As most are now aware, on December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law. Contrary to earlier versions of the Act, the final legislation does not repeal the federal Estate Tax, Gift Tax or Generation Skipping Transfer (the “GST”) Tax. Instead, the new law provides temporary relief in the form of an increased Estate Tax exemption for US citizens dying before January 1, 2026 ($11,200,000 per individual beginning on January 1, 2018, adjusted for inflation). The Act also increases the Gift and GST Tax exemptions to the same $11,200,000 (adjusted for inflation) until the end of 2025.

In 2026, the federal Gift, GST and Estate Tax exemptions will revert back to the current amounts. However, with proper estate planning, the temporary benefits provided under the Act can be extended far beyond 2026.

Proactive estate planning utilizing the increased Gift and GST Tax exemptions will result in valuable estate tax savings post 2026. Utilizing various trusts and the increased exemptions, wealth can be effectively transferred to future generations with limited concern as to what may lie ahead after the sunset of the Act and without imposing any currently payable Gift, GST and/or Estate taxes (for clients dying before 2026). In addition to protecting wealth from taxes, such trusts provide creditor protection, insulation from divorce claims and the opportunity to control the management and distribution of wealth during your lifetime and thereafter. Furthermore, under the new Act, trusts are treated more favorably and will be able to reap valuable income tax benefits that were previously unavailable.

As a reminder, the Act does not increase or repeal state transfer taxes, including New York and Connecticut estate taxes and the New Jersey inheritance tax (the New Jersey estate tax has been repealed starting January 1, 2018, although some speculate temporarily). These transfer tax liabilities must be considered separately, but use of tax-saving gifting strategies by the establishment of trusts under the increased federal exemptions might increase state transfer tax savings as well.

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Please do not hesitate to contact us with any estate planning questions.
212-682-0020 | PutneyLaw.com.

On December 14, 2017, the National Labor Relations Board (the “Board”) issued The Boeing Company and Society of Professional Engineering Employees in Aerospace, case numbers 19-CA-090932, 19-CA-090948, and 19-CA-095926 (“Boeing Company”), which overruled Lutheran Heritage Village-Livonia, 343 NLRB 646 (2004) (“Lutheran Heritage”). Under Lutheran Heritage, a facially neutral workplace policy, rule, or handbook provision (“policy”) that was neither enacted in response to employees’ collective bargaining activity nor applied to restrict employees’ exercise of protected collective bargaining rights could nonetheless be found to violate the National Labor Relations Act (the “NLRA”) if employees could “reasonably construe” it to prohibit protected collective bargaining activity. Since 2004, this standard has been applied to invalidate many facially neutral workplace policies governing workplace civility and standards of conduct, such as those prohibiting employees from criticizing their employer on social media and those advising employees to “work harmoniously” with each other or conduct themselves in a “positive and professional manner.” Many employers found the Board’s application of Lutheran Heritage to be overbroad and unpredictable.

In Boeing Company, the Board in a 3-2 decision overruled Lutheran Heritage, and explained that it would “no longer find unlawful the mere maintenance of facially neutral employment policies, work rules and handbook provisions based on a single inquiry, which made legality turn on whether an employee ‘would reasonably construe’ a rule to prohibit some type of potential [collective bargaining] activity that might (or might not) occur in the future.” Instead, the Board will now determine the lawfulness of a facially neutral workplace policy by balancing (i) the nature and extent of the policy’s potential impact on collective bargaining rights from the perspective of the employee with (ii) the legitimate justifications for the policy’s enactment given the specific facts and circumstances of a case.

After conducting this balancing test, the Board will then classify the challenged policy into one of three categories.

Category 1 Policies are always lawful to maintain. This category includes (i) policies that cannot be reasonably interpreted to have a tendency to interfere with collective bargaining rights, thus obviating the need to balance employees’ rights with employer justifications, and (ii) policies that could be reasonably interpreted to have a tendency to interfere with collective bargaining rights, but the relatively low risk of this interference is always outweighed by the justifications for the rule. According to the Board, examples of Category 1 Policies are those prohibiting employees from using personal electronic devices equipped with cameras when working with confidential information, those requiring employees to develop positive working relationships with coworkers, “and other rules requiring employees to abide by basic standards of civility.”

Category 2 Policies may be lawful to maintain in some cases and unlawful to maintain in others, depending on whether the specific facts of a given case show the policy’s interference with collective bargaining rights to be outweighed by the justification for the policy. The Board did not provide any examples of a Category 2 Policy.

Category 3 Policies are always unlawful to maintain regardless of the circumstances because they can be reasonably interpreted to have a tendency to interfere with collective bargaining rights and this risk of interference can never be outweighed by any legitimate justification. According to the Board, an example of a Category 3 Policy is one that prohibits employees from discussing wages or benefits with each other.

The Board also emphasized that although it may be lawful for an employer to maintain a Category 1 or Category 2 Policy, it remains unlawful for an employer to selectively enforce a Category 1 or Category 2 Policy in a manner than restricts protected collective bargaining activities. For example, a group of employees seeking to unionize cannot be terminated for violating a Category 1 Policy requiring harmony and inclusion in the workplace because although this policy is lawful, the effect of this application is not.

In support of its decision to overrule Lutheran Heritage, the Board explained “[t]hough well-intentioned, the Lutheran Heritage standard prevents the [B]oard from giving meaningful consideration to the real-world ‘complexities’ associated with many employment policies, work rules and handbook provisions,” which is contrary to Supreme Court precedent, the Board’s earlier case law, the NLRA, and “the Board’s responsibility to promote certainty, predictability and stability.” “Moreover, Lutheran Heritage produced rampant confusion for employers, employees and unions,” because neither the Board nor the courts have been able to agree on a consistent and predictable way to apply it.

The Board’s new standard will be applied to all currently pending and future cases.

Takeaway for Employers

This decision eliminates much of the uncertainty and overreach of Lutheran Heritage. Employers now have greater flexibility to adopt workplace civility policies with less risk of the policies being found to violate the NLRA. Employers should, however, ensure that civility policies are not enforced in a way that interferes with employees’ protected collective bargaining rights. Employers should also exercise caution when adopting workplace policies outside of the civility context, as the Category 1 presumption of lawfulness may not apply. Thus, employers need to be prepared to articulate legitimate reasons for adopting such a policy in the event of a challenge.
Given the Board’s stated commitment to providing more clarity regarding the lawfulness of facially neutral workplace policies, future decisions applying this new standard should establish a more firm understanding of permissible workplace policies and the boundaries of each category.

***

If you have any questions regarding the Board’s decision in Boeing Company, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On December 15, 2017, the National Labor Relations Board (the “Board”) issued PCC Structurals, Inc. & International Association of Machinists & Aerospace Workers, Case 19-RC-202188 (“PCC Structurals”), which overturned Specialty Healthcare & Rehabilitation Center of Mobile, 357 NLRB 934 (2011) (“Specialty Healthcare”), an Obama-era decision that enabled employees to form so-called “micro-bargaining units.” Specialty Healthcare had made it very difficult for employers to successfully challenge the appropriateness of a proposed bargaining unit.

Under the National Labor Relations Act, employers are only obligated to collectively bargain with appropriate bargaining units. A proposed bargaining unit may be inappropriate if it is underinclusive. Before Specialty Healthcare was decided in 2011, the Board evaluated the appropriateness of a proposed bargaining unit challenged as underinclusive by assessing whether the traditional community-of-interest factors showed the interests the employees included the proposed unit to be sufficiently distinct from those outside of the proposed unit. The traditional community-of-interest factors include whether the employees comprising the two groups (i) are organized into separate departments; (ii) have distinct skills and training; (iii) have distinct job functions and perform distinct work; (iv) are functionally integrated with the other employees; (v) have frequent contact with other employees; (vi) interchange with other employees; (vii) have distinct terms and conditions of employment; and (viii) are separately supervised. Under the traditional standard, the Board focused on how these factors demonstrated differences between the collective-bargaining interests of each group.

The Board’s decision in Specialty Healthcare in 2011 changed the standard used to assess the appropriateness of a proposed bargaining unit challenged as underinclusive by shifting the Board’s focus to similarities between the interests of the two groups. Under Specialty Healthcare, a proposed bargaining unit was appropriate if it was comprised of a readily identifiable group of employees that shared a community of interest among themselves, regardless of the interests of the excluded employees, unless the employer could show the two groups of employees shared an “overwhelming” community of interest based on the traditional community-of-interest factors. Showing this overwhelming community of interest proved to be a very heavy burden on employers. To show an overwhelming community of interest, an employer was usually required to show the employees in the two groups worked in the same department; had the same skills, training, and job functions; performed the same work under the same terms and conditions of employment; were functionally integrated with each other; had very frequent contact with each other; interchanged across proposed-unit lines; and were jointly supervised. Employers were rarely able to make this showing, resulting in the approval of the micro-units sought by unions.

In PCC Structurals, the Board rejected the level of deference afforded to the union under Specialty Healthcare as inconsistent with its statutory obligations and announced it would once again evaluate the appropriateness of a proposed bargaining unit under the traditional community of interest standard, without considering whether the two groups of employees shared an overwhelming community of interest. The Board explained that there were several policy reasons to overrule Specialty Healthcare and return to the traditional standard that had been applied by the Board throughout most of its history. In returning to this traditional standard, the Board stated that it intends to take a more active role in determining the appropriateness of a proposed bargaining unit than that permitted under Specialty Healthcare.

Takeaway for Employers

By reducing both the level of deference afforded to unions and the burden on placed on employers seeking to challenge a proposed bargaining unit as inappropriate, this decision limits employees’ ability and incentive to form micro-units. Thus, unions will now have to organize on a broader basis in order to be found appropriate, especially given the Board’s stated commitment to taking a more active role in appropriateness determinations.

***

If you have any questions regarding the Board’s decision in PCC Structurals, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On December 14, 2017, in Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017), the National Labor Relations Board, in a 3-2 party-line vote, rejected the joint-employer standard adopted in Browning-Ferris Industries, 362 NLRB No. 186 (2015). By overruling Browning-Ferris, the Board returned to its well-established and longstanding “direct and immediate control standard” used prior to 2015. The Hy-Band decision is one of several major reversals of Obama-era rulings issued in the last week of Board Chairman Philip Miscimarra’s term which ended on December 16, 2017.

Browning-Ferris eliminated the long standing requirement that a putative employer exercise direct and immediate control over the putative employees in order to be found a joint-employer and instead focused on whether the putative employer retained authority to “share or codetermine those matters governing the essential terms and conditions of employment.”

In returning to the “direct and immediate control standard,” the Board held that a finding of joint-employer status will once again require “proof that putative joint-employer entities have exercised joint control over essential employment terms (rather than merely having ‘reserved’ the right to exercise control), the control must be ‘direct and immediate’ (rather than indirect), and joint-employer status will not result from control that is ‘limited and routine.'”

By overruling Browning-Ferris, the Board held that it is returning its treatment of join-employer status to a standard consistent with common-law, and numerous federal and state court decisions. Writing for the majority, Chairman Miscimarra wrote, “We return today to a standard that has served labor law and collective bargaining well, a standard that is understandable and rooted in the real world. It recognizes joint employer status in circumstances that make sense and would foster stable bargaining relationships.”

Key Takeaways For Employers:

  • Joint-employer status once again requires proof that: (1) the alleged joint-employer entities have actually exercised joint control over essential employment terms (rather than merely having “reserved” the right to exercise control); and (2) the control must be “direct and immediate” (rather than “indirect”).
  • Joint-employer status will not result from control that is “limited and routine.”
  • By applying the well-established “direct and immediate control standard” it is less likely that the Board will find joint-employer status for employees of a company’s subcontractors or franchisees.
  • Hy-Brand will apply to all future and pending cases before the Board.

***

Please contact us if you have any questions regarding the Board’s decision or for guidance on what steps may be taken to minimize the potential for being found a joint-employer.
212-682-0020 | PutneyLaw.com.

On November 22, 2017, the New York State Department of Labor (“NYSDOL”) released proposed regulations (“Proposed Regulations”) intended to develop the New York Labor Law’s provisions relating to call-in pay. The Proposed Regulations address schedule predictability for employees, particularly those in the service sector. The Proposed Regulations are subject to a 45-day comment period.

 

Key Provisions

The Proposed Regulations would revise and expand employer obligations relating to call-in pay in New York State:

  • Reporting to work: An employee who by request or permission of the employer reports for work on any shift must be paid for at least four hours of call-in pay.
  • Unscheduled shift: An employee who by request or permission of the employer reports to work for any shift for hours that were not scheduled at least 14 days in advance must be paid an additional two hours of call-in pay.
  • Cancelled Shift: An employee whose shift is cancelled within 72 hours of the scheduled start of such shift must be paid for at least four hours of call-in pay.
  • On-Call: An employee who by request or permission of the employer is required to be available to report to work for any shift shall be paid for at least four hours of call-in pay.
  • Call for schedule: An employee who by request or permission of the employer is required to be in contact with the employer within 72 hours of the start of the shift to confirm whether to report to work shall be paid for at least four hours of call-in pay.

 

Applicability

The Proposed Regulations cover employees subject to New York’s Miscellaneous Wage Order (“Wage Order”), meaning the regulations do not apply to executive, administrative, or professional employees who meet certain requirements in terms of their duties and pay. There are some notable exceptions:

  • Employees covered by a valid collective bargaining agreement expressly providing for call-in pay;
  • Paragraphs 2 through 5 under the “Key Provisions” section above do not apply to employees during work weeks when their weekly wages exceed 40 times the applicable basic hourly minimum wage rate.
  • Paragraph 2 (“unscheduled shift”) under the “Key Provisions” section above does not apply to any new employee during the first two weeks of employment or to any regularly scheduled employee who volunteers to cover: (i) a new and additional shift during the first two weeks that the shift is worked; or (ii) a shift that had been scheduled at least fourteen days in advance to be worked by another employee.
  • Paragraph 3 (“cancelled shift”) under the “Key Provisions” section above does not apply when an employer cancels a shift at the employee’s request for time off, or when operations at the workplace cannot begin or continue due to an act of God or other cause not within the employer’s control.

 

Calculating Call-In Pay

For hours of call-in pay, payments are calculated at the basic minimum hourly wage rate. Employers must of course make payments to employees at the employee’s regular or overtime rate of pay, whichever is applicable, for all time actually worked. Employers may not make deductions for call-in pay. Likewise, call-in pay cannot be offset by the required use of leave time, or by payments in excess of those required under the Wage Order.
The four hours of call-in pay for reporting to work and for cancelled shifts may be reduced to the lesser number of hours that the employee normally works for that shift, as long as the employee’s total hours worked (or scheduled to work) for that shift do not change from week to week. For example, an employee whose regular shift is only two hours will only receive two hours of call-in pay.

 

Impact on New York City’s Fair Workweek Law

New York City recently passed its “Fair Workweek Law,” which went into effect on November 26, 2017. For further information on the “Fair Workweek” legislation and its effect on retail and fast food employers, see our previous alerts:

The NYSDOL has commented its belief that the Proposed Regulations would preempt the Fair Workweek Law. However, whether the Proposed Regulations would in fact preempt the Fair Workweek law, and whether the NYSDOL would formally support that position, remains an open question. A definitive answer on this issue will not be expected until after the 45-day comment period for the Proposed Regulations.

 

Takeaway for Employers

In anticipation of the Proposed Regulations, employers should review their scheduling practices and call-in procedures to make sure that employees are scheduled at least 14 days ahead of time. In addition, retail and fast food employers covered by the New York City Fair Workweek Law should remain compliant with the Fair Workweek Law until there is a definitive response on whether the Proposed Regulations preempt the law.

An employer who wishes to submit a comment on the Proposed Regulations may do so by emailing hearing@labor.ny.gov.

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If you have any questions regarding the Proposed Regulations and employee scheduling, please do not hesitate to contact us. We will keep you appraised of changes and clarifications to the Proposed Regulations.
212-682-0020 | PutneyLaw.com.

On November 26, 2017, New York City’s “Fair Workweek” package of bills will take effect. The legislation prohibits retail and fast food employers from engaging in certain scheduling practices that may limit predictability as to employees’ work schedules and compensation. For further information on the “Fair Workweek” legislation and its effect on retail and fast food employers, see our June 2, 2017 alert.

Key Provisions for Retail Employers

The new law defines “retail employer” to mean any employer that employs a retail employee at a retail business. A “retail business” refers to any entity with 20 or more employees that is engaged primarily in the sale of consumer goods at one or more stores with in New York City. “Consumer goods” are defined as products that are primarily for person, household, or family purposes, including but not limited to appliances, clothing, electronics, groceries and household items.

Under the legislation, retail employers in New York City will be banned from engaging in “on-call” scheduling. “On-call’ scheduling is the practice of requiring an employee to be available for work, to contact the employer, or to wait to be contacted by the employer in order to determine whether employee must report to work. The legislation will also require retail employers to give employees advance notice of their work schedules. Retail employers will be prohibited from adding, changing or cancelling work shifts within 72 hours of the start of an employee’s shift, subject to limited exceptions. Retail employers with valid collective bargaining agreements in place on November 26, 2017 will be subject to the law after the agreement’s expiration date.

Takeaway for Employers

New York City retail and fast food employers should prepare for the November 26, 2017 implementation date by developing their scheduling and recordkeeping practices to ensure that schedules are created and distributed in conformance with the new laws. Affected employers should also make sure that managers and other employees involved in the scheduling process are trained on the requirements of the laws.

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Please do not hesitate to contact us with any questions on the “Fair Workweek” laws.
212-682-0020 | PutneyLaw.com.

On October 23, 2017, New York State Governor Andrew Cuomo signed legislation, amending the “Clean Indoor Air Act” (the “Act”) the use of electronic cigarettes, or “vaping,” in any location in New York State where cigarettes and other traditional tobacco products are already prohibited by law, such as places of employment, restaurants and the grounds of hospitals and residential health care facilities. (For more information on the Act’s impact on hospitals and residential health care facilities, see our October 29, 2013 alert: http://putneylaw.com/cu_102913.html).

 

Takeaway for Employers

The vaping ban will go into effect on November 22, 2017. Prior to the effective date, employers should revise their policies to prohibit the use of electronic cigarettes in addition to other tobacco products in the workplace. Furthermore, although not a requirement under the amended Act, we encourage employers to add “No Vaping” to all “No Smoking” signs or notices. We note that the use of the current international “No Smoking” symbol in all regulated areas will suffice to provide notice of banning electronic cigarettes.

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Please do not hesitate to contact us with any questions on the Clean Indoor Air Act.
212-682-0020 | PutneyLaw.com.

On October 17, 2017, the New York State Workers’ Compensation Board (“WCB”) issued Paid Family Leave (“PFL”) claim forms for use by eligible employees starting January 1, 2018. As of that date, the PFL will allow eligible employees to receive paid leave in certain circumstances, including bonding with a new child, caring for a family member with a serious health condition, or relieving family pressure when someone is called to active military service.

 

Paid Family Leave Forms

The WCB released separate forms for each type of leave as well as an opt-out form:

Paid Family Leave

For more information on Paid Family Leave Law, see our previous alerts:

 

Takeaway for Employers

Pursuant to the PFLL, private employers must provide paid family leave benefits to their employees through a paid family leave insurance policy or self-insurance. The premiums for these policies will be funded by employee payroll deductions. Although the forms are now available, and employers could have begun making deductions as early as July 1, 2017, employees seeking leave may only do so effective January 1, 2018.

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If you have any questions about New York’s Paid Family Leave Law, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On October 31, 2017, New York City’s salary history inquiry law will take effect. The law prohibits private employers of all sizes in New York City from requesting or relying on a job applicant’s salary history in order to determine compensation. The law will also prohibit an employer who already is aware of the applicant’s salary history from relying upon such knowledge when determining salary and benefits. For further information on the salary history inquiry law, see our previous alert here.

Key Provisions

Under the law, employers in New York City will be banned from requesting a job applicant’s current salary level and benefits, as well as their salary and history and past benefits. Employers will also be barred from relying upon such information in making decisions on compensation during the hiring process.

Employers are forbidden from questioning the job applicant him/herself, the applicant’s current or former employer, or from searching public records for such information. However, employers may make statements about the anticipated salary, salary range, bonus, and benefits for a position, and may inquire about an applicants’ expectations or requirements for such compensation.

The law does not apply to positions located outside of New York City. However, the NYC Commission on Human Rights (“Commission”) has indicated that it will “likely” seek to assert jurisdiction over non-New York City positions if the interview takes place in New York City.

Takeaway for Employers

New York Employers should prepare for the October 31, 2017 implementation date by:

  • Deleting questions about salary history from employment applications, background check forms, and other documents used throughout the hiring process;
  • Coordinating with third-party background-checking vendors to ensure that their practices and relevant documents contain no inquiry for salary history;
  • Refraining from seeking salary history during the background check or reference check process, unless the job applicant has voluntarily offered his or her salary history;
  • Ensuring that human resources staff other employees or agents involved in the interviewing or recruitment process are trained on the requirements of the law;
  • Making sure that any locations outside of New York City which do not conform to the new law do not inadvertently continue to ask for or store salary history for New York City-based applicants.

* * *

The Commission has created a website which serves as a resource to guide employers and employees. The website has been and will continue to be updated as further clarifications in the law are needed. It can be found here. We will keep you appraised of changes and clarifications to the law.
212-682-0020 | PutneyLaw.com.

On August 29, 2017, the U.S. Office of Management and Budget (“OMB”) informed the Equal Employment Opportunity Commission (“EEOC)” that it is implementing an immediate stay and initiating a review of the effectiveness of the pay data collection aspects of the EEOC’s revised Equal Employer Information Report (“EEO-1 Report”).

The revised EEO-1 Reports would have required federal contractors and other large employers with more than 100 workers to provide aggregate data on pay ranges and hours worked in addition to already existing requirements to provide information on employee race, ethnicity, and sex by job category. For further information on the now-stayed EEO-1 Reports, see our alerts: http://www.putneylaw.com/cu_071316b.html and http://www.putneylaw.com/cu_012916.html.

Takeaways For Employers With EEO-1 Reporting Obligations

  • OMB’s decision does not suspend the requirement that covered employers file EEO-1 Reports which include their employees’ race, ethnicity, and sex by job category by March 31, 2018.
  • For EEO-1 reports due by March 31, 2018, employers must use employment data from any pay period between October 1 and December 31, 2017, instead of the prior window of July 1 through September 30, 2017.
  • Employers should consider suspending plans to collect pay and hours worked data by race, ethnicity, and sex, but should continue to monitor for updates with respect to OMB’s review.

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If you have any questions, please do not hesitate to contact us. We will apprise you of any developments from the OMB’s review.
212-682-0020 | PutneyLaw.com.

On August 30, 2017, the New York State Department of Taxation and Finance issued a guidance (the “Tax Guidance”) on the tax implications of New York’s Paid Family Leave Law (“PFLL”). The key provisions of the Tax Guidance instruct as follows:

  • Employers should deduct contributions from employees’ after-tax wages.
  • Employers should report employee contributions on Form W-2, using Box 14 – “State Disability Insurance Taxes Withheld.”
  • PFLL Benefits paid to employees will be taxable non-wage income that must be included in federal gross income.
  • Taxes will not automatically be withheld from benefits; employees can request voluntary tax withholding.
  • Benefits should be reported by the State Insurance Fund on Form 1099-G and by all other payers on Form 1099-MISC.

For more information regarding the PFLL, see our previous alerts:

 

Takeaway for Employers

While the Tax Guidance is a useful tool, we remind employers to consult with their tax advisors on the tax treatment of PFLL contributions. We further remind employers that although PFLL leave is not available until January 1, 2018, they may begin making deductions from employees immediately to help fund the cost of purchasing PFLL insurance which must be purchased prior to that date.

As we have previously advised, employers should review all applicable leave policies in anticipation of the January 1, 2018 effective date, such as FMLA, NYC Earned Sick Leave, disability leave, sick leave, military leave, and maternity/paternity leave policies to help ensure coordination with the PFLL. Employers should also consider adopting a system to appropriately track PFLL leave, particularly when PFLL overlaps with other required leave or is taken on an intermittent basis. Employers should also determine whether and when they will make deductions from employees, and, if so, should coordinate with their payroll department or outside payroll vendor.

* * *

If you have any questions about New York’s Paid Family Leave Law, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On August 5, 2017, final rules (“Rules”) interpreting New York City’s Fair Chance Act (“FCA”), commonly known as the “Ban the Box” law, will take effect. The FCA itself has been in effect since October of 2015. The FCA amended the New York City Human Rights Law’s provisions regarding discrimination on the basis of criminal history against job applicants and employees. It also addressed discrimination against applicants for licenses, registrations, and permits. Specifically, the FCA prohibits employers from inquiring about criminal convictions until after the applicant has been offered a job. For more information regarding the FCA, see our previous alert here.

Key Provisions

“Per Se Violations”

The Rules establish certain definitions and procedures applying to the FCA. The Rules define a new category of “per se violations” to include “an action or inaction that, standing alone, without reference to additional facts, constitutes a violation of [the FCA], regardless of whether any adverse employment action was taken or any actual injury was incurred.” For example, “per se violations” include:

  • Referring to criminal convictions or criminal background checks in job postings, advertisements, or other publications. This includes, but is not limited to, phrases such as “no felonies,” “background check required,” and “must have clean record.”
  • Using applications for employment that require applicants to either grant the employer permission to run a background check, or provide information regarding criminal history prior to a conditional offer.
  • Making any statement or inquiry regarding the job applicant’s pending arrest or criminal conviction before a conditional offer of employment is extended.
  • Using, within New York City, a boilerplate form for a job application intended to be used across multiple other jurisdictions, where such form requests or refers to the applicant’s criminal history. Such a practice would be a per se violation even if the form states that applicants should not answer specific questions if applying for a position subject to the New York City Human Rights Law.
  • Failing to comply with the requirements of the Human Rights Law, when applicable, to: (a) provide the applicant a written copy of any inquiry an employer conducted into the applicant’s criminal history; (b) to share with the applicant a written copy of the employer’s Article 23-A analysis (see our prior alert for a discussion of the Article 23-A analysis); or (c) to hold the prospective position open for at least three (3) business days from the date of the applicant’s receipt of both the inquiry and the analysis.
  • Requiring applicants or employees to disclose an arrest that, at the time of disclosure, has resulted in a non-conviction. A non-conviction includes termination of any arrest or criminal accusation, not currently pending, that was concluded by termination in favor of the individual, adjudication as a youthful offender, conviction of a non-criminal offense that has been sealed, or certain sealed convictions.

 

If the NYC Commission concludes that there is a per se violation, it may assess fines under the “Early Resolution Process.” Under this process, the employer admits liability and pays a fine based on its size and the number of its previous violations. Employer fines would conform to the following schedule:

Employer Size (at the time of the violation)

First Violation

Second Violation (within 3 years of the resolution date of the first violation)

4-9 employees

$500.00

$1,000.00

10-20 employees

$1000.00

$5,000.00

21-50 employees

$3,500.00

$10,000.00

Withdrawing Conditional Offers of Employment or Taking Adverse Employment Action
The Rules provide further guidance regarding the process by which employers may withdraw conditional offers of employment based on information learned from an applicant or employee’s criminal conviction history report. The employer must:

  • Provide a written copy of any inquiry made to collect information about a criminal history to the applicant, including but not limited to consumer reporting agency reports, internet searches, public records, written summaries of oral conversations.
  • Provide a written copy of the Article 23-A analysis to the applicant. Employers need not use the form drafted by the Commission for this purpose, but the material substance must not be changed. The Commission’s sample form may be found at: http://www1.nyc.gov/assets/cchr/downloads/pdf/FairChance_Form23-A_distributed.pdf.
  • Inform applicants that they will be given a reasonable time (no less than three business days) to respond to the employer’s concerns. The employer “must affirmatively request information concerning clarification, rehabilitation, or good conduct while engaging in the Article 23-A analysis. The Rules also provide the protocol for the employer’s duty to hold the position open while the applicant gathers this information. Because the three-day “reasonable time” period only begins once the applicant receives both the inquiry and notice of the inquiry, the “Legal Enforcement Guidance” set forth by the NYC Commission on Human Rights recommends that employers confirm receipt, “either by disclosing the information in person, electronically, or by registered mail. Such method of communication must be mutually agreed on in advance by the applicant and employer.” Thus, employers should advise applicants in the employment application itself that communications may be made via e-mail.
  • Consider any additional information provided by the applicant during this period.

 

Inadvertent Discovery or Voluntary Disclosure of Criminal Conviction History
An employer is not automatically liable where the employer, an employment agency, or an agent thereof inadvertently discovers an applicant’s criminal history prior to a conditional offer of employment, or where the applicant provides such information without solicitation. However, liability is created where the employer, employment agency, or agent thereof uses such discovery or disclosure to “further explore an applicant’s criminal history before having made a conditional offer or uses the information in determining whether to make a conditional offer.”

 

Internet Searches
Employers, employment agencies, or agents thereof cannot search for terms relating to criminal history, such as “arrest,” “mugshot,” “warrant,” “criminal,” “conviction,” “jail,” or “prison,” nor can they search websites that purport to provide information regarding arrests, warrants, convictions, or incarceration information for the purpose of obtaining criminal history.

 

Applicant’s Intentional Omission
The Rules provide that the employer, employment agency, or agent thereof “may revoke the conditional offer or take an adverse employment action” where a background check reveals that an applicant “intentionally failed to answer a legitimate question about their conviction history.”

 

Takeaway for Employers

Covered employers should review and revise their hiring practices, including but not limited to their interview questions, application forms, and background check procedures, to ensure that they comply with the FCA.

In order to expedite the application process so that the employer will not have to hold a position open for longer than necessary, employers should inform the applicant in the application form that by submitting the application, the applicant consents to receipt of communications via e-mail.
We remind employers that New York State Law also provides certain limitations on an employer’s right to consider criminal convictions in employment decisions.  Further, the U.S. Equal Employment Opportunity Commission has published guidance that recommends “banning the box” from applications due to the potential for disparate impact under Title VII.  (See our Client Alert here).  To further complicate the recruitment and hiring process, effective October 31, 2017, New York City employers will be prohibited from inquiring about or relying on a prospective employee’s salary history during the hiring process. Accordingly, employers, particularly those that operate in multiple jurisdictions, must make sure they are in compliance with all applicable, and ever-evolving, laws on recruitment, hiring, background checks, and criminal records.

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If you have any questions regarding New York City’s Fair Chance Act, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On July 19, 2017 the New York Workers’ Compensation Board (“WCB”) adopted final regulations for the New York Paid Family Leave Law (“PFLL”), which took effect immediately. The final regulations follow a 30-day period of comment and review, and make several changes to the previously proposed revised regulations issued in May 2017 (which revised the original regulations issued on February 22, 2017). Starting January 1, 2018, the PFLL will allow eligible employees to receive paid leave in certain circumstances, including bonding with a new child, caring for a family member with a serious health condition, or relieving family pressure when someone is called to active military service. For more information regarding the PFLL, see our alerts: http://putneylaw.com/cu_031017.html and http://www.putneylaw.com/cu_040516.html.

 

Key Provisions

Wage Deductions and Notification

The final regulations confirm that employers may begin carrying out wage deductions as of July 1, 2017. Importantly, retroactive deductions are generally not permissible. Thus, to the extent employees have already been paid for work performed in July, employers can begin making deductions in the next payroll, but cannot retroactively make “catch-up” deductions for the early July work. Employers do not need to notify employees of the deduction, but may choose to do so to avoid confusion.

Eligibility

The regulations were amended to clarify employee eligibility requirements. Beginning January 1, 2018, an employee who is regularly scheduled to work at least 20 hours per week is eligible to take PFL after 26 consecutive weeks of employment. The WCB noted that those consecutive weeks may be tolled where jobs have built-in breaks (i.e., a professor on semester break), such that those employees will not restart their period of employment for the purposes of eligibility for PFL.

 

Waiver

Employers are required to offer a PFL waiver to eligible employees whose regular employment will not meet the minimum eligibility criteria under the PFLL. The employee retains sole discretion as to whether or not to exercise the waiver. The WCB is expected to issue a sample waiver form.

PFLL and the New York City Earned Sick Time Act

The final regulations clarify the relationship between the PFLL and the New York City Earned Sick Time Act. The WCB states that the Workers’ Compensation Law permits employees to use accrued but unused vacation and personal leave to receive full salary during a period of PFL. The final regulations expressly permit employers to offer, and employees to elect, to use accruals of other paid time off, including paid time off under the NYC Earned Sick Time Act, to receive full salary during PFL. The WCB affirms that if the rules governing an employee’s use of sick time allow them to use the accrued time off to care for a seriously sick family member – as is required for employees covered by the New York City Earned Sick Time Act – such time falls within the PFLL’s regulations and an employee may elect to use such paid sick time concurrently with PFL and receive 100% of his or her salary during that period.

 

Incidental In/Out of State Work

The WCB confirms that employees working in New York State, with only incidental work outside the state, are covered by the PFLL. Conversely, employees working in another state who only incidentally work in New York are not covered. Service is deemed localized in New York if it is performed entirely within the state, or is performed both within and without the state, but the service performed out of state is incidental to the service within the state, or is temporary or transitory in nature, or consists of isolated transactions.

Takeaway for Employers

The final regulations for the PFLL take effect immediately. Employers may, but are not required to, make PFLL deductions from employees at rates established by the WCB. Although PFLL leave is not available until January 1, 2018, employers may immediately begin making employee deductions in order to help fund the cost of purchasing PFLL insurance which must be purchased prior to January 1, 2018.

In anticipation of the January 1, 2018 effective date, employers should review all applicable leave policies, such as FMLA, NYC Earned Sick Leave, disability leave, sick leave, military leave, and maternity/paternity leave policies to help ensure coordination with the PFLL. Employers should also consider adopting a system to appropriately track PFLL leave, particularly when PFLL overlaps with other required leave. Employers should also determine whether and when they will make deductions from employees, and, if so, should coordinate with their payroll department or outside payroll vendor. We have included a list of frequently asked questions under the PFLL for your convenience.

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If you have any questions New York’s Paid Family Leave Law, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.

On June 12, 2017, the United States Department of Labor (the “DOL”) issued a Notice of Proposed Rulemaking to rescind recent changes to the so-called “Persuader Rule.” The revised rule would have required employers, attorneys and consultants to disclose all arrangements for legal services related to persuading employees to exercise their rights to union representation and collective bargaining, even when the attorneys and consultants limited their activities to advising employers and revising communications to be made to employees. The proposal to rescind comes as no surprise in the wake of the change in Presidential administrations as well as National Federation of Independent Business v. Perez, Case No. 16-cv-066 (N.D. Tex. November 16, 2016), in which the United States District Court for the Northern District of Texas permanently enjoined the DOL from enforcing the Persuader Rule. For more information on the Persuader Rule and the injunction thereof, please see our client alerts dated March 30, 2016, June 27, 2016, and November 18, 2016 at http://putneylaw.com/cu_033016.html, http://putneylaw.com/cu_062716.html and http://www.putneylaw.com/cu_111816.html.

 

The DOL proposed to rescind the Persuader Rule to address the various concerns raised by courts and regulated entities. The courts made clear that the Persuader Rule needed a clearer explanation of the DOL’s statutory authority to promulgate any rule requiring the disclosure of previously exempt activities. In light of concerns about the potentially chilling effect of the Persuader Rule on employers’ ability to obtain legal counsel and representation, the DOL also determined that it had not provided an adequately detailed analysis of how the disclosure of previously exempt activities will affect the furnishing and receiving of legal services in the regulated community. The DOL further determined that rescission was appropriate due to the DOL’s limited resources as the reporting requirements of the Persuader Rule would have increased the DOL’s investigation responsibilities fivefold.

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Although the DOL is accepting comments until August 11, 2017, we expect that the Persuader Rule will be rescinded shortly thereafter. We will continue to provide updates in the event of any developments. Please do not hesitate to contact us with any questions on the rescission of the Persuader Rule.
212-682-0020 | PutneyLaw.com.

The United States Supreme Court unanimously ruled that the term “church plan” in the Employee Retirement Income Security Act (“ERISA”) includes a plan maintained by a church associated organization whose chief purpose is to fund or administer a benefits plan for employees of the church or church-affiliated nonprofit institutions. Advocate Health Care et al. v. Stapleton, et al., Docket No. 16-74 (June 5, 2017). As a result, all such plans including those of church related hospitals and healthcare institutions, whether established by a church or not, are exempt from the reporting and funding obligations of ERISA. The ruling is welcome news to church-related entities with pension plans who have faced massive litigation on the issue. This ruling will bring that litigation to an end.

ERISA is comprehensive federal legislation governing the administration and funding requirements of pension plans. In 1980, Congress amended the definition of church plan in ERISA such that a church plan was defined as a plan established and maintained by a church. (emphasis added.) In the ensuing decades, federal agencies including the IRS, the PBGC and the DOL all interpreted the statute to include plans that were maintained by church-affiliated organizations even if the plans had not been established by a church. In recent years, however federal courts including three appellate courts rejected this expansive definition of the term “church plan” in favor of a definition that limited the church plan exemption only to plans established and maintained by churches. The Supreme Court’s decision expressly reverses these rulings.

The cases before the Court involved three church-affiliated nonprofit institutions that ran hospitals. Each of the hospitals offered their employees defined-benefit pension plans but the plans had not been established by churches. Instead, the plans has been established by the hospitals themselves. The hospitals were sued for failing to satisfy the reporting and funding obligations of ERISA. The hospitals defended the claims, asserting that despite the fact that their plans had not been established by a church, they were entitled to the church plan exemption. The federal courts, including the Courts of Appeal for the Third, Sixth and Ninth Circuit rejected the hospitals’ interpretation of ERISA. The hospitals petitioned for Supreme Court review, which was granted in 2016. The Supreme Court sided with the hospitals and other church-affiliated entities. The Supreme Court’s analysis was textual and logical:

Premise 1: A plan established and maintained by a church is an exempt church plan.

Premise 2: A plan established and maintained by a church includes a plan maintained by a principal purpose organization.

Deduction: A plan maintained by a principal-purpose organization is an exempt church plan.

Slip Opinion at p. 7.

The Court’s ruling is welcome news to church-affiliated entities with pension plans. If you should have any questions concerning the decision or its impact on your plan, please do not hesitate to contact us.
212-682-0020 | PutneyLaw.com.