Employment 2019 Second Edition

Last Updated August 06, 2019

USA

Law and Practice

Authors



Shook, Hardy & Bacon LLP has a national employment litigation & policy practice that represents corporate employers in complex class action (employment discrimination, and wage and hour), EEOC litigation, unfair competition litigation, whistle-blower claims and high-stakes executive disputes. Innovation and collaboration are SHB hallmarks. With offices in Atlanta, Boston, Chicago, Denver, Houston, Kansas City, London, Los Angeles, Miami, Orange County, Philadelphia, San Francisco, Seattle, Tampa and Washington, DC, and with more than 500 lawyers, Shook serves clients throughout the world.

The Fair Labor Standards Act (FLSA) exempts certain white-collar workers from the statute’s minimum wage and overtime requirements. Employers are not required to pay minimum wages or overtime pay to executive, administrative and professional employees who satisfy the salary level and other requirements to meet one of the white-collar exemptions.

Employment contracts are not required. Where a written contract does not exist, courts may imply terms governing the employment relationship from statements made in employee handbooks, offer letters and/or oral representations.

Employment contracts are not required. In the American workplace, employment is generally assumed to be at-will, meaning either the employee or the employer can end the employment relationship at any time. For those employment relationships that are under contract, most are in writing. However, depending on applicable state law, the employment contract need not be in writing to be enforceable.

There is no federal law that requires employers to provide specific written information to employees at the time of hire, but some states require employers to disclose information such as the employee’s wages or regular payday at the outset of employment.

Maximum working hours are imposed by federal and state laws. Under the federal FLSA, most employers are required to pay overtime – at a rate of time and one half of the employee’s regular pay – for each hour worked over 40 hours per week, unless the employee is statutorily exempt. Some states expand these terms and conditions to include overtime in excess of eight hours in one day or overtime for work performed on weekends.

Minimum wage requirements are imposed by federal and state laws. The federal minimum wage for employees covered by the FLSA is currently USD7.25 per hour. Most states impose minimum wages above the federal minimum wage. For instance, the minimum wage in California is USD11.00 per hour and the minimum wage in Washington, DC is USD13.25 per hour. Some cities, like Los Angeles, also impose minimum wage requirements higher than the state minimum wage for certain categories of workers.

Vacation and vacation pay are subject to very few regulations and are not required under federal law. However, most employers do provide some paid vacation leave.

The federal Family and Medical Leave Act (FMLA) requires employers of a certain size to provide unpaid leave for maternity, to take care of a medical condition, or to care for family members. Under the FMLA, an employee is eligible for unpaid leave if the employee has been employed for at least 12 months by the employer and for at least 1,250 hours of service during the previous 12-month period. An eligible employee is entitled to (i) up to 12 weeks of unpaid leave per year; (ii) continuing health insurance benefits during leave (if already provided by the employer); and (iii) job protection (an employee is guaranteed to return to the same job or its equivalent). Leave related to a serious health condition may be taken intermittently or on a reduced leave schedule when medically necessary.

Some state family leave laws provide more generous leave benefits than the FMLA by covering smaller employers, extending the time for unpaid leave for up to 16 weeks, and permitting intermittent leave for maternity.

Additionally, the federal Americans with Disabilities Act (ADA) requires an employer to provide reasonable accommodations to a disabled person unless they would impose an undue hardship on the employer. Reasonable accommodation can include a paid leave of absence, a modified work schedule, or unpaid leave beyond the 12 weeks provided under the FMLA.

Traditionally, there have not been limitations on confidentiality and non-disparagement requirements. Increasingly, though, there are concerns regarding such requirements in the employment arena. This is an area that is still evolving under US law.

In general, employees may be held liable for their actions depending on the nature of the act and the context in which the act occurred. Under the American doctrine of respondeat superior, an employer may be held vicariously liable for an employee’s acts that are committed within the scope of employment.

The laws governing the enforceability of restrictive covenants, including non-competition and non-solicitation clauses, vary considerably by state. A covenant that is enforceable in one state may well be unenforceable in another. Most states follow the general rule that restrictive covenants are enforceable, provided they are necessary to protect a legitimate interest of the employer and are reasonably limited in duration, geographic scope and the restrictions placed on the employee in pursuing his or her profession.

Some states (approximately 15 to 20) have substantially limited the circumstances under which covenants are enforceable. In California, for example, non-competition clauses are invalid unless otherwise covered by an express statutory exception.

An employer can enforce a restrictive covenant by filing a civil lawsuit seeking an injunction to prevent the employee from violating the covenant and/or damages to compensate the employer for the violation.

Whether a court will enforce an overbroad restrictive covenant varies by state. Some states permit “blue pencilling,” which allows the court to strike the overbroad terms and enforce the remaining, reasonable provisions if they are severable. In other states, the courts are permitted to rewrite the overbroad provisions. And still other states do not permit either approach, and the courts in those states will not enforce an overbroad restrictive covenant at all.

See 2.1 Non-competition Clauses.

Employee data protection laws in other countries are often much more restrictive, although the USA is trending towards more data protection obligations with an assortment of data protection laws that regulate the collection, use and transfer of employees’ personally identifiable information (PII) and personal health information (PHI). These laws are not limited to protecting active employee information, so employers’ obligations extend to former employees, job applicants, independent contractors and other non-employee groups whose personal information they may obtain (such as customers). There are five primary federal data protection laws that impact the employment relationship: (i) the Heath Insurance Portability and Accountability Act (HIPAA), which dictates under what circumstances and to whom PHI may be released; (ii) the Genetic Information Nondiscrimination Act (GINA), which covers genetic information; (iii) the Americans with Disabilities Act (ADA), which limits when an employer may obtain medical information, how such information may be used and disclosure of such information; (iv) the National Labor Relations Act (NLRA), which prohibits employers from interfering with workers’ rights to engage in concerted activity, including such activity through social media; and (v) the Fair Credit Reporting Act (FCRA), which applies to those who use consumer reports, including background checks conducted on applicants and employees. Another federal law, the Privacy Act, limits the type of information that federal government employers may keep on their employees.

Additionally, most US sates impose a wide range of requirements. Almost all states have enacted laws requiring notification of security breaches involving PII, and many have enacted laws requiring companies to destroy, dispose of, or otherwise make PII unreadable or undecipherable. Some states have laws providing expanded protections to PHI. More recently, a significant number of states have enacted employee social media privacy laws.

US employers are prohibited from hiring or continuing the employment of a worker who is not authorised to work in the USA. The Immigration Reform and Control Act of 1986 (IRCA) places the burden of immigration compliance on employers and prohibits hiring, or recruiting or referring for a fee, individuals who are not authorised to work in the USA. It also requires that employers confirm the identity and employment eligibility of new employees.

Subject to very few exceptions, a foreign worker must have a work visa permitting him or her to work in the USA. Employers have the option of participating in the immigration sponsorship process. Employers may not, however, directly ask about a candidate’s national origin, citizenship, or immigration status during the hiring process. Instead, they must use neutral questions to determine whether the applicant requires immigration sponsorship to begin working or to continue employment in the future. Those questions include: (i) Are you legally authorised to work in the United States?; and (ii) Do you now, or will you in the future, require immigration sponsorship for work authorisation (for example, H-1B status)? When a candidate answers affirmatively to the second question, the employer may ask more direct questions about the applicant’s immigration status and work authorisation to make an informed hiring decision.

The most common employment-based statuses sought by American employers for their employees include H-1B, L-1 and TN.

H-1B status is available for foreign nationals coming to the USA to work temporarily for a specific American employer in a specialty occupation (ie, one that requires theoretical and practical application of a body of highly specialised knowledge and the attainment of a bachelor’s or higher degree in the specific specialty, or its equivalent in work experience, as a minimum for entry into the job).

L-1 status is available for employees of foreign companies who are coming to the USA to work temporarily for a qualifying organisation related to the foreign company that is either the same company, the parent company, a branch office, an affiliate, or a subsidiary.

TN status was created under the North American Free Trade Agreement (NAFTA) and is only available to citizens of Canada and Mexico. TN status enables citizens of Canada or Mexico to enter the USA to temporarily engage in business activities at a professional level.

The National Labor Relations Act protects employees’ rights to organise a union. While nearly one half of American employees in the private sector belonged to unions in the 1940s, union employees now represent a shrinking segment of the US workforce. In fact, the use of unions in the private sector has decreased in recent years to a rate below 10%. In contract, the percentage of union employees in the public sector has been an area of dramatic growth for labour organisations.

The NLRA prohibits employers from interfering with, restraining, or coercing employees in the exercise of their rights to organise a union.

Secret ballot elections are used to determine whether employees wish to be represented by a union. Section 9 of the NLRA prescribes general rules concerning the election process. Additionally, the National Labor Relations Board (NLRB) and the courts have developed processes through which employees have the opportunity to cast an informed vote in an election determining a union’s representation status.

When employees choose a union to represent them, the employer and the union are required to meet at reasonable times to bargain in good faith to reach a binding agreement setting forth terms and conditions of employment. The employer does not have to adopt any proposal by a union but is required to bargain in good faith.

If no agreement can be reached, the employer may declare an impasse. However, the union may appeal to the National Labor Relations Board if it contends that the employer has not conferred in good faith. The NLRB can order the employer back to the bargaining table.

For workforces that are organised, bargaining typically takes place at the company level. Some large unions do co-ordinate bargaining within an industry. However, they still have to come to independent agreements with each company.

Employment is generally assumed to be at-will, meaning either the employee or the employer can end the employment relationship at any time for any reason (good reason, bad reason, or no reason at all). There are four major exceptions to the employment at-will doctrine: (i) dismissal due to discrimination or retaliation in violation of a federal, state, or local statute; (ii) an express or implied contract, including a collective bargaining agreement; (iii) an implied covenant of good faith and fair dealing; and (iv) a public policy exception prohibiting discharge if it would violate the state’s public policy. The law surrounding these exceptions varies considerably by state.

There are not different procedures depending on grounds for dismissal, unless provided for by the terms of an employment contract or collective bargaining agreement.

In the United States, the term “layoff” is used for instances in which an employer eliminates a number of jobs for economic reasons or due to the employer’s business need to restructure.

While a group of at-will employees may generally be dismissed by an employer at any time, the federal WARN Act and its state equivalents require some employers to provide employees advance notice of a layoff or plant closing. In addition, the federal age discrimination law requires an employer to make certain disclosures to employees being dismissed as part of an exit incentive programme or other employment termination programme, if the employer offers consideration in exchange for signing a waiver of rights under that law. Any such waiver must include certain mandatory provisions to be valid. Lastly, an employer may have additional obligations when dismissing a group of employees as required by an applicable collective bargaining agreement or, in some cases, if the employee works in the public sector.

There are no required notice periods, except in some circumstances involving a plant closing or mass layoff, in which case the employees may be entitled to 60 days’ notice of the layoff under the WARN Act or an applicable state law equivalent. Some of these analogous state laws are more expansive in terms of coverage and employee rights.

Severance is not required, unless provided for by an employment contract. Employees are generally not entitled to compensation on dismissal beyond their final pay and any other business expenses owed to them at the time of dismissal. Depending on the law of the state in which the employee works, an employee may be entitled to receive temporary and partial wage replacement called “unemployment compensation,” which is generated by the state government from a special tax paid by employers.

Because employment is generally assumed to be at-will, an employer may dismiss an employee for any reason, with or without cause, except as otherwise provided for by any applicable employment contract or collective bargaining agreement.

Termination agreements are permissible. In general, there are no specific procedures or formalities required for termination agreements.

The Older Worker Benefit Protection Act (OWBPA) provides procedural safeguards pertinent to a paid release of age discrimination claims. Additionally, special rules exist for the release of claims based on violations of the Fair Labor Standards Act, which requires minimum wage and overtime pay for most employees. Several federal agencies, such as the Securities and Exchange Commission (SEC) and National Labor Relations Board (NLRB), have also brought enforcement actions against employers whose release agreements impede an individual from exercising his or her right to provide truthful information to governmental or regulatory bodies.

There is no specific protection against dismissal for particular categories of employees, except as provided for by the anti-discrimination laws.

Employment is generally assumed to be at-will, meaning either the employee or the employer can end the employment relationship at any time for any reason (good reason, bad reason, or no reason at all). There are four major exceptions to the employment at-will doctrine: (i) dismissal due to discrimination or retaliation in violation of a federal, state, or local statute; (ii) an express or implied contract, including a collective bargaining agreement; (iii) an implied covenant of good faith and fair dealing; and (iv) a public policy exception prohibiting discharge if it would violate the state’s public policy. The law surrounding these exceptions varies considerably by state.

The remedies available depend on the law under which those claims are asserted, but generally include some combination of back pay, lost benefits, front pay, liquidated damages, compensatory damages (which include emotional distress damages), punitive damages, and attorneys’ fees and costs, as well as equitable relief such as reinstatement.

Employment discrimination is prohibited by a variety of federal, state and local laws. Federal law prohibits employment discrimination based on the protected characteristics of race, colour, national origin, sex, pregnancy, religion, age, disability, citizenship status, genetic information and military affiliation. Federal law also prohibits retaliation against employees who oppose unlawful discrimination or who participate in proceedings challenging unlawful discrimination.

Most state and some local laws contain analogous prohibitions, with certain jurisdictions expanding the list of protected categories to include such characteristics as marital and/or familial status, sexual orientation, gender identity, political affiliation, language abilities, use of tobacco products, public assistance status, height, weight and personal appearance.

Prohibited discriminatory practices generally include bias in all terms, conditions and privileges of employment, including hiring, promotion, evaluation, training, discipline, compensation, classification, transfer, assignment, layoff and discharge. These activities are often referred to as “adverse actions.” To demonstrate discrimination, an employee must establish a connection between the protected characteristic and the adverse action or condition.

Workplace harassment is also unlawful. While most harassment cases involve allegations of sexual harassment, harassment based on other protected categories is also actionable. Employer liability in harassment cases depends on who engaged in the harassment, whether the harassment resulted in a tangible employment action and the employer’s response to the harassment.

Finally, it is unlawful to retaliate against employees who raise concerns about unlawful discrimination or harassment. An employee need not prove that discrimination occurred in order to prove that an employer’s response to the employee’s complaints constituted unlawful retaliation. Rather, an employee simply needs to prove a causal connection between the complaints and the adverse action.

Generally, the employee first must prove that she is a member of the protected class, she was qualified for the job and/or satisfactorily performed the job, she was subjected to an adverse employment action and the adverse employment action occurred under circumstances giving rise to an inference of discrimination. The burden of proof then shifts to the employer to establish that the adverse employment action was taken for a legitimate, non-discriminatory reason. If the employer does so, the burden shifts back to the employee to prove that the reason offered by the employer was a cover-up (or pretext) for discrimination.

There are also affirmative defences to discrimination claims that may apply in limited circumstances and depending on the nature of the claim. For example, employers are generally allowed to discriminate on the basis of sex, age, religion, or national origin because of a bona fide occupational qualification (BFOQ). A BFOQ exists when a specific characteristic is necessary for the performance of the job. Gender may be a relevant factor, for example, in job performance for a model of women’s clothing. The BFOQ defence is very narrowly restricted and should not be relied on in most situations.

Remedies available for discrimination claims depend on the law under which those claims are asserted, but generally include some combination of back pay, lost benefits, front pay, liquidated damages, compensatory damages (which include emotional distress damages), punitive damages, and attorneys’ fees and costs, as well as equitable relief such as reinstatement.

Employment disputes may be litigated in either federal or state court, depending on the nature of the claims and the parties involved. Federal courts have jurisdiction to hear cases arising out of the federal employment laws, employment cases in which the USA is a party and employment cases between citizens of different states when there is more than USD75,000 in controversy. The federal court system is comprised of 12 judicial circuits that are geographically divided across the country. Each circuit is divided into a number of geographic districts, with a trial court in each district. Decisions of these trial courts may be appealed to the district’s corresponding circuit court of appeals, and ultimately to the Supreme Court. State courts have jurisdiction to hear cases arising out of state employment laws. Each state has a court system that is comprised of trial courts, courts of appeals, and a state supreme court.

Federal employment agencies such as the EEOC and DOL have authority to investigate certain employment claims and even litigate those claims in federal court on behalf of employees. These agencies also have authority to hear such employment claims through an administrative law judge.

Class action claims are available in employment disputes, unless the employee has waived the right to participate in such claims, such as by signing an employment contract that prevents the employee from pursuing class claims. The United States Supreme Court decision in Wal-Mart Stores, Inc. v Dukes, 564 U.S. 338 (2011) was a landmark decision interpreting the class action commonality requirement as a requirement that the class present the capacity to generate common answers apt to drive the resolution of the litigation. More recently, the Supreme Court’s Epic Systems Corp. v Lewis decision (138 S. Ct. 1612 (2018)) permits employers to implement and enforce arbitration agreements with class action waivers. These are matters that on occasion are addressed by the legislative body, and the current legal landscape could change with respect to enforcement of arbitration provisions through the legislative process.

American employment litigation in the courts is handled by attorneys on behalf of their clients. There is a well-established plaintiffs’ bar that represents individuals and classes, typically on a contingency fee basis. For employer and company defendants, there is also a well-established defence bar. Cases are resolved through the representation of counsel, either by dispositive motion, settlement, or jury verdict.

Employment disputes may be submitted to arbitration. In fact, arbitration is often used in the employment context, and many employers prefer arbitration because the proceedings generally take less time to resolution, are less expensive and are less public.

Pre-dispute arbitration agreements are generally enforceable. The United States Supreme Court has recognised a liberal federal policy favouring arbitration and has permitted employers to require employees to submit all employment-related claims to arbitration on an individual basis (and not as part of a class action).

Attorneys’ fees and costs are available under some employment statutes. For instance, Title VII and other federal anti-discrimination statutes permit the prevailing party to recover attorneys’ fees. Employment contracts may also provide that the prevailing party is entitled to attorneys’ fees.

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Trends and Developments


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Shawe Rosenthal LLP is one of the first law firms in the country devoted exclusively to the representation of management in labour and employment matters, and represents employers throughout the USA in federal and state courts and arbitral forums, as well as before the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor and other administrative agencies. The firm places great emphasis on providing effective and efficient advocacy, responsive client service and sound practical advice. Shawe Rosenthal is the sole Maryland law firm belonging to two major alliances of management labour and employment lawyers: the Employment Law Alliance and Worklaw Network. Both of these alliances afford Shawe Rosenthal access to practitioners of the highest calibre across the country and around the world, giving the firm an unparalleled ability to provide high-quality services to meet its clients’ employment law needs, wherever they may have facilities.

Employers in the USA must comply not only with federal law, but also with the laws of the states, and even municipalities, in which they operate. Given the highly partisan environment in the current US Congress, many states and municipalities have taken the initiative to pass employment-related legislation that has foundered at the federal level. Over the past several years, there have been certain trends in the types of laws that have been widely considered and enacted at the state and local level, including minimum wage, paid sick and safe leave, medical and recreational marijuana, pay equity, sexual orientation and gender identity discrimination, sexual harassment, worker misclassification, and non-competition agreements.

Minimum Wage

Since 2009, the federal minimum hourly wage has been USD7.25. A full-time worker making minimum wage will earn USD15,080 a year, which is slightly above the current federal poverty level for a one-person household (USD12,140) and below that of a two-person household (USD16,460). For many years, workers' advocacy organisations have sought to increase the minimum wage, and their efforts found new momentum in the “Fight for $15,” a labour union-driven campaign to raise the minimum wage to USD15/hour. 

Although an increase in the federal rate does not seem likely any time soon, 30 states and the District of Columbia currently have minimum wage rates that are higher than the federal rate. A large number of municipalities have also increased their rates. Many of those rates are subject to additional scheduled increases over the next several years. However, even in those states with higher minimum wage rates, there has been a push to increase wages even further, to the USD15 mark. In the past year, the number of states scheduled to hit the USD15 rate has increased from three to seven: California (by 2022), Connecticut (by 2023), Illinois (by 2025), Maryland (by 2025), Massachusetts (by 2025), New Jersey (by 2024) and New York (increases tied to inflation rate, capped at USD15). In addition, the District of Columbia has also implemented a USD15 wage (by 2020).

Family and Medical Leave Laws, Including Paid Sick Leave

The USA is the only advanced economy without a federal law requiring employers to provide paid sick leave. States and municipalities have sought to fill that void, with paid sick and safe leave legislation finding increasing success at that level, but creating a patchwork of requirements for multi-state employers.

Thus far, 11 states (Arizona, California, Connecticut, Maryland, Massachusetts, Michigan, New Jersey, Oregon, Rhode Island, Vermont and Washington) and the District of Columbia have passed laws requiring private employers to provide paid sick and safe leave to employees. Sick leave legislation has been proposed in many other states. In addition, numerous local municipalities have enacted such laws. Of particular interest, in 2019, Maine and Nevada passed laws mandating paid leave that may be used for any purpose, including sick and safe reasons. These most recent laws may herald a new and dramatic expansion of paid leave rights for employees.

In general, the sick and safe leave laws specify that the leave may be used for multiple reasons, including for needs arising from domestic violence (ie, “safe” leave), to care for an employee’s or family member’s illness or injury, and for preventative care. Some of the laws provide for additional reasons, such as parental leave following the birth/adoption/foster placement of a child, closure of the workplace or a child’s school due to a public health emergency, household quarantine and even leave to attend school conferences or meetings. The family members covered by the laws encompass a wide range of individuals, typically including a spouse, child, parent, grandparent, grandchild and sibling, by blood or adoption, and sometimes in-law relationships. Some of the laws include legal guardians and those standing in loco parentis, and even unrelated individuals with a close personal relationship to the employee. Most of the laws specifically allow employers to verify the need for leave, although the conditions under which verification may be required differ. Most, but not all, do not require payout of unused leave.

The laws vary greatly with regard to the size of employers covered – some laws ease the burden on smaller employers by reducing the amount of leave that must be granted or requiring only the provision of unpaid leave. They also vary in the amounts of leave granted overall, ranging from 24 to 80 hours a year, as well as whether and how much leave must be carried over to the next year, and how much leave may be used in a year. In addition, notice provisions differ amongst the various laws.

A related type of legislation that has been receiving increased interest sets up a state-run benefits programme, through which employees may receive benefits during certain family and medical leaves. Thus far, seven states (California, Connecticut, Massachusetts, New Jersey, New York, Rhode Island and Washington) and the District of Columbia have enacted such benefits programmes, and similar legislation is pending in a number of other states. 

Depending on the state, the benefits are funded through employer contributions, employee contributions, or a combination of the two. Employees may receive benefits during parental leave and leave for personal or family illness and injury. Some states also include other qualifying reasons, such as qualifying exigencies arising from a family member’s call to active duty, bone or organ marrow donation, or domestic violence. The definition of family member also varies from state to state, with some laws taking an expansive view of the term. In addition, the period of paid leave benefits ranges widely, from four weeks up to 52 weeks. Benefit amounts also vary.

Medical and Recreational Marijuana

Medical marijuana use has been legalised in 34 states and the District of Columbia. Recreational marijuana use has been legalised in 11 states, as well as the District of Columbia. Yet, marijuana is still illegal under the federal Controlled Substances Act, while regulations applicable to Department of Transportation-covered employers prohibit the use of marijuana by covered employees. This, along with varying and sometimes contradictory statements of policy by the federal government, has led to some tension and confusion with regard to the use of marijuana by employees.

Under federal and state disability laws, employers are required to provide reasonable accommodations to disabled employees that enable them to perform the essential functions of their jobs. The federal Americans with Disabilities Act expressly excludes illegal drug use from the definition of a qualified individual with a disability. It is silent on whether permitting the use of medical marijuana is a reasonable accommodation for an otherwise disabled employee; the fact that marijuana is still illegal under federal law suggests that it would not. The answer may be different, however, under state law.

At least one state’s law (Nevada) specifically requires employers to attempt to make reasonable accommodations for the medical needs of an employee who uses medical marijuana. On the other hand, many states’ laws expressly state that employers are not required to “accommodate” the use of medical marijuana during work hours or on work premises. The remaining states’ laws are silent on accommodations. Under all these laws, employers may prohibit the use or being under the influence of marijuana while at work – the only question is whether off-duty use must be permitted.

Several court decisions have examined the interplay of state law and federal law, examining closely the language of the state law, while noting that the Controlled Substances Act does not regulate the employment relationship or expose employers to liability, and that state law may thereby require employers to tolerate the off-duty use of medical marijuana. See Noffsinger v SSC Niantic Operating Co., LLC, 2018 U.S. Dist. LEXIS 150453 (D. Conn. Sept. 5, 2018); Barbuto v Advantage Sales & Mktg., LLC, 78 N.E.3d 37 (Mass. 2017); Callaghan v Darlington Fabrics Corp., No. PC-2014-5680 (R.I. Super. Ct., May 23, 2017). On the other hand, a Maine state court found the CSA to pre-empt state law. Bourgoin v Twin Rivers Paper Co., 187 A.3d 10, 14 (Me. June 14, 2018). Other court decisions have offered protections to medical marijuana users under state discrimination law without reference to federal law. See Whitmire v Wal-Mart Stores, Inc., 2018 U.S. Dist. LEXIS 198407 (D. Ariz. Nov. 21, 2018); Gordon v Consolidated Edison, Inc., 2018 N.Y. Misc. LEXIS 2105 (N.Y. Sup. Ct. May 29, 2018). Thus, employers will need to pay close attention to both the language of the particular state law at issue, as well as how courts in those states react to this issue.

A different analysis applies in the context of the recreational use of marijuana. None of the recreational use statutes requires employers to allow such use, whether at work or off-duty. Some states have statutes that prohibit an employer from taking adverse action against an employee for legal off-duty conduct. Thus far, however, the argument that recreational or even medical marijuana use is legal under state law has not been successful, with the only court to address the issue noting that such use is still illegal under federal law. See Coats v Dish Network, LLC, 350 P.2d 849 (Colo. 2015).

2019 saw the introduction of another aspect of marijuana testing legislation. First New York City, and then Nevada, banned pre-employment testing for marijuana use. This type of legislation is likely to find traction in other states as society grows increasingly tolerant of marijuana use, despite the continued federal prohibition.

Pay Equity

Although Congress passed the Equal Pay Act in 1963, women’s earnings continue to lag behind those of their male counterparts. According to a Pew Research Center analysis of US median earnings, women earned 85% of what men earned in 2018 (a slight improvement over 2017, when women earned 82%). Thus, recent state and local laws have targeted this pay gap through different approaches.

Almost all states have also passed equal pay laws, requiring equal pay for equal work regardless of sex, or laws that prohibit discrimination in wages based on sex. Recently, however, states have taken measures to strengthen these laws. Some have added protected characteristics, such as race or gender identity. They also have extended the time period in which employees may sue, or more specifically defined factors that may be taken into account in establishing legitimate wage differentials.

In addition, an increasing number of states have added pay transparency provisions to their equal pay laws or passed separate pay transparency laws. These laws protect workers’ ability to freely discuss their pay, with the thought that the transparency will encourage equity in compensation. Interestingly, this right already existed for non-management employees under the National Labor Relations Act, regardless of union or non-union status. Additionally, President Obama signed Executive Order 13665 in 2015, providing these protections for employees of government contractors.

Another approach that has been taken by at least 17 states and 18 municipalities is a salary history ban, under which employers are prohibited from asking about an applicant’s compensation history. The premise behind such laws is that compensation is often based on prior earnings, and since women traditionally have been underpaid or arguably are less assertive in negotiating pay than men, this reliance on past salary perpetuates the wage gap.

Sexual Orientation and Gender Identity Discrimination

While Title VII, one of the primary federal anti-discrimination laws, prohibits discrimination based on “sex,” among other things, it does not specifically address sexual orientation or gender identity. The federal Equal Employment Opportunity Commission, which enforces the anti-discrimination laws, has taken the position that sexual orientation and gender identity are encompassed within Title VII’s meaning of “sex,” but this stance has been controversial, even among sister federal agencies such as the Department of Justice. The federal courts are split on the issue, and the US Supreme Court has agreed to decide the issue during its 2019-20 term.

At the state level, however, 23 states and the District of Columbia have passed laws that prohibit discrimination based on sexual orientation, and 21 of those states, along with the District of Columbia, have also prohibited gender identity discrimination. Other states within the jurisdictions of those federal appellate courts that have endorsed the EEOC’s position would also need to comply with the anti-discrimination protections for sexual orientation and gender identity.

Sexual Harassment

The #MeToo movement, starting in 2017, brought about a rapid wave of legislation at the state level, covering a wide range of measures intended to combat sexual harassment. These laws have three primary areas of focus: (1) non-disclosure or confidentiality provisions in settlement agreements, (2) mandatory arbitration or “waiver of rights” agreements and (3) training and policies.

The concern about non-disclosure or confidentiality provisions is that they may protect the identity of alleged harassers, thereby enabling them to continue harassing others. On the other hand, such provisions may be desired by victims in order to protect their privacy. Additionally, some employers may be loath to enter into settlements without some guarantee of confidentiality. At the federal level, Congress included a provision in the Tax Cuts and Jobs Act of 2017 that eliminated tax deductions for payments made by a company or organisation in connection with the settlement of sexual harassment or abuse claims, if the settlement agreement contained a non-disclosure or confidentiality provision that prevents the disclosure of the terms of the agreement. Several states have also enacted laws that restrict – although they do not ban outright – the use of such provisions in sexual harassment settlement agreements.

A variation on these non-disclosure laws arises outside the settlement agreement context, and more broadly prohibits employment agreements that would prevent employees from discussing sexual harassment in the workplace. It is worth noting that the ability of non-management employees to engage in this conduct is already protected by the National Labor Relations Act.

Another primary area of focus in this type of state legislation is mandatory arbitration and “waiver of rights” agreements. Many employers require employees to sign an agreement at the time of hire that binds the parties to arbitrate any disputes that arise in the course of the employment relationship. Other agreements may require employees to waive certain substantive rights or remedies, which may include the right to a jury trial. The concern that has been expressed about such agreements is that they force employees to give up their right to go to court and that they may protect the identity of harassers. The laws that have been enacted and that are being considered in many other states prohibit such agreements with regard to sexual harassment claims. At least one court, in New York, has found that the state’s mandatory arbitration ban is pre-empted by the Federal Arbitration Act; whether other courts will agree is an issue that has yet to be resolved.

The last primary area of focus is training and policies. Prior to 2018, three states – California, Connecticut and Maine – required employers to provide certain employees with sexual harassment prevention training. Since then, two other states – Delaware and New York – along with the District of Columbia (as to tipped employees only) have also passed mandatory training laws, and a number of other states are considering similar legislation. With regard to policies, a number of the recently enacted laws mandate the development of a written anti-harassment policy that meets certain specified requirements.

The individual laws may also contain other provisions aimed at strengthening sexual harassment protections, ranging from reporting to the state, loosening the definition of “harassment,” bans on settlement agreement no-rehire provisions, as well as expanding both remedies and statutes of limitations on sexual harassment claims.

Worker Misclassification

Particularly with the rapidly expanding “gig” economy, there has been heightened interest in the issue of worker misclassification – where employees are improperly classified as independent contractors who are not entitled to the benefits and protections granted to employees. Employers additionally avoid employment taxes on compensation paid to independent contractors, which may be a significant cost saving. While many individuals may be called “independent contractors,” the reality is that the employing entity may exercise such control over aspects of the relationship to render the worker an employee.

Consequently, there have been a number of state laws enacted to address worker misclassification. These laws typically set forth stringent criteria that must be met in order to be deemed an independent contractor. They may require that the independent contractor be certified or given specific mandatory forms. They also typically impose civil or even criminal penalties, monetary and otherwise, on employers who engage in misclassification. Other states have set up task forces to study the issue for future action.

In addition, state courts have weighed in on the issue. For example, the California Supreme Court issued a landmark decision, Dynamex Operations West, Inc. v Superior Court of Los Angeles, 4 Cal. 5th 903 (Cal. Sup. Ct. 2018), announcing a new “ABC” test for determining whether a worker is an employee or an independent contractor. Under the test, which has been adopted by statute in other states, the individual will be presumed to be an employee unless the employer can show each of the following: (i) that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the work contract and in fact, (ii) that the worker performs work that is outside the usual course of the hiring entity's business, and (iii) that the worker is customarily engaged in an independently established trade, occupation or business.

Non-competition Agreements/Covenants Not to Compete

The validity of non-competition agreements that restrict an employee’s ability to be employed in the same line of work is a matter of state law, and it is an issue that has come under increasing attack from state legislatures. States are taking an aggressive approach to limiting the use of non-competition agreements, particularly with regard to low-wage workers. In the past year or so, Illinois, Maine, Maryland, New Hampshire and Washington have banned such non-competition agreements altogether, while Massachusetts has significantly weakened non-competition agreements generally. Similar legislation has been proposed in other states.

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Shook, Hardy & Bacon LLP has a national employment litigation & policy practice that represents corporate employers in complex class action (employment discrimination, and wage and hour), EEOC litigation, unfair competition litigation, whistle-blower claims and high-stakes executive disputes. Innovation and collaboration are SHB hallmarks. With offices in Atlanta, Boston, Chicago, Denver, Houston, Kansas City, London, Los Angeles, Miami, Orange County, Philadelphia, San Francisco, Seattle, Tampa and Washington, DC, and with more than 500 lawyers, Shook serves clients throughout the world.

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Shawe Rosenthal LLP is one of the first law firms in the country devoted exclusively to the representation of management in labour and employment matters, and represents employers throughout the USA in federal and state courts and arbitral forums, as well as before the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor and other administrative agencies. The firm places great emphasis on providing effective and efficient advocacy, responsive client service and sound practical advice. Shawe Rosenthal is the sole Maryland law firm belonging to two major alliances of management labour and employment lawyers: the Employment Law Alliance and Worklaw Network. Both of these alliances afford Shawe Rosenthal access to practitioners of the highest calibre across the country and around the world, giving the firm an unparalleled ability to provide high-quality services to meet its clients’ employment law needs, wherever they may have facilities.

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