Contributed By Barnes & Thornburg LLP
The COVID-19 pandemic will likely change workplaces in Michigan permanently. The highly contagious nature of SARS-CoV-2 (the new coronavirus that causes COVID-19) has significantly affected Michigan employers, employees, their workplaces, and their families.
In addition to the federal response to the COVID-19 pandemic, Michigan’s governor declared a State of Emergency across the state and has issued executive orders significantly impacting the employment of individuals within the state. As of this writing, any business that requires employees to leave their home to work is subject to the required workplace safeguards included in Executive Order 2020-161, which can vary by industry sector and type of employer. Under Executive Order 2020-153, individuals are also required to wear masks and practice social distancing when leaving their home. Executive Order 2020-166 prohibits employers from discharging, disciplining, or retaliating against employees who elect to stay home if they or their close contacts have COVID-19 or symptoms. In Executive Directive No 2020-8, the governor directed the state’s various departments and agencies to ensure that the enforcement of these orders is given the highest priority, including treating the executive orders as fully executed regulations. Michigan employers will want to ensure they also check for other applicable orders or directives from other agencies within the state.
Many Michigan employers have faced downturns, closures, and reductions in force; others have struggled to keep up with consumer demand and to overcome worker shortages. Employers also have:
For the foreseeable future, the workplace will remain changed as employers seek to protect their employee populations and limit the risk that their workplaces become sites of community spread.
COVID-19 has not only caused employers to accept a temporarily remote workforce, it has also led some businesses to adopt remote work as the norm through 2020 and possibly beyond. After weighing the relative financial, environmental, and employee flexibility issues attendant to adopting a permanent remote work plan, employers will find they still need to define and enforce reasonable limits on work hours, performance expectations, and “workplace” safety rules, as well as ensure remote employees remain subject to company policies, develop effective hiring and onboarding practices, and define and bolster communication expectations. Conversely, employers will be challenged to wean employees back to on-site work and must, at least while the pandemic continues, work to define why in-person work is required. Additionally, employees with protected disabilities are now more likely to request remote work as a reasonable accommodation, requiring employers to engage the required interactive process and, if supportable, justify why in-person work is required.
The impact of the COVID-19 pandemic is also likely to have long-term implications on safety and health. In response to the pandemic, most employers developed or updated existing infection control policies and sick leave policies, and evaluated additional protective measures for their workforces, including physical barriers, additional spacing, and staggered shifts. Obviously, one size does not fit all with respect to reconfiguring workplaces, and employers must remain in compliance with federal and state laws protecting older workers and workers with disabilities, and other employment-related laws.
The “Black Lives Matter”, “Me Too”, and other social justice movements have forced global entities, including those operating in the USA, to take a hard look at anti-discrimination and anti-harassment policies, and commitment to social justice and diversity. Michigan employers are re-examining how they manage their workforces and how they interact with their communities. This includes following a wider cultural trend in shifting the focus from simply preventing illegal conduct to adopting a proactive approach in promoting a more respectful and inclusive work environment.
Training focused on legal requirements, civility, respect, and bias (including unconscious bias), and offering multiple avenues to bring concerns forward, coupled with an appropriate response to those concerns, are part of this trend. Adding to this trend, Michigan’s governor issued an executive order recognising racial inequality as a public health crisis and executive directives mandating implicit bias training for all healthcare workers and state employees. Global employers that do not make it clear that their organizations actively oppose discrimination, racism, and sexism risk diminishing their reputations and may seriously damage their ability to recruit, hire, and maintain a diverse workforce.
The pervasiveness of social media also brings scrutiny and rapid societal response, implicating companies and employees who can be tied to them. Faced with such scrutiny, some employers may consider whether an employee’s public conduct may require separation, particularly when the conduct reflects racism or sexism. Michigan law does not prevent consideration of an employee’s otherwise public conduct as an employment consideration.
An October 26, 2019 article published by The Wall Street Journal specifically found that companies with a diverse and inclusive culture had a competitive edge on their peers, had better operating results, and outperformed the least diverse firms in their market sectors. Respondents also noted that diverse workforces fuel innovation, which in turn led to better products and services, which in turn led to higher growth and sales. Given that technological disruption has become the norm, employers with highly innovative workforces are more likely to thrive.
Finally, multiple studies confirm that Generation Z, now entering the workforce, will be the most diverse workforce of any previous generation, and is on track to be the most well-educated generation as well. Global employers that fail to embrace diversity risk losing the recruitment battles for these workers.
The law has struggled to keep up with rapid advances across industries. Before the COVID-19 pandemic, employers had already warmed to the “gig” economy approach, sometimes relying heavily on transient, temporary, and short-stint workers, many focused on particular projects or ventures. COVID-19 has pushed that emphasis as consumers make demands on gig-heavy economies, and individuals have trouble maintaining traditional employment.
With the steady increase in the gig economy, employers must understand the challenges and risks of contracting for services and promoting contracted services. While the economy has drastically changed, applicable US law has not.
Employers (or entities contracting for services or personnel) must consider the costs, savings, and potential risks related to particular choices in this framework. Misclassifying workers as “independent contractors” who should be classified as “employees” leads to the following potential legal issues: collective bargaining, taxes, wage and hour compliance, benefits, and anti-discrimination laws. These areas are based on workers having “employee” status. Independent contractors typically have no such protections under federal and most state employment laws.
The question regarding whether a worker or group of workers is properly classified can easily lead to disputes before administrative agencies and state and federal courts. See more detailed information on the independent contractor relationship in 2.1 Defining and Understanding the Relationship.
Most companies prefer to operate union-free for reasons such as avoiding limitations on dealing directly with their employees and minimizing the risk of work stoppages. Union membership has significantly declined in the United States for decades, with private sector union membership hovering around 6.5%. Unions remain strongest on the coasts (eg, New York, California). The South historically has the lowest unionization rate, but many states in the Midwest, including Michigan, have seen union numbers reduced. Between 2018 and 2019, the percentage of union members in Michigan declined from 14.5% to 13.6%.
Michigan is a “Right to Work” state. As a Right to Work state it is unlawful for a collective bargaining agreement in Michigan to require employees to pay union dues.
In 2020, there has been a national uptick in unionization efforts during the COVID-19 pandemic. To the extent workers feel their workplace is unsafe or believe they should receive things such as “hazard pay,” companies may see unions try to exploit those issues to gain entry to the company. In addition, unions are leveraging movements such as Black Lives Matter in labor disputes to garner media coverage and pressure employers to accede to union bargaining demands.
The National Labor Relations Board (NLRB, or "Board") is vested with enforcing the National Labor Relations Act (NLRA), which provides workers with certain rights with respect to unionizing and discussing, protesting, etc their terms and conditions of employment. The NLRB governs private sector labor relations in the United States, and its regulations and administrative decisions apply to all 50 states. Consisting of five members appointed by the president, their views can change from administration to administration. Because the law is national in scope, no specific region, generally speaking, has a “leg up” on another when it comes to US labor law.
The NLRB has yet to weigh in on many pressing issues related to the COVID-19 pandemic. For example, it is not yet clear whether companies have to bargain with unions over their emergency measures undertaken in response to the virus. In addition, it is not clear whether bargaining with unions must be done face-to-face (as is customary) or via videoconference. Protected concerted activity claims related to safety complaints arising from COVID-19 have also seen an uptick. Accordingly, companies looking to start or augment their business in the USA should continue to closely monitor important legal obligations under the NLRA and decisions coming out of the NLRB.
It is important that the parties agree on the terms and conditions at the outset of their relationship, and ensure that the agreement reached is consistent with applicable law.
The default service relationship in the United States is that of employer and employee. Most states, including Michigan, are “at-will” employment jurisdictions, meaning either party (the employer or the employee) can terminate the relationship at any time and without having to provide a reason – provided, of course, that the termination decision is not otherwise prohibited by law (ie, due to discrimination or retaliation). Although Michigan is an employment-at-will jurisdiction, an employer can forfeit its at-will right to terminate an employee by promising employment for a fixed period or stating (including verbally) that employment will only be terminated under certain circumstances, such as for “good cause or reason.” A carefully drafted disclaimer can help avoid these pitfalls.
Employees may also have contracts specifying the terms and conditions of their employment. Such contracts are not required in the United States, but may be warranted depending on the type of employee in question (ie, an executive). Barring a formal written contract, terms defining the relationship are typically relegated to documents such as offer letters, job descriptions, employment policies, or employment handbooks. Even if an employer defaults to the presumptive at-will employment status, individual employment agreements often address confidentiality, intellectual property, plus non-competition and non-solicitation covenants that are enforceable if reasonable in scope and duration – see 4.1 Restrictive Covenants.
Joint employment is not the norm and applies only in limited circumstances, usually in a legal proceeding as a mechanism by which an employee attempts to recover damages against a third party. For a third party to be joint employer, the third party must have exerted significant control over the employee. Factors to consider in determining joint employer status are:
Under the NLRA, the NLRB currently may find two or more entities are joint employers if they are both employers within the meaning of the common law and if they share or codetermine matters governing the essential terms and conditions of employment. The NLRB has changed the standard it uses this context several times over the years, so it is important to keep abreast of all changes on this front.
The importance of control in a relationship extends to the determination of whether a worker is an independent contractor versus an employee. Contracting is very popular in the USA; the number of contractors as a percentage of the workforce has doubled since the 1990s (see GAO-15-168R Contingent Workforce). As contracting has grown in popularity, it has attracted more scrutiny from the courts, lawmakers, and administrative agencies. Accordingly, simply describing a worker as an independent contractor is not sufficient. The law in this area is rapidly evolving and there are no rigid rules for determining whether a person is an independent contractor. Various jurisdictions and administrative agencies in the USA have adopted different tests to determine whether an individual is an independent contractor.
Most of the enforcement activity is at the federal level. The US government will seek unpaid income taxes, unemployment taxes, and overtime, as examples. Misclassified independent contractors can also seek benefits (health insurance and retirement) under the federal Employee Retirement Income Security Act. The federal government, generally, applies a common law control test, exemplified by the six factors used by the US Department of Labor:
At the state level, potential misclassification liabilities include income tax, unemployment, and workers’ compensation. In Michigan, an "economic reality test" has traditionally been applied to determine if an employer/employee versus independent contractor relationship exists. That test focuses primarily on whether the work performed is an integral part of the employer’s business and if the compensation from the employer is their primary income source. Recently, the Michigan unemployment agency adopted the US Internal Revenue Service 20-factor test.
Businesses and workers are often complicit in the objective to characterize the relationship as a non-employment independent contractor – both parties save money. However, governments lose a lot of revenue and critically examine those relationships. Also, if the relationship sours or the worker is injured while working, the independent contractor will often seek employment-related benefits, such as workers’ compensation or unemployment, and the business will have no insurance coverage in place to manage the risk. Best practice, at a minimum, is to be conservative in characterizing workers as independent contractors and to make sure appropriate insurance coverages are in place for non-employee independent contractors.
Unpaid internships have been the subject of considerable scrutiny in the past few years, notably from the standpoint of whether private businesses can rely on unpaid interns. The US Department of Labor’s Wage and Hour Division has developed a test for evaluating whether an individual constitutes a “trainee” (intern) for the purposes of the Fair Labor Standards Act (FLSA) and is thereby not required to be paid.
See Fact Sheet #71: Internship Programs Under The Fair Labor Standards Act, available at www.dol.gov/whd/regs/compliance/whdfs71.htm#2.
Michigan does not have different enforcement guidance.
Federal law requires that every employer verify the identity and employment eligibility of new employees and complete Form I-9, Employment Eligibility Verification. This requirement arose out of the Immigration Reform and Control Act of 1986. Developing and following a comprehensive immigration compliance program, to include I-9, is extremely important to avoid immigration audits, fines or raids and the accompanying negative press coverage.
Employers and employees are responsible for completing their respective portions of Form I-9 within a defined period. Employees must complete Section 1 no later than their first day of employment, and never before an employee has accepted the offer of employment. Employers must complete Section 2 within three business days of the employee’s first day of employment. This section requires an employer to review the physical document presented by the employee to establish the employee’s identity and employment eligibility. Section 3 applies only to reverifications and rehires. Reverification must be completed prior to the expiration date of an employee’s employment authorization document. Employers should not re-verify US citizens, US nationals, or US legal residents who presented a legal residency card or certain identity documents. If an employer rehires an employee within three years of the date the Form I-9 was previously executed, an employer may either complete Section 3 of the previous I-9 or complete a new I-9. Employees rehired after three years of execution of Form I-9 must complete a new Form I-9.
The Hiring Process
To complete the Form I-9, employers may be subject to charges of discrimination or document abuse by requiring specific documents or too many documents as a part of that process. It is illegal to discriminate against employment-authorized individuals in hiring, firing, recruitment, or referral for a fee in the employment eligibility process based on the individual’s citizenship status, immigration status or national origin. The refusal to hire or continue to employ an individual due to a future expiration date on the documents presented by an employee is also prohibited.
However, an employer is allowed to ask an applicant if they will require visa sponsorship during the interview process. For example, while applicants may not be asked if they are US citizens or be asked to show employment authorization prior to hiring, an employer may ask applicants if they are currently authorized to be employed in the United States and if the applicants will require visa sponsorship from the employer. In addition, applicants should not be told that only citizens are hired. Applicants should not be told that the organization does not sponsor visas – unless that truly is the case. Employers also should be aware that some categories of employment authorization must be paid for by the employer and may not be paid for by the employee; others may be paid by either the employer or the employee, or the cost may be split between them.
Punitive agreements to pay the employer back for immigration or employment authorization-related costs are generally unenforceable, although in certain cases a forgivable loan agreement, which reduces over time, may be permissible. Because no entity can predict with certainty whether a government agency will grant a request for employment authorization or visa, an employer may choose to state that it will attempt to assist an employee with these efforts, but it should not promise to obtain any specific result.
Corporate Structure and Relationships
The L visa is reserved for international companies wishing to transfer executives, managers, or specialized workers to the USA. A business operating in at least one foreign country may wish to consider whether common ownership and control (at least 51%) exists with the foreign entity and the existing or planned US operation. If common ownership and control exists, the organization may be able to transfer specialized knowledge or managerial and executive employees from the foreign operation to the US entity after one year of qualifying service abroad.
H-1B visas are generally reserved for specialty occupations – those occupations requiring at least a relevant bachelor’s degree. Demand far exceeds the number of available H-1B visa slots and new H-1B slots are typically used within the first few days of filing each federal fiscal year. An H-1B is potentially available for foreign workers where the position to be filled is a specialty occupation and for which the foreign worker has earned at least a relevant bachelor’s degree or the foreign equivalent. Some exceptions exist to this quota system in that workers granted an H-1B in the last six years may be exempt from the cap, while some university and research or nonprofit employers may not be subject to the cap. A relatively new exception to the cap exists for entities having a formal affiliation agreement with a university or research institution; structured correctly, this can be a valuable tool for H-1B for an otherwise cap-subject employer.
The NAFTA Professional (TN) visa allows employers to sponsor citizens of Canada and Mexico for employment in the USA in a professional capacity. To be eligible for a TN visa, the profession must be on the NAFTA list and the employee must satisfy the qualifications for eligibility for employment in that profession.
The E visa category includes treaty traders and treaty investors who come to the USA under a treaty of commerce and navigation between the USA and the country of which the treaty trader or investor is a citizen or national, and some employees of the treaty trader or treaty investor. This category also includes Australian specialty workers – similar to an H-1B visa. The general requirements are that the employee share the same nationality as the employer, and that the employee be engaged in the duties of an executive, manager, or specialized worker.
Employing Recent University Graduates and Use of E-Verify
While some of these recent graduates are hired in H-1B or some other moderate-term employment status, many are employed for a short time, post-graduation, in Optional Practical Training (OPT) status. A college or university, in coordination with US immigration agencies, may grant up to 12 months of practical training authorization (minus time spent working as a student) in order for the individual to work in a field related to his or her studies. At the end of this time, the employer must either discontinue employing the person, or move him or her to another status, such as H-1B status. However, for graduates in certain STEM fields, the initial 12 months of OPT may be extended by up to an additional 24 months of STEM OPT, if the college or university agrees. E-Verify is not required for the initial OPT employment, but an employer must participate in E-Verify to qualify to utilize STEM OPT.
Maintenance of Status and Compliance Issues
Compliance with Form I-9 requirements and regulations governing employment visas have increased in importance. Federal agencies, such as ICE and the Department of Labor, have greatly increased their investigation and routine compliance monitoring, as well as expanding methods for the general public or interested parties to report violations. Fraud, noncompliance, and even some unintentional errors can lead to the loss or denial of work authorization, large fines, and, in the most egregious cases, criminal charges for responsible management or ownership. This stresses the importance of accurately completing immigration and Form I-9 documents, correcting any errors, ensuring that any terms and conditions of the visa classification are followed and that any material changes are examined for potential consequences, and maintaining a robust system of tracking Form I-9 expiration dates and compliance, and for monitoring and requesting or renewing any needed work authorizations.
To remain union-free, it is critical to establish a positive culture and get buy-in from your leadership team. The vast majority of union campaigns start because of perceived toxicity in the workplace (eg, favoritism or no outlets for employees to express their views). Being union-free vests the organization with the autonomy to make decisions about policies and other terms and conditions of employment. If the employees are represented by a union and/or ever vote a union into the workplace, an employer has a legal obligation to bargain virtually every potential change to workers’ terms and conditions of employment with the union. Accordingly, many employers strive to remain union-free in order to enjoy maximum flexibility.
The pre-hire and interviewing process is a significant opportunity for Michigan employers to identify and hire the strongest employment candidates. Before the employment interview, have applicants complete an employment application that accurately describes prior educational and work history, reasons for leaving prior employment, references, and any special skills. Have applicants complete the application even if they provide a resume. The questions on the application seek additional information not included on a resume, such as dates of employment and reasons for leaving.
The employment application should include a certification by the applicant that he or she provided complete, accurate and truthful information on the application. It should also include an affirmation of the “at-will” nature of the employment relationship and limit any verbal or written modifications. Employment applications should reflect that applicants are aware of post-offer testing and background checks, and the ability to request reasonable accommodations, if needed.
The employment application and the interview process should not ask questions or elicit information about legally protected characteristics such as age, national origin/race, religious practices, pregnancy or desire to have children, sex, sexual orientation or gender identity, or medical conditions. Many jurisdictions “ban the box,” meaning the employer is prohibited from asking about criminal convictions on an employment application. Michigan does not have a ban the box statute except for state employers. In fact, a 2018 Michigan executive order actually prohibits any restriction on private employers’ ability to inquire about an applicant’s criminal history. Local ordinances may limit background checks, too. The background check process (criminal and credit) is also regulated by the federal Fair Credit Reporting Act.
The Americans with Disabilities Act (ADA) requires employers to provide reasonable accommodation to disabled applicants to permit them to participate equally in the hiring process.
The ADA prohibits employers from any pre-employment inquiries about an applicant’s medical conditions. Thus, the employer may not ask any questions designed to elicit medical information prior to a conditional job offer being made.
After a conditional offer of employment has been made, the employer may then conduct a post-offer medical examination, provided that this is required of all applicants for the position. To withdraw an offer of employment, the employer must be able to demonstrate that the individual is unable to perform the essential functions of the job in question, even with reasonable accommodations.
The Genetic Information Nondiscrimination Act (GINA) similarly imposes restrictions on employers during the hiring process (and afterward), making it unlawful for employers to request genetic information with respect to employees. Because genetic information is defined broadly to include family medical history, employers should ensure that any post-offer medical examinations, even those conducted by occupational doctors, do not elicit this information.
Michigan Anti-Discrimination Laws
Under Michigan law, it is illegal for employers to discriminate in the hiring process based on certain protected categories, as detailed below.
The Elliott-Larsen Civil Rights Act (ELCRA)
Michigan's Elliott-Larsen Civil Rights Act (ELCRA), MCLS § 37.2101 et seq, prohibits job application questions about the following protected characteristics of the applicant: race, color, national origin, age, sex, height, weight, or marital status (MCLS § 37.2206(2)). MCLS § 37.2202(1)(d) prohibits hiring discrimination due to a person's pregnancy, childbirth, or a related medical condition. MCLS § 37.2205a prohibits application questions regarding an applicant’s misdemeanor arrest, detention, or disposition that did not result in a conviction.
The Michigan Persons with Disabilities Civil Rights Act
The Michigan Persons with Disabilities Civil Rights Act, MCLS 37.1101 et seq, prohibits job application questions concerning the disability of a prospective employee that are unrelated to the duties of the particular job (MCLS § 37.1206(2)(a)). The law also prohibits hiring discrimination on the basis of an applicant's disability or genetic information unrelated to the duties of a particular job (MCLS § 37.1202(1)(a)). Employers may not refuse to hire an individual when adaptive devices or aids would enable the individual to perform the job (MCLS § 37.1202(1)(f)).
The Michigan Department of Civil Rights Pre-Employment Inquiry Guide
The Michigan Department of Civil Rights Pre-Employment Inquiry Guide provides practical guidance to employers regarding the legal limitations on job applications in Michigan. The publication is on the Department's website, available at www.michigan.gov/documents/mdcr/Preemploymentguide62012_388403_7.pdf.
Local Anti-Discrimination Ordinances
In addition to the classifications protected by state law, several Michigan cities have passed ordinances that prohibit hiring discrimination based on sexual orientation, gender identity, gender expression, and other characteristics.
In Michigan, the enforceability of restrictive covenants changed significantly in 1985. Prior to 1985, restrictive covenants were considered void and illegal as restraints of trade under Michigan statutory law. On March 29, 1985 this statute was repealed and replaced with MCLA §445.774(a), which is now applicable to restrictive covenants and agreements entered into after March 29, 1985. The 1985 statute now permits a restrictive covenant that “protects the employer’s reasonable competitive business interests” provided the restrictive covenant is “reasonable as to its duration, geographical area, and the type of employment or line of business.”
A restrictive covenant must be supported by “sufficient consideration.” The courts continue to define and evaluate “sufficient consideration,” “reasonable duration,” and “geographical area.” A Michigan Court of Appeals decision found the “[m]ere continuation of employment is sufficient consideration to support a non-compete agreement in an at-will setting.” With respect to duration, the courts have generally found a period of six months to three years to be reasonable. The reasonableness of the geographical area will be determined by the scope of the business and the legitimate competitive business interests of the party seeking to enforce the restrictive covenant. Restrictive covenant provisions seeking to preclude an individual from working in any capacity in any location for a competitor have been found to be unreasonable.
If a court finds a restrictive covenant to be “unreasonable in any respect,” the Michigan statute permits a court to “limit the agreement to render it reasonable in light of the circumstances in which it was made and specifically enforceable agreement as limited.”
Michigan has adopted the Michigan Uniform Trade Secrets Act (MUTSA), MCLA 445, 1901 et seq. Under MUTSA, “trade secret” means information (which includes a formula, pattern, program, device, method, technique or process) having independent economic value from not being generally known or readily ascertainable that has been subject to reasonable efforts to maintain its secrecy. The party seeking to protect a trade secret must also demonstrate the defendant did not have express or implied consent to disclose or use the trade secret information.
Michigan’s definition of trade secret does not protect all information a company may consider proprietary or confidential, and courts require the party alleging a trade secret violation to specifically identify the alleged misappropriated trade secret. Examples of information that have garnered trade secret protection include information regarding specialized equipment and industrial processes, chemical processes, manufacturing methods, marketing and sales strategies, contractual details for customers, pricing lists and profit margins. Customer lists may be protected, but if such lists are compiled from personal or publicly available sources, or if the information is readily ascertainable from other channels, they may lose protection. Software, computer programs, data compilations and automation tools are not automatically entitled to trade secret protection and also must meet MUTSA’s elements required for such protection.
A party making a MUTSA trade secret claim must do so within three years. Remedies may include both injunctive relief and damages both for the actual loss (compensatory damages), unjust enrichment or a reasonable royalty for the unauthorized disclosure. Attorneys’ fees may also be recovered. Other civil remedies for trade secret protection under tort and other common law theories are displaced by MUTSA’s remedies; however, a party may still pursue contractual remedies.
Because not all information may be considered a trade secret by Michigan courts and because contractual remedies are not preempted by MUTSA, contractual protection of information through confidentiality agreements more broadly defining proprietary and/or confidential information is a common and recommended practice. Such agreements are generally enforceable in Michigan.
The Federal Defend Trade Secrets Act of 2016 (DTSA) also creates a federal civil cause of action for trade secret misappropriation. DTSA is similar in many respects to MUTSA, but does not preempt or displace MUTSA.
Privacy rights in Michigan are covered by both common law and statutory protections. The Supreme Court of Michigan has recognized four common law privacy claims:
In some respects these claims overlap, each turning on particular facts that generally involve the disclosure of information that is either “highly offensive,” “unreasonable,” or “false” and that are private and/or disclosed publicly or to a large number of people.
Michigan also provides statutory privacy protections for certain information. Michigan has an eavesdropping statute prohibiting eavesdropping by third parties, including employers, on private conversations (MCLA 750.539a et seq). In such cases, all participants in the conversation must consent to recording the conversation. A participant may, however, record the conversation. Michigan’s Polygraph Protection Act prohibits employers from requiring that applicants or employees take a polygraph (MCLA § 37.201 et seq). Michigan’s Persons with Disabilities Civil Rights Act prevents employers from performing genetic testing or requesting genetic information (MCLA 37.1101 et seq). Michigan’s Bullard-Plawecki Right to Know Act prohibits employers from gathering or maintaining records regarding “an employee’s associations, political activities, publications, or communications of non-employment activities,” without written authorization (MCLA 423.508). Michigan’s Social Security Number Privacy Act, MCLA 445.81 et seq, limits how an employer may use, display, or transmit an employee’s social security number and violations may result in civil and/or criminal penalties. Among other things, this statute requires encryption if four or more consecutive numbers of a person’s social security number will be used to gain access to the internet, websites, or computer systems or networks. Michigan’s Internet Privacy Protection Act, MCLA 37.271 et seq, generally prohibits employers from accessing personal internet or social media accounts of employees and prohibits retaliation against a person who fails to disclose such information.
Employers in Michigan can prescribe limits on an employee’s use of its data or equipment, but exceptions do apply.
Even before the Black Lives Matter and Me Too movements, employers should have had thorough policies addressing discrimination, harassment and retaliation, and will have supported the implementation of such policies through proactive training.
Training, which many employers mandate, will identify the types of behaviors that are inappropriate in the workplace, how to report concerns and specifically identify who to report those concerns to, and prohibit retaliation against those who pursue complaints or assist in an investigation. Supervisors’ training should also identify the supervisor’s role in setting the standard of professional workplace behavior, and how to appropriately escalate, investigate, document and address reports of prohibited behaviors, including through any needed intermediate remediation and discipline. Most employers also include workplace respect, diversity and anti-bullying training designed to foster an inclusive and respectful workplace.
In reaction to the Black Lives Matter movement, the State of Michigan declared that racial inequity is a public health crisis and mandated implicit bias training for healthcare workers and state employees. There is no such mandatory training legislation for employees of private employers, although the majority of private employers are redoubling efforts to identify and eliminate unconscious bias from hiring, firing, and other employment decisions.
More generally, examining corporate culture and policies in these areas, and ensuring that employees – and especially managerial personnel – are properly trained to root out bias, harassment and prejudice has taken on even greater importance given the growing social awareness of these issues over the last few years. Coupled with the widespread use of social media, this has made many employers rethink their approach on these subjects, both from a legal and a general business standpoint. Part of that process has led companies to shift their focus from just preventing illegal conduct to actively promoting more inclusive and respectful workplaces. Many employers have taken it upon themselves to adopt policies and training programs consistent with promoting a culture of inclusion, to paying more attention to equity and implicit bias concerns raised by employees.
The Occupational Safety and Health Administration (OSHA) is the federal agency charged with enforcing all applicable safety laws and regulations in the OSH Act. Roughly 22 states have been granted authorization to establish their own occupational safety and health programs. Michigan has an approved state plan, and the Michigan Occupational Safety and Health Administration (MIOSHA) administers the OSHA statutory and regulatory mandates. Michigan typically follows the federal OSHA regulations and does not implement standards that are stricter than the federal guidelines.
Like federal OSHA, MIOSHA has not issued a specific COVID-19 regulation or standard, instead relying upon existing applicable standards (PPE, hazard communication, respiratory protection, record-keeping and sanitation, as examples) and its “general duty clause” that requires employers to furnish each employee a place of employment that is free from recognized hazards – even in the absence of a specific standard. To leverage this “general duty” obligation along with her emergency management authority, the Michigan governor has issued a series of executive orders that effectively establish MIOSHA standards in Michigan for COVID-19-related occupational safety and health. Responsibility for COVID-19 workplace safety has been moved from the MIOSHA director to the deputy director of the Department of Labor and Economic Opportunity. As of this writing, Executive Order No 2020-161 is the latest iteration of Safeguards to Protect Michigan Workers, and establishes overall workplace safety requirements as well as expectations for specific types of businesses. Directly related is Executive Order No 2020-160, establishing that the work that is capable of being performed remotely must be performed remotely. From an enforcement standpoint, Executive Directive No 2020-8 was issued by the governor to heads of her departments and agencies directing them to enforce her executive orders as if fully issued regulations.
The Michigan worker’s compensation framework has several advantages for employers, including relatively modest statutory caps on benefits available under the Act, the ability of the employer to direct authorized medical care, and a robust exclusivity provision. The Michigan Worker’s Compensation Act is adjudicated through an administrative law structure, with hearings being held by a single hearing member assigned to that geographic location. Appeals from the decision of the single hearing member may be appealed to the full Board.
The provision of employee benefits and the documentation of employee benefit plans is largely a matter of federal law under the Employee Retirement Income Security Act of 1974 (ERISA). Generally, state law is preempted as it relates to employee benefit plans.
Effective March 29, 2019, the Michigan legislature enacted a paid medical leave statute requiring covered employers (those with 50 or more employees – including outside of Michigan) to provide 40 hours of paid time off for an eligible employee’s or his or her family member’s health condition, due to domestic violence or sexual assault, or closure of work or school due to a public health emergency. Employers must pay close attention to the coverage requirements defining an eligible employee. Additionally, employers can select from front loading or accrual over time of the 40-hour paid leave benefit. Employers also have flexibility, by policy, to define increments of use and the notice, procedural, and documentation requirements associated with use. Many employers will satisfy the paid leave requirement with existing paid vacation days, paid personal days, and other paid time off. Finally, the governor’s COVID-19 employee non-retaliation Executive Order No 2020-166, discussed above, attempts to expand the Michigan Paid Medical Leave Act to extend an additional entitlement to unpaid leave.
Michigan’s Payment of Wages and Fringe Benefits Act regulates the frequency of wage payments, format, and allowable deductions for the benefit of the employer and related procedures.
Terminating an employee is one of the most difficult decisions facing employers and is also the most likely to result in litigation.
If the employment relationship is at-will, it means that an employee has no contractual right to continued employment. That said, employers should always explain the basis for any employment termination. In the context of a lawsuit claiming that the termination decision was unlawfully discriminatory or retaliatory, many statutes permit an employer to avoid liability where they are able to articulate a legitimate, non-discriminatory (and/or non-retaliatory) basis for making their decision.
Termination of Employment by Operation of Contract
Where the employer and employee have entered into an employment agreement, that agreement will often address how and under what circumstances the employment relationship will terminate. Close attention should be paid to the language of the employment agreement, especially where there are defined terms addressing termination for “cause,” “change of control,” and other provisions. Employees are not entitled to severance pay as a result of termination unless the employer agrees to provide it according to the terms of an agreement or policy, or a discretionary decision to offer it. Many employers offer severance pay upon termination. Best practices dictate that severance or separation agreements include a release and waiver of all claims against the employer (unless release and waiver is precluded by explicit operation of law).
Separation Agreements and Releases
Waivers by employees age 40 or over are subject to special procedures to obtain a release of claims under the federal Age Discrimination in Employment Act (ADEA). In order for a waiver of claims to be valid under the ADEA, the release and waiver provisions must (i) be written in plain language understandable by the average individual eligible for the severance; (ii) specifically refer to ADEA claims and rights; (iii) not cover prospective or future rights or claims; (iv) be in exchange for valuable consideration in addition to any benefits or pay to which the employee was already entitled; (v) advise the employee, in writing, to consult with an attorney before signing; (vi) provide the employee 21 days to consider the agreement; and (vii) permit the employee to revoke the agreement within seven days after it is executed by the employee. In the case of a group termination – ie, involving termination of two or more employees from the same decision-making process – employees receive 45 days (not 21 days) to consider the agreement (again, with a seven-day revocation provision) and a disclosure identifying the class of employees eligible to receive the severance package, their ages and the ages of all employees within the same job classification, division or organization who are not eligible or selected for participation in the termination program along with identifying the selection criteria.
WARN Act Obligations
The Worker Adjustment Retraining and Notification Act of 1988 (“WARN Act”) applies to any business that employs 100 or more employees (excluding part-time employees) and terminates employees under circumstances that qualify as a “plant closing” or “mass layoff.” In those instances, the employer must provide affected employees and certain government officials at least 60 days' advance notice of the job loss event. Employers who fail to do so may be required to pay the affected employees back pay for each day of the violation, reimburse for any loss of benefits and medical expenses incurred, and pay civil penalties.
In addition to the federal WARN Act, Michigan has its own “mini-WARN” Act. Michigan’s mini-Worker Adjustment and Retraining Notification (mini-WARN) law, the Employee-Owned Corporation Act, MCL §§ 450.731–450.738, encourages (but does not require) an employer to notify the Michigan Department of Licensing and Regulatory Affairs (LARA), the affected employees, any employee organization representing them, and the affected community as soon as possible after making a decision to close a facility at which at least 25 employees work.
The Families First Coronavirus Relief Act (FFCRA) has created new leave mechanisms for qualifying employees, including paid leaves for limited amounts of time, and, correspondingly, potential new causes of action for interfering with these leaves or retaliating against employees for taking them. Additionally, employers who took advantage of Paycheck Protection Program loans and who terminated employees or reduced their work schedules will be obligated to rehire or reinstate employees to the extent they intend to have the loans forgiven pursuant to the terms of the legislation. Lastly, terminating an employee because they have the virus or are suspected of having the virus can result in disability discrimination or retaliation claims.
In Michigan, under an executive order, employers may not discipline or terminate an employee who misses work because they test COVID-19 positive, exhibit COVID-19 symptoms, or come into close contact with someone who is positive or symptomatic.
Michigan law presumes that the employment relationship is at-will and terminable by either party for any reason or no reason, with or without notice. Care must be taken to ensure that an employer follows Michigan requirements for preserving the at-will status of the employment relationship.
Where there is an individual written contract of employment, or an agreement that the employment relationship will continue for a specified, definite duration, termination of the employment agreement proceeds according to the terms of that agreement. If termination violates the terms of that agreement, the employer may be subject to a breach of contract/wrongful termination claim and damages equivalent to the pay the employee would have received under the contract.
In Michigan, a non-union employee who argues that his or her employment is not at-will, but rather requires “just cause” to terminate, may attempt to prove such in one of three ways:
An employer’s emphasis of the at-will nature of employment and use of a contractual disclaimer (in employment applications, offer letters, handbooks, policy statements, etc) as well as the employer’s reserved right to change or terminate its policies at any time (and with or without notice) is critical to limiting liability and avoiding a plaintiff/employee’s argument that he or she may only be terminated for “just cause.” Also, supervisory training to avoid misleading assurances or implied promises of continued employment is required to avoid the creation of circumstances supporting a “just cause” claim.
While beyond the scope of this summary, employers can establish internal dispute resolution procedures that are “final and binding” to support the use of “just cause” or “satisfaction” (versus “at-will”) employment status.
Even with at-will employment, other employment agreements are enforceable, such as those concerning confidentiality, intellectual property, and restrictive covenants to arbitrate and waive class-action participation, and/or an agreement to shorten the statute of limitations.
Many federal laws prohibit discrimination, harassment and retaliation based on legally protected characteristics (sometimes referred to as “immutable traits”) or based on legally protected activity by an employee. The legally protected characteristics that are protected under federal law include age, gender (including sex and potentially including sexual orientation and/or gender identity), pregnancy, race, color, national origin, disability, military or veteran status, genetic information, religion and citizenship. In addition to federal laws, Michigan’s civil rights laws expand the coverage of legally protected characteristics to include height, weight and marital status. Federal law is now settled, with the US Supreme Court decision in Bostock v Clayton County, 590 U.S. ____ (2020), that discrimination based upon an employee’s sexual orientation and gender identity is prohibited by Title VII.
Employees do not have to first exhaust administrative remedies by filing a charge with the Michigan Department of Civil Rights before bringing a civil suit alleging discrimination, harassment and/or retaliation under Michigan’s civil rights laws. The limitations period for filing a civil suit is three years, although most courts enforce agreements to abbreviate the limitations period that applies to actions brought to enforce Michigan civil rights in employment laws. An explicit policy prohibiting discrimination, harassment and retaliation is a key component in addressing employee concerns and defending against a civil suit. Equally important, in terms of regulating workplace behaviors and defending against litigation, is the provision of periodic training, and especially supervisors’ training; supervisors, as the employer’s agents, are subject to individual liability under many Michigan civil rights laws.
The "Me Too" and "Black Lives Matter" movements have highlighted harassment and retaliation claims based on sex and race, and may lead to an uptick in such claims. COVID-19 has brought into focus claims based on employee medical conditions and accommodations, and alleging retaliation based on voiced safety concerns.
As part of the COVID-19 pandemic, Michigan’s governor prohibited (Executive Order 2020-166) employers from discharging, disciplining, or otherwise retaliating against an employee who stays home from work because the employee (i) tests positive for COVID-19, (ii) exhibits one or more of its principal symptoms, or (iii) comes into close contact with a person who tests positive for COVID-19 or exhibits one or more of its principal symptoms. Employers are required to treat employees in the categories above as if taking medical leave under Michigan’s Paid Medical Leave Act (PMLA), even if unpaid. The length of such leave must extend as long as the employee remains away from work within the time periods described in the Executive Order.
Under federal law, sexual harassment claims that are settled may not be tax deductible if subject to a non-disclosure clause. Michigan does not have such a provision.
In all but a very few instances, the FLSA governs wage and hour claims brought by employees in Michigan. The FLSA requires that all covered, non-exempt employees be paid at least minimum wage for every hour worked, and receive overtime pay at no less than 1.5 times the regular rate of pay for all hours worked in excess of 40 within a workweek. Potential wage and hour-related claims can include misclassification of a worker as an independent contractor or consultant (rather than as an employee), misclassification as exempt from overtime pay, payroll docking policies and practices, “off-the-clock” unpaid work hours, meal periods, breaks, overtime, record-keeping, deductions from pay and rounding. Notably, Michigan law severely restricts when and how an employer can deduct money from an employee’s paycheck.
Because an individual employee’s claim is usually small, claims under the FLSA are often brought in a class action (referred to as a Rule 23 class) or a collective action under Section 216(b) of the FLSA. Through either framework, a large number of employees citing similar wage or compensation errors may join together to seek back pay, front pay, punitive or liquidated damages, and attorneys’ fees. Carefully crafted individual agreements to arbitrate claims, including a waiver of the right to proceed in a class or collective action, can help combat the risks and costs associated with class and collective actions.
Nearly every federal and Michigan employment law protects employees who report perceived unlawful acts, or participate in an investigation into the same. Even if it is ultimately determined that the employee’s perception is wrong, the employee will generally have “a right to complain” and still be protected unless it is shown that the employee knew he or she was making a false report. Thus, protection is granted to employees who report or complain about job safety issues, discrimination or harassment, violation of the Affordable Care Act, wage payment violations, environmental violations, fraud against the government including tax evasion, and misappropriation or misuse of investor funds in the context of a public company, as examples. Employers are well advised to establish a standalone non-retaliation policy. When an employee who has engaged in protected conduct must be disciplined or discharged, an employer should be able to provide substantial (and, ideally, documented) evidence of its non-retaliatory basis for the discipline or discharge.
As discussed in 6.2 Discrimination, Harassment, and Retaliation Claims, in response to COVID-19, Michigan’s governor has issued an executive order prohibiting employers from discharging, disciplining or otherwise retaliating against employees who stay home from work for COVID-19-related reasons.
The growth of social justice movements has also created increased awareness of the ability to pursue government redress of grievances. While Michigan has not yet done so, some states have adopted laws prohibiting confidentiality provisions in separation agreements that would otherwise prevent employees from discussing the facts of a discrimination or harassment claim with government agencies. The impact of COVID-19 has accelerated the number of employees reaching out to government officials to express concerns over a variety of health-related issues, including hygiene protocols and adherence to social distancing and mask mandates that have been adopted by government bodies. This trend will result in more investigations and potential actions by law enforcement, state health agencies, and the state and federal OSHA.
The growth of various social justice movements has caused many employers to reassess their training programs with respect to discrimination and harassment. The previous focus on simply preventing illegal conduct has shifted to one fostering a culture of inclusion. Part of that process involves giving greater emphasis to identifying bias, including unconscious or implicit bias, a greater awareness and sensitivity to these issues, particularly on the part of human resources personnel and managers, and strengthening the mechanisms by which employees can express concerns and by which those concerns will be evaluated. The promotion of environments that encourage reporting and offer multiple avenues to bring concerns forward, coupled with an appropriate response to the behaviors at issue, are important components of such a program.
In response to racial disparities surrounding healthcare illustrated by the COVID-19 pandemic, the Michigan governor declared racial inequity to be a public health crisis and directed the LARA to begin the process of promulgating rules to establish implicit bias training standards as part of the knowledge and skills necessary for licensure, registration, and renewal of licenses and registrations of health professionals in Michigan. The governor also directed all state employees to attend implicit bias training.
In addition to wage and hour claims, certain forms of discrimination claims are often brought in a class action under Federal Rule of Civil Procedure 23. A class action allows a large number of employees citing similar alleged discriminatory practices to join together against an employer to make claims for monetary and equitable relief.
Potential damages vary depending on the statute under which an employment-related claim is brought, but may include back pay, front pay, punitive or liquidated damages, and attorneys' fees. The court can also order the employer to reinstate/rehire employees found to have been improperly discharged.
In class and collective actions, the remedies may be multiplied by the number of employees implicated. Seemingly minor errors in the payment of wages that by themselves would not cause concerns about litigation by an individual plaintiff can mutate into high-stakes litigation when large numbers of employees and former employees combine and become eligible for unpaid wages, liquidated damages and penalties, and attorneys' fees and costs, particularly when the potential minor errors span a number of years.