2019 Labor & Employment in Review

By: Melanie Dunajeski

Labor and employment issues were front and center in the courts and in administrative agencies during 2019. Here is a sampling of some of the major issues from the last year.

(1) SCOTUS hears arguments on whether Title VII prohibits discrimination on basis of sexual orientation or gender identity:  The US Supreme Court (“SCOTUS”) heard arguments on October 8, 2019 on a trio of landmark cases. The cases, Altitude Express v. Zarda, Bostock v. Clayton County, Georgia, and R.G. & G.R. Harris Funeral Homes v. EEOC  examine whether adverse employment actions allegedly taken on the basis of an employee’s sexual orientation and/or gender identity violate Title VII of the Civil Rights Act of 1964’s bar on discrimination in employment “on the basis of sex.”  Decisions on these cases are expected to issue by the end of the current court term in June 2020 and are likely to be the most significant in recent years.

 (2) EEOC discards salary data “component 2” requirement of EEO 1: Revisions to the EEO-1 Form made in 2016 drastically expanded the data collected from employers on that form, to include summary pay data by job category, separated into 12 pay “bands” for each category.  While the rationale for collecting the data was to identify areas where equal pay issues may be the most persistent,  employers and business groups were highly critical of the intrusiveness of the new requirements as well as the data gathering and reporting burden that the new form placed on employers.  After multiple delays,  the first report for employers of more than 100 persons was due September 30, 2019. Shortly thereafter, the EEOC announced that it would no longer collect component 2 data in the future.   There may be further court challenges to this move by pay equity groups, so stay tuned.  Savvy employers may want to use that form on their own to conduct an audit of their own pay practices and identify any possible areas of concern.

(3) Indiana Blue Pencil doctrine is “eraser” only: Indiana considers employee non-competition and non-solicitation agreements to be in restraint of trade, and thus disfavored by the law and subject to strict construction.  One tool that Indiana courts have utilized in interpreting agreements containing non-solicitation agreements is the so-called “blue pencil doctrine” which permits a court to strike unreasonable portions from a restrictive covenant if the covenant is clearly divisible into parts and if by so doing the restriction may be rendered reasonable –and therefore enforceable. The Indiana Supreme Court recently clarified when and how the blue pencil doctrine can be used in Heraeus Medical, LLC et al. v. Zimmer, Inc. et al., Indiana Supreme Court, December 3, 2019.  The subject agreement contained a “reformation clause” that purported to give any court interpreting the agreement the power to re-write any offending provision. Relying on that clause, the Court of Appeals re-wrote the scope of the class of persons the employee was prohibited from soliciting, ostensibly under the blue pencil rule as expanded by the invitation of the parties contained in the reformation clause. On further appeal to the Indiana Supreme Court, Chief Justice Loretta Rush writing for the unanimous court made clear that parties could not contract to expand the blue pencil doctrine beyond the strictly limited contours already existing under Indiana law. Parties may not incorporate a “magic phrase” into their agreements that will delegate to the courts the task of crafting a reasonable agreement. “While reformation clauses might encourage an interpreting court to blue-pencil an agreement, they do not allow a court to overstep the bounds of Indiana’s blue pencil doctrine by adding terms.” The doctrine, the opinion advises, “is really an eraser.”   Once again, Indiana employers are encouraged to use the least restrictive means possible to protect their business interests.

(4) National Labor Relations Board Employer Friendly Decisions: The NLRB rolled back a number of Obama-Era decisions, re-establishing that an employer’s obligation to deduct union dues from employee wages ends when the Collective Bargaining Agreement expires (Valley Hospital Medical Center, Inc., 368 NLRB 139 (2019)), that an employee does not have a presumptive right to use employer-provided email during non-work hours for union organizing and communications (Caesar’s Entertainment, 368 NLRB 143 (2019) overturning the 2014 Purple Communications decision), and re-establishing the employer’s right to keep ongoing investigations confidential (Apogee Retail, LLC, 368 NLRB 44 (2019) applying the new Boeing test as to the permissibility of work rules).  Other employer-friendly moves include returning to a greater level of deference for arbitrators’ resolutions of grievances that are also the subject of unfair labor practices charges and  giving employers more time to comply with pre-election requirements and resolve voter eligibility and bargaining unit scope before elections are held.  The new final rule on joint employers issued January 2020 and imposes a new stringent four-factor test that substantially reverses the 2015 Browning-Ferris opinion . The new rule goes into effect March 16 and is good news for businesses who regularly contract with others.

(5) New salary basis test under FLSA: The salary threshold for the “White Collar” exemptions from overtime under the Fair Labor Standards Act (“FLSA”) increased from the current $23,660 ($455/week) to $35,568 ($648/week) on January 1, 2020. Under the FLSA, unless an employee meets both the “salary test” and the “duties test” of one or more of the exemptions set forth in that law, then that employee must be paid 1.5 times their “regular rate” for hours worked in excess of 40 per week. The new rule also allows up to 10% of the threshold to be satisfied by non-discretionary bonuses and incentive payments, including commissions, that are paid annually. The rule also changes the threshold for the “Highly Compensated Employee” exemption from $100,000 to $107,432.  It is estimated that between 1.2 and 1.4 million employees are affected by this change, many in types of work that traditionally have low salaries and long hours, such as restaurant management, retail management, and  non-profit administration. The new rule does not contain provisions for automatic upward adjustments at set intervals, although the DOL has indicated that the thresholds will be re-examined with more regularity—the last increase in the threshold was in 2004.

 (6) DOL opinion letters on designation and use of FMLA leave:  The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) released its Opinion Letter FMLA2019-1A on March 14, 2019 advising employers (1) that they cannot delay designating qualifying leave as Family Medical Leave Act (FMLA) leave; and (2) that employers cannot designate more than 12 weeks of leave per year as FMLA leave (26 weeks per year if the leave qualifies as military caregiver leave under the Act). Under FMLA covered employers must give eligible employees up to 12 weeks of leave per year for qualifying medical or family reasons. This leave is job-protected and benefit-protected but unpaid. In practice, many employers have permitted eligible employees to tap available paid leave (such as vacation or sick time) before designating FMLA leave and starting the 12-week annual maximum clock ticking—a practice previously endorsed by the Ninth Circuit Court of Appeals in Escriba v. Foster Poultry Farms Inc. (2014). In Escriba, the court allowed that an employee could decline to begin to use available FMLA leave until the employee exhausted leave available under other employer policies. This practice—and the Escriba holding– has now been specifically disapproved by the March 14th  DOL opinion letter. Thus, under the Opinion Letter even if the employer and the employee both desire to delay the start of an FMLA-qualifying leave while an employee utilizes other accrued paid leave, this is not an acceptable practice.  Note that although the DOL opinion letter is considered persuasive authority it does not overturn Escriba or any other judicial precedent. While courts are not required to defer to DOL Opinion Letters, an employer’s reliance on a DOL Opinion Letter may give the employer the defense in a subsequent lawsuit that it was acting in good faith reliance on the Opinion Letter when making the FMLA decisions.

(7) No expansion of Indiana at-will doctrine (public policy exception):  Indiana held firm in its support of the Employment at Will doctrine in an intriguing case where an employee left work to testify at the unemployment benefits appeal hearing of a former co-worker, believing that he had been subpoenaed to do so.  He was terminated shortly thereafter on other grounds, which he asserted were pretextual and filed suit for wrongful termination.  The trial court granted the employer’s Motion for Summary judgment and the employee appealed. The court of appeals agreed with the trial court-and held that the employee’s act of testifying at a co-worker’s hearing did not fall under the public policy exception of the Indiana employment at will doctrine where no valid subpoena had issued. The employee’s belief that he had been subpoenaed did not protect him from discharge, since appearing on the mere belief that he had been subpoenaed did not give rise to a duty to testify, nor the protection that the public policy exception to the doctrine provides. Perkins v. Memorial Hospital of South Bend, 121 N.E.3d 1089 (Ind.App.2019).

The DSV Labor & Employment group posts blog posts monthly on new and emerging issues-follow our posts at www.dsvlaw.com.