In the past few days, Gov. Brown signed several important employment-related bills into law:

• AB 22: Prohibits employers from being able to use credit reports for applicant or employment purposes, except in limited circumstances.


• SB 459: Provides new penalties for “willfully” misclassifying independent contractors. Imposes joint liability on non-attorney outside consultants who knowingly advise an employer to treat an individual as an independent contractor to avoid employee status.


• AB 1396: Requires written commission agreements. Employers must comply by January 1, 2013.


• SB 299: Makes it an unlawful employment practice to refuse to maintain and pay for coverage for an employee who is on pregnancy disability leave under the same conditions that coverage would have been provided if the employee had continued in employment during the PDL leave. Look for upcoming newsletters for an in-depth explanation of what this bill means for your existing policies.


• AB 887: Further defines “gender” under the Fair Employment and Housing Act to include both gender identity and “gender expression.” Gender expression is defined as “a person’s gender-related appearance and behavior whether or not stereotypically associated with the person’s assigned sex at birth.”? This definition is consistent with existing law.

Gov. Brown vetoed AB 325, a CalChamber “job killer” bill, which would have required California businesses to provide up to three days of unpaid bereavement leave.

Copyright: HRC/CalChamber

In an important ruling for employers, the California Supreme Court clarified
an employer’s duty relating to workplace safety of independent contractors. The
court held that an employer can delegate the duty to ensure the safety of the
specific workplace that is the subject of the contract to the independent
contractor.

The court also held that the employer will generally not be liable if one of
the independent contractor’s workers is then hurt on the job. SeaBright v.
US Airways, 52 Cal.4th 590 (2011).

Level of Responsibility

The case involved an airline that hired an independent contractor to maintain
and repair a conveyor used to move to luggage.

US Airways hired Lloyd W. Aubry Co. (Aubry) to maintain and repair US
Airways' luggage conveyor at San Francisco International Airport. Because Aubry
was hired as an independent contractor, the airline did not direct Aubry’s work
or direct airline employees to participate in Aubry’s work.

Aubry employed Anthony Verdon Lujan, who was injured while performing an
inspection of the conveyor. Verdon’s arm got caught in the conveyor's moving
parts, and the conveyor lacked certain safety guards required by
regulations.

Aubry’s workers’ compensation insurer, SeaBright Insurance, paid Verdon
benefits based on his injury. SeaBright then sued US Airways, claiming the
airline caused Verdon’s injury and seeking to recover what it paid in benefits.
Verdon also sued US Airways for negligence.

SeaBright argued that US Airways was liable because of its obligations under
Cal/OSHA to provide a "safe workplace." The issue was whether US Airways could
delegate that obligation to its contractor, with respect to the safety of the
contractor’s employees. The California Supreme Court held that it could.

The court noted that the general rule is that when employees of independent
contractors are injured in the workplace, they cannot sue the person or entity
that hired the contractor to do the work. Privette v. Superior Court, 5
Cal.4th 689 (1993)

The court held that when a company hires an independent contractor, the
company delegates to the contractor any legal duty it owes to the contractor’s
employees to ensure the safety of the specific workplace that is the subject of
the contract.

The company which hired the independent contractor would face liability for
the injury only if the company retained control over the independent
contractor’s work and exercised control in a way that "affirmatively
contributed" to the injury. Hooker v. Department of Transportation, 27
Cal. 4th 198 (2001)

The ruling does not change the fact that US Airways owes its own employees
the duty to provide a safe workplace and that the airline cannot delegate that
duty.

Best Practices

• Clarify any duties and responsibilities that you are delegating to your
  independent contractor


• Carefully describe in your independent contractor agreement who is
  responsible for duties such as workplace safety


• Once you delegate those duties to your independent contractor, relinquish
  control


• Exercising control over the work performed, including time and location, is
  one of the most common misclassification mistakes


• If you continue to control how your independent contractor performs and
  handles its duties and responsibilities, you could be liable - - regardless of
  what your written agreement says

Copyright: HRC/Cal Chamber

California's Department of Fair Employment and Housing recently announced an administrative award of $846,300 to a man fired because he had cancer. This is the agency’s largest ever award.

The sales manager was fired because his employer claimed that he wasn’t spending enough time on sales travel during the same time frame that he was still recovering from cancer.

Charles Wideman worked for Acme Electric Corporation as a western regional sales manager from 2004 to 2008. He developed kidney cancer in 2006 and prostate cancer in 2007. Wideman’s cancers required two surgeries and numerous outpatient appointments. He was granted time off for the surgeries and recuperation time off.

Wideman returned after each operation, but requested an accommodation to limit his travel while undergoing additional cancer treatment. Acme Electric refused to grant or even acknowledge the requests to limit travel.

Instead, in December 2007, Wideman’s supervisor gave him an unfavorable performance evaluation, criticizing him for insufficient sales travel. In February of 2008, Acme Electric fired Wideman on the basis of the December performance evaluation. Acme Electric ignored the fact that Wideman’s performance since the December evaluation dramatically improved.

After a three-day hearing, the Fair Employment and Housing Commission found that Acme Electric violated the Fair Employment and Housing Act (FEHA) by:
Failing to accommodate Wideman’s known travel limitations due to his cancers
Failing to engage in a good faith, interactive process
Discriminating against Wideman because of his disability
Failing to take all reasonable steps to prevent discrimination from occurring.

Employers cannot discriminate against employees on the basis of disability. Further, under the FEHA, employers must reasonably accommodate employees with known disabilities. The duty to accommodate is an on-going obligation and requires a genuine effort to work with the employee to arrive at a workable reasonable accommodation.

Copyright: Cal Chamber of Commerce/HRC

1. Federal Court Says "Aloha" to Hotel Service Charge Practices in Hawaii

2. OSHA Spotlight: OSHA Hitting Hard on "Repeat" Penalties at National Chains, and Ergonomics (Housekeepers, etc.) Are Back in Play

3. ADA Title III News: Boston Area Hotels Under Investigation; March 15, 2012 Deadline For Compliance With Revised ADA Accessibility Standards Nears; The Latest Updates On DOJ Rulemaking Over Website Accessibility, Equipment And Furniture

4. IRS Guidance Makes 2014 Hospitality Employer Health Care Costs More Predictable

5. The NLRB and Social Media

Hospitality Team Updates

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1. Federal Court Says "Aloha" to Hotel Service Charge Practices in Hawaii

By: Ariel Cudkowicz and Kevin Young

As we reported earlier this summer, the hospitality industry has, in recent years, attracted the attention of various plaintiffs' attorneys who have attacked, on behalf of service employees, practices related to levying service charges on food and beverage purchases. While several recent decisions have stemmed the tide of such cases, threats remain in those states that statutorily proscribe certain service-charge practices. This threat came to bear late last month, when Hawaii's federal district court granted partial summary judgment to a group of hotel banquet servers who asserted that their employer violated Hawaii law by charging, and retaining some portion of, an 18-to-22 percent service charge on food and beverage purchases.

The six named plaintiffs—who worked as banquet servers at the Four Seasons Resort Maui and the Four Seasons Resort Hualalai—brought the case as a Rule 23 class action in November 2008. They asserted five causes of action pertaining to the disputed charges, including an unfair competition claim, two contract-related claims, an unjust enrichment claim, and a claim under Hawaii's wage-withholding statute, the violation of which entitles an employee to double the unpaid wages.

The plaintiffs moved for summary judgment with respect to their claim under the wage-withholding statute, Hawaii Revised Statute ? 388-6. Section 388-6 prohibits employers from deducting or retaining "any part or portion of any compensation earned by any employee except where required by [law]." The plaintiffs argued that the hotel's service-charge practice violated this law, namely when read in conjunction with Hawaii Revised Statute ? 481B-14. Section 481B-14 is part of Hawaii's Unfair and Deceptive Practices Act and requires hotels and restaurants to distribute food and beverage service charges "directly to . . . employees as tip income or clearly disclose to the [customer]" that the charge is not being used for wages and tips.

One of the hotel's primary objections was that Section 481B-14 was intended to protect consumers, not service employees. Thus, the hotel argued, after pointing to various legislative history, the law does not, and was not meant to, create a claim for service employees under Section 388-6. The hotel further asserted that Section 388-6 only applied to tips, and that in the hotel industry tips are entirely distinct from service charges. The court rejected these arguments, finding that the two statutes could and should be read in harmony, with Section 481B-14 requiring hotels and restaurants to pay service charges to employees as "tip income," and Section 388-6 providing a cause of action for withholding wages, including "tip income."

Over these and various other objections, the court agreed with the plaintiffs that there was no genuine issue of material fact for trial: The hotel employed the plaintiffs as food and beverage servers, it retained portions of food and beverage service charges, and did not clearly disclose that a portion of the charge was not distributed to the plaintiffs.

This decision is consistent with a number of other decisions in Hawaii dealing with the hotel industry practice of charging and distributing service charges for banquet events. The result is instructive for other hospitality-industry employers in Hawaii, and even for those outside the state. In either setting, it remains critically important for employers in the industry to be cognizant of service-charge rules in the states in which they operate and, moreover, to communicate with their customers as clearly and consistently as possible about the purpose of mandatory charges, including, for instance, through language on event orders, menus, receipts, service agreements, posted policies, and any other written statements concerning such charges.

2. OSHA Spotlight: OSHA Hitting Hard on "Repeat" Penalties at National Chains, and Ergonomics (Housekeepers, etc.) Are Back in Play

By: James Curtis

OSHA Hitting Employers With Significant "Repeat" Penalties

On July 13, 2011, OSHA issued $104,000 in serious and repeat citations to a national retail chain for workplace hazards relating to ladder use, storage shelving, emergency exit routes and electrical panels, many routine safety issues encountered in the hospitality industry. Significantly, $99,000 of the penalties were for violations classified as "Repeat." This chain is not alone. Under the current administration OSHA is increasingly using "Repeat" classifications as a tool to drive up OSHA penalties. A "Repeat" citation can be issued where the employer had a citation in the previous five years for a "substantially similar" hazard. Because "Repeat" citations can carry a penalty of up to $70,000 per violation, (whereas the maximum penalty for a serious violation is $7,000) knowing your Company's OSHA history and avoiding repeated violations is becoming increasingly important.

Even where there is no merit to an OSHA citation employers often choose not to contest minor OSHA citations because the monetary penalty is small and the employer believes that it will cost less to simply pay the fine and move on. What many employers fail to appreciate is that these minor citations will be used as the basis for a Repeat citation with a ten fold penalty increase if a similar violation occurs at another company facility anywhere in the country. For example, in the above mentioned case, the prior violations had occurred three years earlier at the chain's facility in Chicago, Illinois and the current violations were at a facility in Georgia. Anyone even remotely familiar with operating a business knows that local management at a Chicago facility is unlikely to have substantive interaction with the operations at a different facility half way across the country. Yet, because the Company is a single "employer," it is irrelevant whether there are 2 facilities or 200 facilities. Further, it is irrelevant whether local management had any knowledge of the prior violation at the other facility. If a hazard is "substantially similar" to a prior citation, the OSHA can legally issue a Repeat citation whether or not management was aware of the prior citation at the other facility. Obviously, large employers with multiple facilities around the country are particularly at risk in this situation.

Additionally, OSHA can look back five (5) years in an employer's history to find a prior citation upon which to base a "Repeat" citation. Accordingly, there is a very long tail on the potential for a "Repeat" citation. Employers should be especially aware of this when there is a change of management personnel at a facility. The new management will likely be unaware of the Company's past OSHA history unless they are specifically briefed on prior citations when they take over.

Accordingly, we strongly recommend that all OSHA citations received at any facility be reviewed for accuracy. Where OSHA got it wrong, it is well worth the effort to go through the process of having the citation either modified or deleted in its entirety. Where OSHA got it right and the facility must take the citation, ensure that the citation has been communicated to all of the other facilities so that they can ensure that similar hazardous conditions do not exist at their facility and thereby avoid the "Repeat" citation trap.

Ergonomics Back in Play

As part of its increased enforcement efforts, OSHA has begun targeting ergonomic hazards, especially in the hospitality industry. In response to union complaints, OSHA recently opened numerous investigations across the country at a major hotel chain. OSHA was specifically investigating allegations that housekeepers were exposed to repetitive motion injuries. We have also seen OSHA investigating ergonomic/carpel tunnel injuries for clerical staff working at computer stations. These investigations come as no surprise as OSHA has long identified ergonomic hazards, especially back injuries, as one of the most common workplace injuries. While federal OSHA does not have a specific ergonomics standard in place it does issue citations for ergonomic hazards under the general duty clause. California is the only jurisdiction that has a specific ergonomics standard and has been using it with increasing frequency.
In response to OSHA's increased ergonomics enforcement activity, we strongly recommend that hospitality employers review their ergonomic safety policies, workers compensation histories and OSHA logs to ensure that all ergonomic hazards are being properly addressed. Where the OSHA logs and/or workers compensation histories reveal trends in ergonomic injuries, the employer should analyze the trends for their root cause and implement a strategy to prevent such injuries going forward.

3. ADA Title III News: Boston Area Hotels Under Investigation; March 15, 2012 Deadline For Compliance With Revised ADA Accessibility Standards Nears; The Latest Updates On DOJ Rulemaking Over Website Accessibility, Equipment And Furniture

By: Minh Vu and Laura Robinson

U.S. Attorney's Office for the District of Massachusetts Initiates ADA Compliance Investigation into Boston
Area Hotels

The U.S. Attorney's Office for the District of Massachusetts (USAO-MA) recently began investigating hotels in the Boston area for their compliance with Title III of the Americans with Disabilities Act (ADA). The ADA authorizes the U.S. Department of Justice (DOJ) to investigate complaints submitted by members of the public and to undertake compliance reviews of covered entities on its own initiative. The DOJ may file a civil lawsuit against a covered entity in federal court in any case that involves a pattern or practice of discrimination or raises issues of general public importance. Such cases can result in injunctive relief, monetary damages, and/or civil penalties.

This is not the first time the federal government has investigated a group of hotels, and the prior investigations demonstrate hotel companies should be very concerned about his development. In 2005, U.S. Attorney's Office for the Southern District of New York (USAO-SDNY) launched its Hotels Initiative which, in part, was designed to enforce the ADA. As part of the Hotels Initiative, the USAO-SDNY conducted ADA compliance reviews of almost fifty hotels located in Times Square. The USAO-SDNY required each hotel within the scope of the initiative to complete a survey. Upon receiving the completed surveys, the USAO-SDNY conducted on-site inspections of each hotel. The initiative resulted in a number of Voluntary Compliance Agreements between the DOJ and Times Square area hotels, and lawsuits against five hotels which culminated in court-ordered consent decrees.

Similarly, in February of 2011, the U.S. Attorney's Office for the District of New Jersey (USAO-NJ) commenced a similar review of hotels and casinos located in Atlantic City. The USAO-NJ sent each targeted hotel and casino a survey form, and notified each property that the USAO-NJ likely will conduct an on-site inspection to confirm survey responses and review for ADA compliance.
Based on preliminary indicators, we anticipate that the process that the USAO-MA is currently undertaking will be similar to the New York-Times Square and New Jersey-Atlantic City investigations.

Will Your Hotel's Recreational Facilities and Reservations Processes Be Ready on March 15, 2012?

On September 15, 2010, the Department of Justice (DOJ) published revised regulations to the Americans with Disabilities Act (2010 ADA Regulations) which include a new set of detailed accessibility standards for lodging and other public accommodations facilities (2010 ADA Standards). The 2010 ADA Standards added requirements and standards for certain recreational facilities that were not included in the 1991 ADA Standards. Such recreational facilities include: swimming pools, wading pools, and spas; saunas and steam rooms; exercise machines and equipment; play areas; fishing piers and platforms; recreational boating facilities; golf facilities; amusement rides; mini golf facilities; shoot facilities; team or player seating; an accessible route to bowling lanes; and an accessible route to court sports facilities.

Hotels must bring these existing recreational facilities into compliance with the 2010 ADA Standards by March 15, 2012, if it is "readily achievable" to do so. The 2010 ADA Regulations defines "readily achievable" as "easily accomplishable and able to be carried out without much difficulty or expense." This analysis requires an examination of many factors such as the nature and cost of the action needed to remove the barrier, the impact of the barrier removal on operational issues, and the resources of the owner and operator of the hotel (and its corporate parent where applicable).

The DOJ also created new rules in the 2010 ADA Regulations for reservations policies, practices, and procedures. Effective March 15, 2012, for reservations made by any means, hotels must:

1. Modify their policies, practices, or procedures to ensure that individuals with disabilities can make reservations for accessible guest rooms during the same hours and in the same manner as individuals who do not require accessible rooms;


2. Identify and describe accessible features of their hotels and guest rooms via their reservations systems in sufficient detail to reasonably permit individuals with disabilities to independently determine whether a hotel or guest room meets his/her accessibility needs;


3. Ensure that accessible guest rooms are held for use by individuals with disabilities until all other guest rooms of that type are rented and the requested accessible room is the only remaining room of that type;


4. Reserve, upon request, accessible guest rooms or specific types of guest rooms and ensure that the requested guest rooms are blocked and removed from all reservations systems; and


5. Guarantee that the specific reserved accessible guest room is held for the reserving guest, regardless of whether the room is held in response to reservations made by others.

The 2010 ADA Standards and the 2010 ADA regulations can be found online at www.ada.gov.

DOJ Delays Rulemakings on Standards for Website Accessibility but Pushes Forward on Equipment and Furniture

In September 2010, we alerted you to the U.S. Department of Justice's two Advanced Notices of Proposed Rulemakings (ANPRMs) issued under Title III of the Americans with Disabilities Act (ADA). Click here to read our September 2010 Newsletter. Comments concerning the ANPRMS were due on January 24, 2011. One ANPRM concerned public accommodation websites, and the other concerns a public accommodation's self-service equipment and furniture. Seyfarth Shaw submitted comments to the DOJ in response to each ANPRM on behalf of the American Hotel & Lodging Association. The DOJ will issue a Notice of Proposed Rulemaking ("NPRM") that reduces the content of each ANPRM to a full text of the proposed rulemaking.

The DOJ anticipates issuing the NPRM governing public accommodation equipment and furniture by December 2011, and the NPRM covering public accommodation websites by December 2012, pushing back its date by a year. We expect that significant issues for hotels in the equipment and furniture NPRM will be bed height in accessible rooms and accessible exercise equipment in hotel recreational facilities. There will be a comment period commencing the day each NPRM is published in the Federal Register in which the public may respond to any aspect of the NPRM.

4. IRS Guidance Makes 2014 Hospitality Employer Health Care Costs More Predictable

By: Ben Conley

The IRS recently released clarifying guidance that should make it easier for hospitality employers to control health care costs starting in 2014 when the employer "play or pay" mandate kicks in.

Background - Calculating the Play or Pay Penalty

The Affordable Care Act requires large employers (those employing 50 or more full-time equivalent employees) to either offer affordable health care coverage or pay a penalty. The play or pay penalty is made up of two components: (a) a penalty for failure to offer coverage to all full-time employees, and (b) a penalty for failure to offer "affordable" coverage. The penalties are calculated as follows:

Failure to Offer Coverage

Large employers who fail to offer major medical coverage to all full-time employees (those working thirty or more hours per week) must pay an excise tax of $2,000 per full-time employee (excluding the first thirty employees from the calculation), as long as at least one employee receives a tax credit through the 2014 health care exchanges offered in each state.

Failure to Offer Affordable Coverage

The Affordable Care Act treats coverage as "affordable" if (a) the employee's premium does not exceed 9.5% of that employee's household income, and (b) the employer covers at least 60% of the actuarial value of coverage. A large employer that fails to offer affordable coverage will be subject to an excise tax of $3,000 per employee who receives a tax credit through the exchanges. While this is a larger dollar amount than the tax for failure to offer coverage, this tax is only multiplied by the number of employees who receive a tax credit, rather than by all full-time employees.

Affordable Care Act Creates Confusion Regarding the Affordability Test

The statutory definition of "affordable" created two problems for employers:

1. The Affordable Care Act did not specify whether affordability (i.e., premium contribution not to exceed 9.5% of household income) was measured using the premium for employee-only coverage or the premium for the coverage the employee actually elected (e.g., employee plus one, family, etc.). Employers often subsidize employee-only coverage more heavily than family coverage. So, if the IRS calculated the penalty using the premium for the coverage the employee actually elected, the likely result would be that more employers would face greater penalties for offering coverage deemed "unaffordable" by the IRS.


2. "Affordable" coverage is measured by comparing the premium cost to the employee's "household income." While most employers know how much they pay the employee, they have no way of calculating an employee's household income. As a result, it would be difficult for employers to price employees' premium to avoid the penalty.

IRS Guidance Makes Affordability Test More Predictable

Recent IRS guidance detailed how to calculate the 2014 penalty. The guidance provided a favorable interpretation of the affordability test. First, the guidance indicated that the penalty would be calculated based on the cost of employee-only coverage, regardless of the coverage selected by the employee. So, the cost of employee-only coverage cannot exceed 9.5% of the employee's household income, regardless of the actual level of coverage elected by the employee.

For example, assume an employee has $30,000 a year in household income. The employer covers at least 60% of the actuarial value of coverage. Employees must pay a premium of $2,400 for employee-only coverage (8% of household income) and $3,000 for family coverage (10% of household income). The employer will be deemed to have offered the employee affordable coverage, even if the employee elects family coverage.

Second, the guidance indicated that future regulations will create a "safe harbor" to address the unpredictability involved in calculating employees' household income. Under the proposed safe harbor, employers that meet certain conditions, such as offering all full-time employees coverage, will not be subject to the penalty if the employee premium does not exceed 9.5% of the employee's current W-2 wages. This is merely a safe harbor. If the employee's premium contribution exceeds 9.5% of the employee's W-2 wages, but the premium is still less than 9.5% of the employee's household wages, the employer will be deemed to have offered affordable coverage.
For example, assume an employer knows the lowest-paid full-time employee makes $30,000 in W-2 wages per year. If the employer (a) covers at least 60% of the actuarial value of coverage, and (b) sets the employee-only premium for health coverage at $2,850 (i.e., 9.5% of W-2 wages) no employee will ever become eligible for tax credits through the exchanges, and the employer will not be liable for the play or pay penalty.

What This Means For Hospitality Employers

Under the new rules, employers should be able to better calculate and predict their potential tax liability starting in 2014 when the employer mandate begins. Employers may consider designing a benefit option that provides minimum value and does not require an employee premium payment that would exceed 9.5% of any full-time employee's W-2 wages (in essence, a "bare bones" plan). Employers will still face the decision of whether to stop offering coverage entirely, send all employees to the exchanges for health insurance, and simply pay the penalty for all full-time employees.

Seyfarth Shaw's Health Care Reform Team regularly issues alerts on the Affordable Care Act, including updates on the ongoing legal challenges summaries of new regulations and guidance. For access to the Team's web page, which contains all of its alerts (25 to date), click here. To subscribe to the Team's health care alerts, click here.

5. The NLRB and Social Media

By: Jack Toner

Employers in the hospitality industry, because of the potential negative impact on business, must be particularly sensitive to comments by employees in social media vehicles such as Facebook or Twitter regarding the nature and quality of the operations in which they work. To the extent to which employers establish and enforce policies regarding employee postings on social media vehicles, they also must be cognizant of employee rights under Section 7 of the National Labor Relations Act ("Act") to engage in protected concerted activities, which may include certain social media postings. For all of the press about the National Labor Relations Board and social media policies, until recently there has been no published social media decision as to how exactly the Board or its administrative law judges (ALJ's) will apply the Act to this new medium. The first ALJ decision is in, and it may be cause for concern if the NLRB upholds it.

The Early Guidance on Social Media

An employee's right to engage in protected concerted activity has been interpreted to protect, among other activities, certain communications by and between employees for the purposes of collective bargaining or other mutual aid or protection. Individual activity traditionally has been considered to be "concerted" so long as it is engaged in with the object of initiating or inducing group action. With the growth of social media, the Board's Regional Directors and its General Counsel have, when investigating unfair labor practice charges regarding social media postings, applied Board precedent over other forms of communication to the social media context in determining whether to issue a complaint.

The most common social media issues addressed by NLRB Regional Directors and the General Counsel involve allegations: (1) that an employer's policy restricting employee use of social media is illegal on its face because it is so overbroad it would discourage employees from exercising their Section 7 rights; and/or (2) that an employer unlawfully discharged or disciplined an employee because the specific language the employee's social media post constituted protected concerted activity, i.e., that employee's comments were concerted in nature (involved other employees) and the subject discussed involved wages and or other working conditions.

For example, in one recent case the NLRB General Counsel determined that a complaint should issue where an employer had allegedly illegally disciplined an employee for posting on Facebook comments regarding a customer event including a comment critical of the quality of the food and beverages served to the customers. In another recent case, however, the General Counsel declined to issue a complaint, finding that an employer legally terminated an employee (a bartender) for posting Facebook comments that, among other things, were critical of customers.

These early policy decisions regarding whether to issue complaints on social media cases, however, were not decisions by the Board itself. It is the Board, however, and not the Regional Directors or the General Counsel that ultimately decides what constitutes a violation of the Act and the Board has not yet had an opportunity to rule on a social media issue.

The First ALJ Decision: Hispanics United of Buffalo

The Board is now one step closer to finally getting to issue a social media decision, for on September 2, 2011, an Administrative Law Judge ("ALJ") issued a decision in Hispanics United of Buffalo, 3-CA-27872. If upheld by the Board, this decision would significantly expand the definition of what constitutes protected activity by an individual employee in the social media context. In Hispanics United of Buffalo, the ALJ ruled that an employer unlawfully terminated five employees who had posted comments on Facebook in response to a co-worker's complaint about their job performance. The co-worker complained to the employer that the employees had harassed her by the postings, and she allegedly even suffered a heart attack. The employees were terminated because the employer deemed the social media posts to constitute bullying and harassment in violation of its harassment policy.

The ALJ found the Facebook postings by the employees in reaction to the co-worker's criticisms of how they did their job to be protected concerted activity. The ALJ found nothing in the record that could create an argument that the postings had risen to the level of unprotected activity. He found no record evidence that the employees had actually harassed the co-worker in violation of the employer's policy, or that the employees' action had triggered a heart attack.

The ALJ further rejected arguments that the comments were not concerted because the employees were not trying to change their working conditions or communicate their concerns to the employer. The ALJ equated the posting to employees discussing their wages with each other, a long-recognized concerted activity, or employees talking together as part of a first step towards taking group action.

While the ALJ's ultimate conclusion may be correct, critically the ALJ relies in part on Parexel International LLC, 356 NLRB No. 82 (Jan. 28, 2011), in which the NLRB broadly expanded the scope of "concerted" activity. Prior to Parexel, the Board had long held that for an activity to be "concerted" the activity must "be engaged in or with the authority of other employees, and not solely by and on behalf of the employee himself." In Parexel the Board found that the employer had illegally terminated an employee despite concluding that the employee had not discussed her complaint with any other employees or indicated that she was speaking for anyone other than herself. The Board found the violation on the basis that the individual employee might at some future date possibly seek to include other employees in her complaint.

Thus, if exceptions to Hispanics United of Buffalo are filed with the Board, and the Board expands its Parexel rationale to the social media context, hospitality employers will find it that much more difficult to properly respond to employee social media postings about the employer — including negative comments regarding its operations and services.

Best Steps Forward

Notwithstanding the current lack of total clarity in the law regarding the extent to which the Act protects employee social media postings concerning their employer or work-related issues, hospitality employers should develop carefully crafted prophylactic policies in order to properly and quickly respond to inappropriate postings by employees. Those policies should carry disclaimers recognizing employee rights to engage in protected concerted activity under the NLRA — although how far such disclaimers will go is open to question. Employers should not forget the other legal and practical issues of social media policies addressed in a previous article, click here. Last and certainly not least, before disciplining any employee for postings to a social media site employers should consult with counsel to insure that the posting are not protected concerted activity.

Immigration Update:On September 7, a broad group of H-2B employers and trade associations sued the Department of Labor in Louisiana regarding the H-2B wage increases scheduled to go into effect on September 30. The plaintiffs are represented by Seyfarth Shaw, along with the law firm Fisher & Phillips. The plaintiffs are alleging that DOL failed to comply with the Administrative Procedure Act in issuing the regulations mandating the wage increase. Every H-2B employer will see wage rates increase under the new rules. Many H-2B employers are facing mandatory increases of 50 and 60%, with some being required to pay wage increase of more than 120%. The plaintiffs are seeking an injunction to block the rule from going into effect on September 30.

HRWatchdog?has frequently blogged on the increased activity by the National Labor Relations Board (NLRB) as it relates to employer discipline for social media postings made by employees. In the past year, the NLRB has seen an increase in the number of charges related to social media and has filed several complaints against employers who discharged employees for social media postings in which the employees complained about workplace conditions.

Employees, in both union and non-union workplaces, have the right under Section 7 of the National Labor Relations Act (NLRA) to engage in concerted activities. Such activities might include two or more employees discussing working conditions, pay or other work-related issues. The typical example of a protected activity is when employees gather around the water cooler to complain about their supervisor. These days, that water cooler conversation might take place online – on Facebook, Twitter or some other social media outlet.

There has been some uncertainty for employers as to when social media postings will be regarded by the NLRB?as a protected concerted activity and when employers can and cannot take disciplinary action against employees for their social media postings. Last month, the NLRB's Office of General Counsel issued a report outlining some of the social media cases. The report detailed the outcome of the NLRB's investigation into these cases. The purpose of releasing the document was to provide guidance to labor law counsel and human resource professionals.

Now, for the first time, a NLRB?Administrative Law Judge (ALJ) has weighed in on the issue after a full hearing. The ALJ ruled against a Buffalo non-profit organization and found that the organization unlawfully discharged five employees after they posted comments on Facebook concerning working conditions, including work load and staffing issues.

An employee at Hispanic United of Buffalo, Inc. (HUB), a non-union employer, posted the following on her Facebook page: “Lydia Cruz, a coworker feels that we don’t help our clients enough at HUB I about had it! My fellow employees how do u feel?” Several other HUB employees then went on Facebook and commented on the original post. These comments expressed negative opinions about Cruz’s criticism, defended employee job performance, and complained about working conditions. The comments were often sarcastic and some used profanity.

None of the posts were made during work hours and none were made using a work computer. After learning of the posts, HUB discharged the employees who had participated, claiming that the comments constituted harassment of Lydia Cruz, who was originally mentioned in the post.

The ALJ?disagreed with HUB’s position and found that the Facebook discussion was protected because it involved a discussion among coworkers about the terms and conditions of employment, including job performance and staffing levels. The ALJ noted that expressions related to defense of job performance are a protected activity, especially where the employees could reasonably believe that they would need to defend their job performance to management.

The ALJ ordered reinstatement of the five employees and also awarded the employees back pay because they were unlawfully discharged.

The ALJ?also found that the employees did not engage in any conduct that forfeited their protection under the NLRA. The ALJ noted that there was not a violation of HUB’s anti-harassment policy because there was no evidence that the complaining individual was harassed and no evidence that she was harassed based on a protected characteristic.

Copyright: HR California/CCC

With profuse apologies to the Gershwins.? This post is not about show tunes.? It’s about a new case from the California court of appeal, which offers good insight on how courts out here view vacation and related matters.

In Paton v. Advanced Micro Devices, the court faced the question whether a promised company sabbatical (remember when some tech employers — and even law firms — offered those?) constituted “extra vacation” which had to be paid if not taken by the employee before his employment ended.? AMD offered paid eight-week sabbaticals?to salaried employees after seven years of service.? (Later the program was changed to offer four-week sabbaticals for employees after five years of service, and the program was later abolished entirely.)? Eric Paton was a salaried employee who worked for AMD for seven years, but (for a variety of reasons) never got his sabbatical.

When he quit, Paton contended that he should be paid for the sabbatical, because it was (in Paton’s view) “really just extra vacation.”? And, as we all now know, a departing employee must be paid for accrued but unused vacation when he leaves.? When AMD refused, Paton filed a class action suit seeking the usual remedies (back pay, penalties, and, let us never forget, attorneys’ fees).? The trial court threw the suit out, finding that the sabbatical program was not equivalent to vacation.

The court of appeal said not so fast.? First, the court (admirably) tried to come up with a workable definition of “vacation” under California law, something that no court had yet tried to do.? After reviewing prior legal and regulatory pronouncements on the subject, the court stated:

We take from the foregoing a rough idea of what constitutes vacation.? It is paid time off that accrues in proportion to the length of the employee’s service, is not conditioned upon the occurrence of any event or condition [like a particular length of service, or an illness], and usually does not impose conditions upon the employee’s use of the time away from work [as compared to a traditional academic sabbatical for research or scholarship purposes].

Next, the court compared corporate sabbatical programs in general to its? “rough idea” of vacation:

By attempting to incorporate the characteristics of a traditional sabbatical into the [non-binding regulatory] test, the Labor Commissioner implicitly recognized that legitimate sabbaticals?would be those that were designed to achieve purposes similar to the purposes for which traditional sabbaticals are used, namely to provide incentive for experienced employees to continue with and improve their service to the employer.? Where a corporate sabbatical is granted for a specified sabbatical project (other than rest and recreation) one would have little trouble concluding that it is not vacation.? The thornier problem is where the sabbatical is granted based only upon the length of service and is unconditional with regard to the employee’s use of the time away.? Such a program has elements in common with regular vacation.? But it could still be a legitimate sabbatical if the facts show that the leave is designed as an incentive for continued and improved performance by the most experienced employees and not merely as a reward for a prior period of service.

The court proposed a four-part test to determine whether a corporate sabbatical program was a “true sabbatical”, instructing lower courts and employers to consider: (1)? the frequency of the leave (the less frequent the leave, the more likely a sabbatical); (2) the length of the leave (the longer the leave, the more likely a sabbatical); (3) whether the leave supplants or supplements regular vacation (true sabbaticals are offered in addition to regular vacation); and (4) whether the program requires the employee to return to work after the sabbatical (yes, sabbatical; no, vacation).

Finally, the court looked at the specifics of AMD’s sabbatical program, and found it was too close a question for summary judgment:

As to the elements of plaintiff’s wage claim, the undisputed evidence shows that defendant’s sabbatical program contained the elements of a vacation.? It was based upon the employee’s length of service; if he worked seven (or five) years he was eligible for eight (or four) weeks off with pay.? Although the program required that the employee bring his performance up to company standards before he could use the leave, and it allowed defendant to postpone a planned leave if it had business reasons for the postponement, the written policy does not impose any conditions upon earning the time off.? Both the policy itself and the benefits brochure indicate that the employee was eligible after service for the prescribed number of years.? The leave was granted without any conditions as to how the time was to be spent and did not require the employee to account in any manner for what he or she did while away.

As to defendant’s claim that the leave was a legitimate sabbatical, defendant produced evidence to support that claim.? The policy provides that employees on sabbatical “will return to their same job,” which suggests that the program is designed as a retention incentive.? But that feature alone is not dispositive.? Although defendant asserted that the leave was also offered for a longer period than what was “normally” offered for vacation, and that it was not offered “too” frequently in that it was offered only every five or seven years, these are qualitative parameters upon which reasonable minds could differ.? If a jury were presented with only the sabbatical and vacation policies, we cannot say that a reasonable jury would reach but one conclusion.? It would not be unreasonable for a jury to decide that a four-week sabbatical is not “normally” longer than vacation of four-weeks, or that an eight-week sabbatical is not longer than that “normally” allowed for vacation where eight-weeks equals the length of time an employee could be gone on vacation if he took the maximum amount he could accrue all at once.? And, although we know that defendant also offered a vacation policy, we do not know how defendant’s vacation policy compared to vacation benefits offered by defendant’s competitors.

So what can employers and employees glean from the Paton case?

• Get used to risk.? There’s no real guarantee with a sabbatical program, unless you’re a university or the California court system.? The court’s conclusion that a fact issue existed could be applied to virtually every sabbatical program that could be written.? And the four-part, no-single-part-conclusive, test proposed does not create a friendly environment for dispostive motions.


• Length matters.? If you offer a sabbatical, make it long — much longer than your vacation accrual cap.


• Leave out the welcome mat.? Make it clear that you expect employees to return to work.? A sabbatical should not be an early retirement program.? Obviously you can’t force them to return, but make the expectation clear.? And back it up with policies to get in touch with employees on sabbatical as their return date approaches.


• Do it for a reason.? If you can tie the purpose of the sabbatical to something that will assist the employer upon return — research into a relevant academic field, for instance — do so.?? By the same token, make sure that the sabbatical program materials state that the program is intended to induce long-term employees to stay, and to increase their productivity.

It will also be interesting to see what other purported synonyms of “vacation” come out of the woodwork after this opinion.? Any time a court says something can’t be decided on summary judgment, the employee bar smiles.

Something to remember during the next bubble.? Until then, sabbatical programs are likely to be rarer than hen’s teeth.? (Which aren’t that rare, but that’s another post for another blog.)

By: Kevin Christiansen

On September 14, 2011, the IRS issued updated guidance(pdf) on the tax treatment of employer-provided cell phones, effectively treating both business and personal use of such phones as exempt from an employee’s wages.

The Small Business Jobs Act removed cell phones from the definition of “listed property” beginning January 1, 2010, meaning they no longer required heightened levels of substantiation to qualify as a business expense. However, Congress had not altered the use of an employer-provided cell phone as a fringe benefit. As a result, the value of employer-provided cell phones was still subject to inclusion in an employee’s wages unless a specific exclusion applied.

In Notice 2011-72 the IRS observed that “[m]any employers provide their employees with cell phones primarily for noncompensatory?business reasons.” Accepting what is a common business reality today, the IRS announced that if an employer provides an employee with a cell phone “primarily for noncompensatory business purposes,” the cell phone will be treated as a working condition fringe benefit and the value of the cell phone usage will be excluded from the employee’s wages.

The IRS explained that “noncompensatory business purposes” can include “the employer’s need to contact the employee at all times for work-related emergencies, the employer’s requirement that the employee be available to speak with clients at times when the employee is away from the office, and the employee’s need to speak with clients located in other time zones at times outside of the employee’s normal work day.” It added that providing cell phones to “promote the morale or good will of an employee, to attract a prospective employee or as a means of furnishing additional compensation to an employee” do not qualify as being “primarily for noncompensatory business purposes.”

In addition to the business use of a cell phone, the IRS also announced that it will treat the value of any personal use of such a cell phone as a nontaxable?de minimis fringe benefit. Therefore, personal use will also be excluded if the business use of the phone is for noncompensatory business purposes.

These new administrative rules are effective for periods beginning January 1, 2010. They apply to both employer-provided cell phones, as well as reimbursement of employee-owned cell phones.

In light of these changes, employers should consider reviewing their cell phone policies. Many policies prohibited any personal use of employer-provided cell phones. Companies may want to reconsider those policies in light of the IRS’ new guidance. Employers should also ensure that any employer-provided cell phone or reimbursement is for a noncompensatory?business purpose and is not merely to promote morale, attract employees or to add to an employee’s compensation.

By: William Weissman