EMPLOYMENT CORNER

The EEOC recently unveiled its final rule for the Pregnant Workers Fairness Act (PWFA), a sweeping pro-worker law that will enable pregnant workers to access accommodations that would permit them to perform their duties safely without fear of reprisal. The PWFA “encourages early and open communication between employee and employers, allowing them to address issues in a timely manner to get employees the temporary accommodations they need and to avoid unnecessary disputes or litigation.”

Through the PWFA, workers are provided with vital information about their legal rights, while employers are given guidance for meeting their responsibilities under the law. Under PWFA, employers will be required to offer reasonable workplace accommodations to workers who are pregnant, or have a condition related to pregnancy or childbirth, unless the accommodation would cause the business an undue hardship. The EEOC maintained a broad definition of “pregnant,” which is consistent with how courts and the EEOC itself have interpreted “pregnancy, childbirth, or related medical conditions” and as it appears in the Title VII of the Civil Rights Act. Under PWFA, the EEOC has provided a non-exhaustive list which includes current pregnancy, past pregnancy, potential or intended pregnancy (including infertility, or fertility treatments), labor and childbirth, lactation, miscarriage, and having or choosing not to have an abortion.

The PWFA is scheduled to take effect on June 18, 2024, and will require all employers with at least 15 employees to provide reasonable accommodations to qualified employees. 

In a decision involving a transfer of a female police officer to a different unit, the Supreme Court confirmed that prevailing in a Title VII suit against an employer does not require showing significant injury.

The Sergeant of a police department was transferred from the specialized intelligence division, where she worked as a plainclothes officer to a uniformed job in a different department. The Sergeant’s rank and pay remained the same; however, her perks, schedule, and responsibilities, were diminished by the transfer. Now, the Sergeant was required to supervise patrol officers, approve their arrests, review reports, handle administrative matters, and even perform patrol work. The Sergeant’s former specialized intelligence division replaced her with a male candidate because the male officer “seemed a better fit for the Division’s ‘very dangerous’ work.”

The Sergeant filed a Title VII suit to challenge the transfer, arguing that the city discriminated against her based on sex and materially diminished her status and benefits. The federal court held that because the Sergeant could not demonstrate a material employment disadvantage—change in salary or rank—her loss of networking opportunities was immaterial and did not rise to the level of a Title VII violation. The appellate court affirmed the lower courts holding, and the Sergeant filed an appeal with the Supreme Court.

The Supreme Court reversed and resolved the jurisdictional split, clarifying that the text of Title VII does not impose a requirement of “significance” to the injury. Instead, Title VII prohibits discrimination based on protected class categories, such as race, color, religion, sex, or national origin. Establishing such discrimination requires showing a change in working conditions that caused some disadvantageous change or a “‘difference in treatment that injure’ employees.” Treating someone worse, according to the Court, implies the change in terms or conditions—a concept that covers more than mere economic or tangible disadvantages. The Court explained that the statutory text did not impose the requirement of substantiality to such injury. According to the Court,  “[t]he transfer must have left her worse off, but need not have left her significantly so[,].”

Three Justices concurred and, while they agreed with the result that the majority of the court articulated, they disagreed with the “some-harm” approach. Concurring Justices argued that Title VII violations that are viewed to affect “terms” or “conditions” of employment needed to be effectively differentiated from “every unwanted employment experience.”

A federal court, applying New York law, held that a private company’s employment practices liability policy does not cover a subsequent interrelated lawsuit arising out of a discrimination claim. The company was initially sued by an employee, prior to the claims-made policy period at issue, for discriminatory behavior under Title VII. A subsequent lawsuit was filed, during the policy period, by a different employee that alleged retaliation for cooperating in the Title VII case against the company. The carrier denied coverage for the subsequent lawsuit because it was interrelated to the earlier suit and therefore a claim made prior to the policy period. 

The policy’s Interrelated Claims provision provided that “all Claims arising from, based upon, or attributable to the same Wrongful Act or Interrelated Wrongful Acts shall be deemed to be a single Claim first made on the earliest date that . . . any of such Claims was first made, even if such date is before the Policy Period.” Interrelated Wrongful Acts was defined as “Wrongful Acts that have as a common nexus any fact, circumstance, situation, event, transaction, cause or series of causally connected facts, circumstances, situations, events, transactions or causes.” The court found the language was unambiguous and the actions were interrelated because they both arose out of the alleged Title VII discrimination with the subsequent lawsuit referencing the prior lawsuit as the basis for its claims. Therefore, the suits must be deemed a single claim made outside of policy period.

Recently, the Federal Trade Commission (“FTC”) issued a new ban (the “ban”) on almost all employer noncomplete agreements that is expected to go into effect in a few months. According to the FTC, the ban will likely affect millions of Americans currently confined to noncompete agreements. Despite its purported intentions, the ban faces multiple legal challenges, including a lawsuit filed by the U.S Chamber of Commerce (the “Chamber”), which argued that there has never been a federal level bar on noncompete agreements, and this ban goes beyond the limits of the FTC authority. Additionally, the Chamber views such agreements as being beneficial to the nation’s economy.

Currently, the rule appears to be a blanket ban on noncompete agreements although the definitions and provisions within the ban have been deemed as unclear and muddy. Businesses are concerned about the bans’ retroactive effect on non-competes and its ability to invalidate millions of existing agreements. Despite its broad scope, the ban does impose some exemptions for franchise agreements and nonprofits. While businesses should closely monitor its implementation, the ban is not likely to take effect immediately due to the current legal hurdles. 

In a recent and highly anticipated ruling, the U.S Department of Labor (the “DOL”) revised the Fair Labor Standards Act (“FSLA”) and increased the minimum salary thresholds for overtime exemptions. The rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees (the “Rule”) is designed to extend overtime protections to lower earning salaried workers. Additionally, the Rule will raise the overtime salary threshold for highly compensated employees and is set to automatically renew every three years. A DOL administrator, stated that the Rule is intended to restore and extend overtime protections to salaried workers and prevent “future erosion of overtime protections while ensuing greater predictability.” 

The Rule, which is set to take effect in a few months, is a big win for millions of Americans working forty-plus hours a week. However, this new ruling should also be closely monitored by covered businesses. Businesses should ensure that they are in compliance with the Rule and analyze their current exempt employee pool. If covered businesses find themselves in current non-compliance with the Rule, they should consider adjusting salaries, re-classifying employees and employee duties, and refer to applicable policies that may provide protection for potential violations.

In efforts to accommodate the constantly evolving investment landscape, the Department of Labor (the “DOL”) issued final regulations which expand ERISA’s reach by re-defining what constitutes an investment advice fiduciary. The regulations require more market participants to remain ERISA compliant, unless they qualify for an exemption. 
The effects of the regulatory package are expected to take place over a delayed time period, with the initial deadline being set for September for individuals to acknowledge their fiduciary status and comply with the impartial conduct standards of the rule. The rule will provide a one-year transition period after the effective date. 

In alliance with DOL’s October proposal, one-time rollover transactions out of an employee benefit plan and into an annuity product or an IRA would constitute an investment advice subject to ERISA fiduciary duties. Moreover, advice to buy non-securities products, such as 401(k) related advice or guidance surrounding index annuities would fall under the final rule’s coverage under the new definition of an investment advice fiduciary. 

Modifications of the five-part test of 1975 which focuses on what constitutes investment advice is expected to be one of the significant changes aimed at promoting uniformity and mitigating effects of biased advice. The proposed revision is likely to convert the five-part test with a shorter one consisting of three prongs, focusing on whether one had discretion over assets, the context of relationship and communication, and whether one has proclaimed a fiduciary status.

This expansion of ERISA’s reach, however, is not expected to impact HR professionals who provide guidance to employees.

California employers got a major win in their fight against wage statement penalties. In this rare ruling, the California Supreme Court held that employers can rely on a good faith defense and not be held liable for statutory penalties arising out of wage statement inaccuracies and violations.

This ruling stems from a lawsuit filed by a former employee who argued that their employer failed to report and compensate employees who missed their meal breaks. Most notably, the employee sought statutory penalties for the employer knowingly and intentionally failing to comply with wage statement requirements laid out in the California Labor Code §226 (“Section 226”).

Here, the court held that an employer is not required to pay alleged statutory penalties if it did not knowingly or intentionally fail to comply with Section 226. The court reasoned that if an employer acts in good faith and has reasonable belief that its issued statements are accurate, they are not subject to statutory penalties.

This recent decision has afforded state employers with a stronger good faith defense for alleged wage statement violations. Despite potential erroneous mistakes, if an employer believes that they are in compliance with Section 226, they can assert this good faith defense and avoid potential high-exposure claims.