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Employer Liability Concerns in Employee Management: Federal

Author: Jose M. Jara, Buck Consultants


  • Minimizing claims by employees and the government requires good management of employee activities, having set policies and procedures in place, maintaining appropriate documentation and records, and having a good internal investigation process. See Minimizing Employee Claims.
  • Damages and penalties under labor and employment laws are comprehensive and can amount to significant liability to an employer who is not compliant. See Damages and Penalties.
  • Trends in employment liability have centered on government enforcement efforts. Enforcement actions, which are prevalent, have primarily been in the area of retaliation, whistleblowing, misclassification of employees, immigration issues, and reductions in force. See Trends in Risk.
  • The US Department of Labor (DOL), the Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) have implemented major efforts to increase enforcement of labor and employment laws. See Enforcement Initiatives.

Minimizing Employee Claims

Managing Employee Conduct

Poor employee management increases the number of employee charges, complaints and claims. In today's workplace environment, it is essential to manage employees to ensure the employee clearly understands their duties and responsibilities to the employer. As a starting point, the following actions would be advisable:

  • Provide notice and a copy of the employer's manual and policies and procedures to the employees;
  • Provide notice to employees regarding any "expectations of privacy" by disclosing the use of any surveillance, searches, email and telephones policies;
  • Maintain employee personal matters outside the workplace (i.e., any questions to employee must be tied into the employer, employee performance or job responsibilities);
  • Maintain updated employee manuals and policies and procedures;
  • Ensure proper training is given to all employees on the employer's policies and procedures; and
  • Ensure employees sign and acknowledge that they received the proper training.

Maintaining a safe workplace begins by having a careful hiring practice as well as a continuous monitoring process, especially when employees have public and consumer contact.


Background checks must be in compliance with the Fair Credit Reporting Act (FCRA), and be conducted of all employees in a uniform systematic manner.

See Preemployment Screening and Testing: Federal; Promotions: Federal.

Following the FCRA and applying fair procedures may decrease claims of discrimination, unfair labor or employment practices, or charges of retaliation in the future.

Background screening will aid in hiring employees who are a cultural fit to the organization. Because employers may be held liable for the actions of an employee when he or she is working within the scope of his or her employment relationship, implement hiring practices that center on integrity.

Workplace Violence

In certain instances, background checks may help to reduce violence in the workplace by identifying potentially violent applicants during a preemployment relationship. In addition, best practices dictate taking immediate action of any issues relating to violence. See Negligent Hiring: Federal. For instance, should an employee carry an unauthorized weapon at work and threaten co-workers and/or consumers, his or her termination of employment must be immediate. See Employee Discipline: Federal. This policy should be implemented uniformly and be well-documented. See Workplace Security: Federal.

Workplace Harassment/Bullying

In addition to workplace safety, employers should address workplace harassment and bullying in order to minimize potential liability under federal and state laws. Although no federal law specifically prevents harassment against employees who are not members of a protected class, a number of state laws and other protections may expose an employer to claims.

Workplace bullying is disruptive to the workplace and needs to be stopped as soon as it is discovered. Employers should implement and enforce zero tolerance anti-harassment policies, and guard against any workplace conduct that may be intimidating or harassing to any employees, contractors or consumers. See Employee Handbooks - Work Rules - Employee Conduct: Federal. In extreme circumstances, an employer can and should obtain a restraining order.

Privacy Claims

Minimizing privacy claims requires implementing practices vigilant of the discrimination laws during the different stages of employment. At the recruitment and hiring stage, employers need to be mindful of preemployment screening and testing practices and ensure compliance with federal and state laws. See Preemployment Screening and Testing: Federal. During the employment relationship, employers should develop policies that address a number of areas, including:

  • Drug and alcohol testing;
  • Health and medical information, ensuring compliance with the Health Insurance Portability and Accountability Act (HIPAA) and Genetic Information Nondiscrimination Act (GINA);
  • Trade secrets and corporate intellectual property;
  • Workplace theft; and
  • Use of computers and mobile devices.

Employees should be notified of existing policies and obtain acknowledgements that they have been reviewed and understood. Such privacy policies should discourage employees from maintaining any personal items in the office. See Employee Privacy: Federal.


Training employees with respect to internal policies minimizes employer risk. Although certain training is required by law (e.g., sexual harassment training in certain states, as well as apprenticeship requirements for general contractors), best practices dictate offering as much training to as many employees as is feasible. See Training and Development. Training should be given on new and developing topics, such as sexual harassment and social media. A signed acknowledgment form that the training was given should be filed in the employee's personnel file.

With respect to job-based training, a review of the selection process should be undertaken for formal training. Employers should monitor the composition of the group selected for training and analyze any trends. These actions should be taken through the life of an employee's career.

Actions undertaken must be documented. For example, upon promoting an employee, an acknowledgement form should be signed by the employee indicating that proper training was provided. See Promotions: Federal.

Employment Practices Liability Insurance Policy (EPLI)

Notwithstanding having all the proper manuals, policies and procedures in place, a review of the adequacy of the Employment Practices Liability Insurance Policy (EPLI) should be made. Employers should determine if the policy limits are sufficient, and should determine whether the covered "wrongful acts" are appropriate. Typical coverage includes claims made by workers for employer violations of their legal employee rights, such as:

  • Sexual harassment and discrimination claims;
  • Breach of employment contract;
  • Wrongful termination; and
  • Failure to promote.

Employers should understand the policy limits and exclusions, especially with respect to prior administrative hearings, liability limits and control of litigation. See Organizational Risk: Federal.


Employee Waivers/Acknowledgments

Employees should be required to sign an acknowledgement form indicating that they received and read the employee handbook and all policies. Again, it is important that these acknowledgment forms be retained in the employee's personnel file, generally for a period of six years. See Recordkeeping for Employee Management Purposes: Federal. Each time the handbook or policy is amended or a new policy is implemented, an employee should sign a new acknowledgement form. See Employee Handbooks - Work Rules - Employee Conduct: Federal.

Performance Appraisals

In evaluating an employee's performance, certain uniform procedures should be in place. For example, at the evaluation meeting, the supervisor should be accompanied by someone from human resources. This third party should take careful notes of any communications made in the meeting. The employee being reviewed should also sign an acknowledgement form indicating that the performance evaluation was explained to them. In the case where an employee refuses to sign the form, such failure to sign should also be documented. See Performance Appraisals: Federal.

Maintenance of Employee Records

Federal statutes (such as FLSA, FMLA, Title VII, and OSHA) require the maintenance of employee records. See Recordkeeping for Employee Management Purposes: Federal. However, beyond complying with the law, having a proper documentation process can ensure evidence is preserved that could later exonerate an alleged wrongful employment practice.

The starting point for proper maintenance of records is the employee handbook. Handbooks or manuals should be updated periodically and should be implemented in a uniform manner. A retention policy should be in place to explain how to store records, when to update the records, and at what point should the records be destroyed. See Employee Access to Personnel File Policy.

It is important to note that once a discrimination claim is filed by an individual or governmental agency, the employer must maintain all personnel records relating to the claim through the final disposition of the claims. +29 C.F.R. § 1602.14; +29 C.F.R. § 1627.3. Courts have ruled that if the records are not properly maintained, then there is an inference in favor of the employee that the discriminatory act occurred.

Practical Example

Marcus is fired from his position at Acme Shipping for attendance problems. Marcus sues Acme under Title VII, claiming that he is being treated differently because of his race. Acme fails to produce attendance records of employees similarly situated to Marcus. The court rules that Acme's failure to produce records supports Marcus's case of race discrimination. See Clay v. United Parcel Service, Inc., +501 F.3d 695 (6th Cir. 2007).

Employers should keep records in separate files when necessary. Personnel files must not include:

Internal Investigations - Process and Procedures

Employers should have clear processes and procedures in place for internal investigations, in order to avoid liability. See Internal Investigations: Federal. A person, usually in HR, should be designated to take complaints and maintain confidentiality to the extent provided by law. Employers should ensure supervisors report complaints immediately.

When receiving an employee complaint, whether written or oral, the following steps should be taken:

  • Determine if a formal internal investigation is necessary;
  • Determine if the acts may cause immediate business harm and if so, take immediate action;
  • Retain an outside investigator, if necessary;
  • Review the applicable sections of the employee handbook, internal policies and procedures;
  • Outline the investigation;
  • Conduct interviews of the employee, the accused and any witnesses;
  • Gather and analyze any relevant documents;
  • Evaluate the evidence;
  • Document the investigation (explain why a decision was made and how);
  • Consider going to in-house counsel or outside counsel depending on the gravity of the matter;
  • Apply any appropriate discipline;
  • Continue to monitor the situation to ensure the problem has ceased and is not recurring; and
  • Guard against any form of retaliation.

See Discipline an Employee Using Progressive Discipline.

Avoiding Retaliation Claims

Employers need to be mindful that even oral complaints may trigger protections and requirements under various laws with anti-retaliation provisions. These protections may be triggered even where there is no specific mention of an oral complaint. Employers should provide training to supervisors and managers to determine when an oral communication amounts to a complaint, and to determine whether to proceed with an internal investigation.

For example, the FLSA prohibits retaliation by an employer against an employee who "filed a complaint" regarding wage and hour concerns. This language could be interpreted to require a written complaint. But, not so. The Supreme Court ruled that an oral complaint regarding wage and hour issues protects an employee from retaliation.

Employees should be encouraged to report incidents of harassment and discrimination before the conduct becomes pervasive and severe. Employers should be aware that, under certain circumstances, attention must be given to third parties involved in the incident. Title VII's statutory prohibitions protect a third party who is in the "zone of interest" of the law's protections.

Practical Example

Miriam filed a sex discrimination claim with the EEOC against Acme Steel. Thereafter, Eric, Miriam's fiancé, was fired and filed a lawsuit for retaliation. The court found that Eric was protected from retaliation because of Miriam's protected activity (that is, filing a claim with the EEOC). See Thompson v. N. Am. Stainless, LP, +131 S. Ct. 863 (2011).

The Supreme Court has stated that the firing of an employee's close family member will almost always receive retaliation protection, whereas an employer inflicting a minor reprisal on an employee's acquaintance will not receive retaliation protection. See EEO - Retaliation: Federal.

Periodic training should be provided to supervisors to be wary of third party rights, and to guard against retaliatory employment practices. See Training and Development: Federal.

Avoiding "Cat's Paw"

A "cat's paw" case is a lawsuit seeking to hold an employer liable for the bad acts of a supervisor, even though that supervisor did not make the ultimate employment decision (such as firing or demoting an employee). The term "cat's paw" is derived from a fable involving a monkey inducing a cat to remove chestnuts roasting on a fire. In the fable, the cat burns its paw and the monkey runs away with the chestnuts.

In the employment context, a supervisor engaging in a discriminatory practice induces the HR manager or other supervisor into making an employment decision to warn, demote or fire an employee. See Staub v. Proctor Hosp., +131 S.Ct. 1186 (2011); USERRA: Federal. Employers should note that in Vance v. Ball State University, +133 S.Ct. 2434 (2013), the Supreme Court ruled that only those employees who can take significant employment actions against a complaining employee (such as hiring, firing, failing to promote, demoting or making a decision causing a significant change in benefits) can be considered supervisors for purposes of employer liability for acts of a supervisor under Title VII of the Civil Rights Act of 1964.

If an employer can show that the immediate supervisor's bad acts did not induce the adverse employment action, then that employer can limit its "cat's paw" liability. For example, an employer may show that it received a number of complaints regarding a claimant's poor performance, which were made by employees other than a biased supervisor. See Johnson v. Miles, +2011 US Dist. LEXIS 99578 (E.D. Ky. Sept 2, 2011).

Review of an employee's personnel file warnings and how and why they were issued could minimize "cat's paw" liability. Conducting an independent investigation, which does not rely on the findings of the complaining supervisor, may also help. However, if an independent investigation relies at least in part on a biased supervisor's report, an employer will not eliminate its risk of "cat's paw" liability. See EEO - Discrimination: Federal.

Damages and Penalties

Inflation Adjustment Act

The 2015 Amendments to the Inflation Adjustment Act allows for federal civil penalties to be adjusted annually based on the Bureau of Labor Statistics' Consumer Price Index. The adjustments first went into effect on August 1, 2016, and are reassessed on January 15 of each year following. Penalties under the following laws and provisions, enforced by the Departments of Justice and Labor, are affected:

  • Mine Safety and Health Act;
  • Employee Retirement Income Security Act (ERISA);
  • OSH Act;
  • Fair Labor Standards Act;
  • Migrant and Seasonal Agricultural Worker Protection Act;
  • Employee Polygraph Protection Act;
  • Longshore and Harbor Workers' Compensation Act;
  • Black Lung Benefits Act;
  • False Claims Act;
  • Anti-Kickback Act;
  • Immigration and Nationality Act;
  • Unlawful employment of aliens penalties under the Immigration Reform and Control Act of 1986 (IRCA);
  • Paperwork violations (per relevant individual), which include Form I-9 paperwork violations;
  • Violations related to a participating employer's failure to notify of final nonconfirmation of an employee's employment eligibility;
  • Unfair and discriminatory immigration-related employment practice violations and document abuse; and
  • Violations related to IRCA document fraud.

See, e.g., +28 CFR Section 85.5; +30 CFR 100.3; +30 CFR 100.4; +29 CFR 2575.2; +29 CFR 1903.15; +29 CFR 825.300; +29 CFR 578.3; +29 CFR 579.1; +29 CFR 500.1; +20 CFR 655.810; +29 CFR 501.19; +20 CFR 702.204; +20 CFR 726.302.

Discrimination Claims

The majority of claims in labor and employment law stem from discrimination suits, where employees allege different treatment based on age, disability, gender, sex or other protected categories. See EEO - Discrimination: Federal. In states where additional categories, such as sexual orientation, are designated as protected classes for purposes of a discrimination lawsuit, employers are subject to similar damages or penalties.

Damages involving a discrimination claim may include:

  • Back pay and benefits;
  • Injunctive relief (such as ordering the employer to hire or to promote an employee);
  • Compensatory damages (including pain, suffering, emotional distress, loss of enjoyment of life, medical expenses and out of pocket expenses for seeking new employment);
  • Punitive damages, which act to punish malicious or reckless acts of discrimination;
  • Required implementation of new procedures to end the discriminating practice; and
  • Attorney fees, expert fees and court costs.

These damages are awarded to "make whole" the employee, as if the discrimination did not occur.

Awards of punitive damages are granted in situations where the defendant acted "willfully," with "gross negligence," "maliciously " or with "reckless indifference." However, the employer can mitigate its exposure by demonstrating efforts of good-faith compliance with the law, such as providing training to employees and managers. See Kolstad v. American Dental Ass'n, +527 US 526 (1999); Training and Development.

Even if a jury awards punitive damages to an employee, an employer may appeal to the court, arguing that the damages are excessive. However, recent trends show verdicts in the millions of dollars in favor of employees who have proven their discrimination claims based on age and sexual orientation.

Family and Medical Leave Act (FMLA) Claims

The FMLA provides eligible employees to take unpaid, job-protected leave, with continued group health insurance coverage, for certain family and medical situations as if the employee was still at work. See FMLA: Federal. The FMLA and its associated regulations prohibit an employer from:

  • Interfering with, restraining or denying the exercise of any FMLA right;
  • Discriminating or retaliating against an employee or prospective employee for having exercised an FMLA right;
  • Discharging or discriminating against an employee complaining about any unlawful employment practice under the FMLA; and
  • Discharging or discriminating against an employee who has filed a charge, given information about an FMLA claim, or testified about an FMLA claim.

The Department of Labor's (DOL) Wage and Hour Division enforces the FMLA. Generally, claims must be made within two years of the date of violation.

An employer may be liable as a joint employer under the FMLA. The analysis for determining joint employment under the FMLA is the same as that under the FLSA. See Joint Employment Liability; FMLA: Federal.

Wage and Hour Claims

Under the Fair Labor Standards Act (FLSA), all covered nonexempt employees must be paid at least the minimum wage rate set under the applicable time period for all hours worked. See Hours Worked: Federal. In addition, the FLSA requires that overtime pay be set at time and a half the regular rate for all hours worked over a 40-hour workweek. See Overtime: Federal. Employers may not fire or in any way retaliate against an employee who has filed a complaint under the FLSA. +29 U.S.C. § 215(a)(3).

The DOL's Wage and Hour Division enforces the FLSA's provisions. However, affected employees have the option of filing private complaints. Private claims can settle for millions of dollars. Recent cases have alleged the following:

  • Unpaid overtime compensation and break periods;
  • Failure to pay drivers overtime wages;
  • Implementation of formal and informal wage and hour policies causing the failure to pay employees accurately for hours worked;
  • Failure to pay overtime to assistant store managers; and
  • Misclassification of loan underwriters as exempt from overtime pay requirements.

Employment Contracts

Conflicts involving senior executives with employment contracts usually entail the use of litigation early in the dispute to enforce provisions of the employment contract. At times, a senior executive could seek to remove another executive because it would be detrimental to the organization for a variety of reasons. This implicates employment contracts that may trigger termination "for cause" provisions, which seek to limit the ousted executive's rights.

Additional concerns center around:

  • Noncompete clauses;
  • Tortious interference with a contractual relationship;
  • Breach of contract;
  • Negligence; and
  • Defamation.

Once these disputes arise, analysis of the terms of the employment agreement become crucial. Liability increases when these terms were:

  • Not clearly set forth in the contract;
  • May not have applied to a particular employee for the type of job category they were in (such as having a territorial provisions for a salesperson, when the employee is in technology); or
  • Just plain ambiguous.

Employee Retirement Income Security Act (ERISA) Claims

Highly litigated cases in ERISA today revolve around cases involving employer stock drop and inappropriate or duplicative fees. See Retirement Benefits. Liability often centers on whether an individual meets the statutory definition of fiduciary, which has been addressed in ERISA regulations taking effect on June 7, 2016. See ERISA: Fiduciary and Disclosure Duties.

Employer Stock Cases

ERISA's Section 404 protects employees where the plan's fiduciaries breached their fiduciary duties by:

  • Imprudently offering employer stock as an investment option in the employer's defined contribution plan when it was imprudent to do so; and
  • Failing to adequately disclose pertinent information to the plan participants regarding the employer stock.

In Fifth Third Bancorp v. Dudenhoeffer, +2014 U.S. LEXIS 4495 (2014), the Supreme Court ruled that a plan administrator for an employee stock ownership plan (ESOP) is not entitled to any special presumption of prudence over other ERISA fiduciaries in a stock-drop case. However, ESOP fiduciaries are not liable for losses that result from a failure to diversify assets (as are other ERISA fiduciaries) because an ESOP by its very nature involves specific company stock - the employer's. +29 USCS § 1104(a)(2).

These cases usually do not go to trial and eventually settle in the millions. Minimizing the risk of a stock drop lawsuit includes:

  • Reviewing the overall investment options in the defined contribution plan to ensure it meet's the plan's investment policy;
  • Reviewing the plan document language and determining whether to take away any discretion on the plan's fiduciary to invest in employer stock by mandating the investment in employer stock;
  • Consider limiting/capping the investment in employer stock;
  • Have special procedures in place should the employer's stock drop sharply; and
  • Conduct a fiduciary compliance review of the investment options and plan's procedures.

Fee Claims

In fee litigation, employees allege that the:

  • Plan was charged excessive fees because the plan fiduciaries could have obtained a lower institutional fee;
  • Fiduciaries failed to unbundle and ascertain that the fees were reasonable to meet ERISA's reasonable contract requirement; or
  • Plan paid duplicative fees.

In Tibble v. Edison International, +2015 U.S. LEXIS 3171, the Supreme Court ruled that plan fiduciaries have a continuing obligation to monitor mutual funds for excessive fees and, generally, to ensure that all investments are prudent. The Court explained that "a trustee has a continuing duty to monitor trust investments and remove imprudent ones," a duty that is separate and apart from selecting investments at the outset.

The case law regarding fee claims continues to develop. Minimizing risks in this area entails:

  • Conducting a fee audit to ascertain whether fees are comparable to the market, are not duplicative and meet the requirements of the new regulations; and
  • Consider issuing a "request for proposal" (RFP) for an investment platform and determine if the current plan provider is competitive.

Claims Regarding Service Providers

ERISA claims have also surfaced in the area of selecting and monitoring of service providers. Employers should pay specific attention to the selection process. Further, if an RFP has not been issued in the past three years for the service provider, it may be prudent to issue one to ensure it meets the reasonable contract requirements under ERISA.

Claims Regarding Delinquent Contributions

Other common ERISA claims include delinquent contributions, which are very high on the Employee Benefits Security Administration's (EBSA's) radar. The DOL asserts that the employee contributions to the plan have to be made as soon as reasonably segregable from the employer's general assets. This can be determined to be as soon as three business days, in other cases up to seven business days, but not often greater than that. The DOL would require that the principal amount be made to the plan as well as any earnings or interest on the number of days later.

The DOL created an amnesty program, the "Voluntary Fiduciary Compliance Program," where employers/fiduciaries can self-determine any delinquencies, report them voluntarily to the DOL, and be able to avoid sanctions and penalties. While great caution should be taken when entering into a voluntary compliance program with the government, in this area it is advisable to do so. The process is fairly efficient because the documentation and time expended in filing is advantageous when compared to a protracted DOL investigation.

Retaliation and Other Claims

Lastly, ERISA too provides that an employee cannot be retaliated against in connection with seeking benefits.

Recent ERISA private settlements include actions alleging:

  • Breach of fiduciary duty for offering unduly expense mutual funds as an investment option in its retirement plan;
  • Breach of fiduciary duty by offering company proprietary funds as opposed to better performing, lower-cost option; and
  • Mismanagement of the employee stock fund with the 401(k) plan.

Defend Trade Secrets Act Claims

The Defend Trade Secrets Act (DTSA) allows for a federal cause of action for trade secret theft or misappropriation claims. Therefore, an employer may bring a claim in federal court as well as state court for trade secret theft. The DTSA does not preempt any state laws patterned after the Uniform Trade Secrets Act that may be in effect.

An employer may be the subject of an offensive DTSA claim in federal court by another employer.

Under the DTSA, an employer may seek the following remedies:

  • Injunctions;
  • Reasonable royalties;
  • Compensatory damages, or damages for actual loss and for unjust enrichment or as a royalty for unauthorized use or disclosure;
  • Exemplary damages, or two times the actual damages permitted for willful or malicious misappropriation;
  • Third party seizure, in which an application for seizure may be brought for enforcement by a court without any notice to the employer, subject to certain limitations; and
  • Attorney fees.

If an employer files in federal court, a unanimous jury verdict is required (this may not be a state requirement). In addition, an employer may file for declaratory relief (i.e., no actual damages would be awarded but the court makes a binding declaration affecting the rights of the parties: such as whether or not certain business information is a trade secret).

The DTSA does not recognize the "inevitable disclosure" argument, which allows an employer to enjoin, or prevent, a former employee from going to work for certain competitors based on:

  • The employee's previous exposure to and knowledge of the employer's trade secrets; and
  • The inevitability that, as part of having similar job responsibilities, the employee will disclose those trade secrets during the course of his or her employment for a competitor of the employer's.

In addition, an employee's defense of reverse engineering (back engineering, or taking apart an object or design in order to see how it works for duplication or enhancement purposes) is available under the DTSA.

When considering whether to initiate a claim under the DTSA, an employer should note that the DTSA contains a whistleblower immunity provision. This provision protects an employee, consultant or contractor who discloses a trade secret from civil or criminal liability and the disclosure:

  • Is made:
    • In confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and
    • Solely for the purpose of reporting or investigating a suspected violation of law; or
  • Is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

Out of all employment law areas, the largest numbers of private lawsuits recently filed were employment discrimination claims. In addition, the EEOC has set historic high results in filing discrimination charges. The EEOC's enforcement efforts have produced monetary results in the hundreds of millions of dollars. Following employment discriminations lawsuits, were lawsuits under ERISA and the FLSA.

Under the FLSA, which sets the rules for minimum wage, overtime, child labor and employer recordkeeping, there has been a steady number of claims filed in federal court. Most of the claims seek recovery for unpaid work time and overtime wages. Employers need to ensure that they review what is compensable time, and whether it includes time preparing for work and cleaning up after work.

Don-Doff Actions

Don-Doff Actions are lawsuits filed under the FLSA claiming that time to dress in work clothing prior to and after the work shift should be included in time paid. See Enforcement, Liability, Prevention and Defense: Federal. Many of these types of cases have been settling for large sums.

Practical Example

Steven and seven of his co-workers sued their employer, Acme Corn Processors, because they were not paid for time changing into clothing required while on the plant. Acme policy required all workers to wear uniforms, hard-toed shoes, safety gloves, ear plugs and a hard hat. Once the employees were wearing their uniforms and special equipment, they could not leave the workplace unless they took off the uniform and equipment, which would take additional time. Acme did not pay the employees for the time spent putting on their special equipment. Due to mounting legal costs, Acme settled the case for $1.3 million, including almost $1 million in back pay and over $300,000 in attorney fees. See Hartman et al. v. Archer Daniels Midland Co., No. 3:10-cv-00135 (D.Iowa filed October 21, 2010).

The result in the practical example above may be somewhat different in a labor environment. With respect to a unionized workforce, a long-standing custom or practice may become an implied term in a collective bargaining agreement (CBA). If such a long-standing custom or practice was not to pay for time donning and doffing the required work clothing, and the CBA is silent on don-doff time, then courts will accept the long standing custom or practice of not paying for don-doff time as an implied term of the CBA.

Practical Example

Margot works as an hourly employee on the production floor of a snack-making factory owned by Acme Foods. Margot must wear shoes, safety glasses, earplugs, hairnets, work pants and an Acme shirt. Margot must leave the shoes, shirt and pants at the factory at the end of her shift. Margot's wages are negotiated in a CBA between Acme and the local union. The current CBA follows the terms of previous CBAs regarding nonpayment of wages for clothes-changing, dating back to when Acme first became unionized 30 years ago.

Under the CBA, the time it takes Margot to don and doff her uniform is not part of her workweek. Because there has been a longstanding policy of non-payment for clothes-changing, Margot will likely lose a claim alleging Acme failed to pay her for time spent donning and doffing clothes and protective equipment. See Curry v. Kraft Foods Global, Inc., +2012 US Dist. LEXIS 3720 (Jan. 12, 2012).

Misclassification of Employees

Regulators have taken a heightened interest in the misclassification of employees. Estimated losses run in the billions due to nonpayment of Social Security taxes, unemployment taxes, and income taxes. The DOL and IRS have a memorandum of understanding and have established an amnesty program for voluntary compliance. See US Department of Labor Initiatives.

Misclassifying employees exposes the employer to back taxes, back wages, possible I-9 violations and violations of other employment laws. Because of this heightened interest by the government, employers should conduct a self-audit if a large number of independent contractors are retained.

The IRS focuses on the degree of control and independence in determining whether a worker is an employee or independent contractor. See Types of Employers and Workers > Independent Contractors > Under the Tax Code. Such degree of control and independence is broken into three categories: behavioral control, financial control, and the relationship of the parties. See Types of Employers and Workers > Independent Contractors > The Simplified IRS Three-Factor Test.

Note that states may have additional requirements with respect to the classification of independent contractors.

Practical Example

Layla, an insurance agent with Acme Insurance Company, claimed that she was an employee and not an independent contractor. Layla claimed that Acme owed unpaid employee entitlements under the state Labor Code. Layla sued in state court.

The court found Layla to be an independent contractor by applying the following factors:

  • Acme managers were only available to assist Layla and not supervise her.
  • Training was generally available, but not mandatory.
  • Acme provided software to Layla as a "best practice," in order to enable her to sell Acme products more successfully.
  • Acme did not reimburse Layla for business expenses.
  • Acme did not guarantee Layla compensation. Her payments were comprised of commissions and bonuses.
  • Layla's position was nonexclusive. She was free to solicit other insurance companies for separate business.
  • Agents who chose to use the Acme's office were required to pay a fee for their workspace and telephone service.
  • Layla's occupation of Acme's offices required a license.
  • Layla was responsible for her own tools. See Arnold v. Mutual of Omaha Insurance Company, +2011 Cal. App. LEXIS 1647 (Dec. 30, 2011).

The DOL and IRS have a misclassification amnesty program. Entering into the program limits the amounts of taxes, penalties and/or sanctions that may be imposed.

Immigration Audits

Under the Immigration Reform and Control Act of 1986 (IRCA), employers must hire US citizens or non-citizens with USCIS employment authorization. New hires must have completed I-9 forms. See Immigration, Form I-9 and Work Visas: Federal. These issues are under the jurisdiction of the:

  • US Department of Homeland Security (DHS) and its enforcement arm, Immigration and Customs Enforcement (commonly referred to as "ICE"); and
  • US Department of Justice and its Civil Rights Division's Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC). (Effective January 18, 2017, the Office of Special Counsel was renamed the Immigrant and Employee Rights Section.)

ICE - I-9 Audits

Employers are required to maintain I-9 Forms which certify that the employee is a US citizen or eligible to work based on a VISA or other immigration program. ICE can initiate an audit with only three days' notice to the employer.

Failure to have a completed I-9 form can amount to a range of penalties, which are adjusted for inflation. See Inflation Adjustment Act. Where the employer knew or should have known an employee was ineligible, penalties are much higher. In addition, settlements with the Civil Rights Division involving unfair documentary practices during the employee eligibility verification process include periodic monitoring on these issues for a period of three years or more.

To minimize risks, an employer must adequately control and supervise employment eligibility verification practices. Best practices dictate the maintenance of a separate folder only containing the I-9 forms. An employer may also consider using the electronic system E-verify. E-verify compares Social Security numbers with a DHS database and provides verification regarding an employee's eligibility. However, careful consideration must be taken before participating in this federal program. Participation in the program may open doors to future ICE or Social Security Administration enforcement reviews.

DOL H-1B Audits

H-1B employees are nonimmigrant foreign workers who have a professional or special occupation. An employer must attest to the employee's wages, working conditions, benefits. In addition, an employer must specifically provide the employee's work location.

The DOL's Wage and Hour Division investigates and enforces H-1B practices. The DOL can investigate whether H-1B employees are being paid at or above required wages. The DOL can verify whether the employer has received any unauthorized payments from the H-1B employee, or violated any rules of the H-1B program. Investigations can be triggered by an employee or former employee complaint or through targeting, such as a specified industry. Violations subject the employer to civil penalties, possible criminal penalties, and debarment from participating in the H-1B program. In addition, the DOL publicly discloses those employers who willfully violated the H-1B Program, and those employers who are debarred from the program.

Discrimination Claims Based on National Origin

Note that IRCA also prohibits employers from discriminating on the basis of national origin or citizenship status in employment. +8 U.S.C. § 1324b. Jurisdiction in this regard rests with the Justice Department and its Civil Rights Division's Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC), which has been renamed the Immigrant and Employee Rights Section effective January 18, 2017. The Civil Rights Division may bring a complaint before an Administrative Law Judge (ALJ). However, a complainant need not wait for the agency to file with the ALJ to file his or her own complaint. +8 U.S.C. § 1324; +28 C.F.R. § 44.300; +28 C.F.R. § 44.301; +28 C.F.R. § 44.302; +28 C.F.R. § 44.303.

The Civil Rights Division has entered into Memoranda of Understanding with various federal, state and local agencies (as well as a number of international authorities) in order to share information and coordinate enforcement actions. Notably, the Civil Rights Division has entered into partnership agreements with the US Citizenship and Immigration Services, the Equal Employment Opportunity Commission and the National Labor Relations Board.

Reductions in Force

Discrimination Liability

During tumultuous global economic times, in order to avoid discrimination or similar claims, carefully consider the pool of employees that will be included in a reduction in force (RIF). See Involuntary Terminations: Federal. The employer should adopt a reasonable method, which relies on factors other than age. However, at times, a neutral and reasonable method can result in a disparate-impact discrimination case, where the RIF had a discriminatory effect on older workers. Prior to implementing an RIF method:

  • Review and analyze the potential results of the method;
  • Retain relevant documentation and records; and
  • Ensure records are stored in an easily retrievable manner.

An employer has the burden of persuading a court that the method employed was nondiscriminatory and reasonable. See Meacham v. Knolls Atomic Power Laboratory, +554 US 84 (2008). Therefore, adequate documentation is essential to a good defense.

ERISA Liability

ERISA-type claims may arise in a RIF involving severance, vesting of pension benefits, health care and COBRA. See Reductions in Force; COBRA Liability. If an employer decides to offer severance to an employee or group of employees, a determination should be made as to whether such severance is a plan that is governed under ERISA. Furthermore, the employer must be very careful as to the communications made to employees to avoid what are coined Varity type claims.

Practical Example

Acme Corporation had a plan, "Project Sunshine", to transfer its troubled divisions to its subsidiary, Bankrupt Holdings. Acme held a meeting with employees to persuade them to voluntarily transfer to Bankrupt Holdings, guaranteeing no change in their benefits. However, Bankrupt Holdings was broke from the first day the employees transferred. The transferred employees lost all their nonpension benefits. The Project Sunshine employees sued. The court held that:

  • Acme was acting as a fiduciary when it held a meeting and communicated information about benefits;
  • Acme breached its fiduciary duties by misleading the employees; and
  • ERISA provides a number of options for relief for the Project Sunshine employees, including offering individual employees reinstatement in the benefits plan. See Varity Corp. v. Howe et al., +516 US 489 1996).

In connection with the vesting of benefits, if an employer lays off a significant number of employees, the IRS may consider that pension plan to be partially terminated. The IRS uses a facts and circumstances test in determining whether a partial termination has occurred. However, despite the test, the IRS assumes a partial termination has occurred if there are 20 percent or more affected participants in the layoff.

If a partial termination has occurred, all affected participants must become fully vested in their pension account. Failure to vest such participants places the plan at risk of being disqualified. The consequences of failing to maintain the plan's qualified status are:

  • The employer loses its deductions for nonvested contributions;
  • Participants will be subject to taxes on recognized income for vested benefits;
  • The plan's trust will be subject to taxes on recognized income; and
  • Lawsuits from plan participants for breach of fiduciary duty.

Aside from consulting with an expert to determine the percentage of participants being affected, the employer may file for a "determination letter" from the IRS to determine whether a termination has occurred.

COBRA Liability

Lastly, an employer involved in a RIF must ensure that benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) are extended to eligible employees for the appropriate coverage period.


Health Care Continuation (COBRA): Federal;

Compliance, Reporting and Disclosure Requirements: Federal.

After an employee's termination or after a reduction in hours that causes an employee to lose health benefits, the employer must provide the plan administrator within 30 days. Thereafter, within 14 days after the administrator receives notice from the employer, the administrator must provide notice to the individual employee and their covered dependents of their right to elect COBRA coverage. Individuals are generally provided COBRA benefits for a maximum period of 18 months.

Whistleblower Liability

There has been a large increase in employee claims regarding whistleblower retaliation. Because a number of laws address an employee's right to "blow the whistle" on perceived corporate ill conduct, employers should be aware of whistleblower protections, filing deadlines and potential liabilities. Employers should take affirmative steps to minimize their liability by:

  • Developing and enforcing policies against retaliation;
  • Avoiding strict employee confidentiality requirements;
  • Implementing internal procedures to process employee complaints; and
  • Emphasizing integrity within the workplace.

Occupational Safety and Health Administration (OSHA) Whistleblower Protection Program

OSHA enforces 22 whistleblower protection statutes, including the Occupational Safety and Health Act (OSH Act).

See Employee Discipline: Federal; HR and Workplace Safety (OSHA Compliance): Federal.

The OSH Act prohibits any person from firing or in any way retaliating against any employee because he or she has exercised rights under the OSH Act, such as:

  • Complaining to OSHA;
  • Seeking an OSHA inspection;
  • Participating in an OSHA inspection;
  • Participating or testifying in any proceeding related to an OSHA inspection; and
  • Reporting a work-related injury, illness, or fatality. +29 U.S.C. § 660 (c).

The other whistleblower protection statutes administered by OSHA protect employees who report violations of various airline, commercial motor carrier, consumer product, environmental, financial reform, food safety, health care reform, nuclear, pipeline, public transportation agency, railroad, maritime and securities laws.

The 22 statutes enforced by OSHA and the regulations governing their administration are as follows:

OSHA prioritizes its response to complaints by first addressing and correcting systemic problems. Whistleblower complaints under any statute may be filed orally or in writing, and in any language. See Whistleblower Statute Filing Requirements. In addition, OSHA accepts electronically filed complaints on its Whistleblower Protection Program website.

In resolving these cases on behalf of whistleblowers, OSHA seeks to achieve full restitution, i.e., 100 percent relief, wherever possible. Settlements usually include the following:

  • Reinstatement to the same or equivalent job, including restoration of seniority and benefits that the employee would have earned but for the retaliation. If acceptable to the employee, a respondent may offer front pay (an agreed upon cash settlement) in lieu of reinstatement.
  • "Front pay" in the context of settlement is a term referring to future wage losses, calculated from the time of discharge, and projected to an agreed-upon future date. Front pay may be used in lieu of reinstatement when one of the parties wishes to avoid reinstatement and the other agrees.
  • Wages lost due to the adverse action, offset by interim earnings. That is, any wages earned in the employee's attempt to lessen his or her losses are subtracted from the full back wages. However, unemployment compensation benefits may never be considered as an offset to back pay.
  • Erasing of warnings, reprimands, or derogatory references resulting from the protected activity, which have been placed in the employee's personnel file or other records.
  • The employer's agreement to provide a neutral reference to potential employers of the employee.
  • Posting of a notice to employees stating that the employer agreed to comply with the relevant whistleblower statute and that the employee has been awarded appropriate relief. If the employer usually uses email or intranet to communicate with employees, then the employer should use email or intranet to post the notice to employees.
  • Compensatory damages, such as:
    • Out-of-pocket medical expenses resulting from the cancellation of a company insurance policy;
    • Expenses incurred in searching for another job;
    • Vested fund or profit-sharing losses;
    • Property loss resulting from missed payments; and
    • Compensation for mental distress caused by the adverse action, as well as out-of-pocket expenses for treatment by a mental health professional and medication related to that distress.
  • Attorney fees, if authorized by the applicable laws.
  • An agreed-upon lump-sum payment to be made at the time of the signing of the settlement agreement.
  • Punitive damages may be considered under certain circumstances, such as:
    • When a supervisor takes an adverse action against an employee with the knowledge that the adverse action would violate whistleblower protections. The only exception to the awarding of punitive damages under these circumstances is if the corporate employer had a clear-cut, enforced policy against retaliation.
    • When the respondent's conduct is particularly egregious, such as:
      • When a firing is accompanied by previous harassment or subsequent blacklisting;
      • When the employee has been discharged because of his or her association with a whistleblower;
      • When a group of whistleblowers has been discharged; or
      • When there has been a pattern or practice of retaliation in violation of the statutes OSHA enforces.

US Securities and Exchange Commission (SEC) Whistleblower Program

The SEC is authorized to make monetary rewards to individuals who provide original information that leads to an SEC enforcement action resulting in over $1,000,000 in sanctions. Section 922 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111-203, § 922(a). Awards are made from the SEC's Investor Protection Fund in the amount of 10 to 30 percent of the monetary sanctions collected.

Complaints in this area concern:

  • Market manipulation;
  • Corporate disclosures and financial statements;
  • Offering fraud;
  • Violations of Foreign Corrupt Practices Act, which addresses bribery of foreign nationals;
  • Insider trading;
  • Trading and pricing;
  • Municipal securities and public pensions; and
  • Unregistered offerings.

Employees can report alleged violations directly to the SEC without submitting an internal complaint. However, the SEC incentivizes employees who report alleged violations to the employer first by increasing their potential reward. Notably, the Supreme Court has ruled that the anti-retaliation provision of Dodd-Frank extends only to those individuals who have reported a violation of the securities laws to the SEC. See Digital Realty Trust, Inc. v. Somers, +2018 U.S. Lexis 1377 (2018).

Employers should strongly consider having a whistleblower policy, providing training on the policy, and encouraging employees to file internal complaints prior to going to the SEC.

False Claims Act

The federal False Claims Act (FCA), the country's oldest whistleblower law, provides that someone may be subject to liability if he or she:

  • Knowingly presents to a US Government officer or employee a false or fraudulent claim for payment or approval; or
  • Knowingly makes, uses or causes to be made or used, a false record or statement to get a false or fraudulent claim paid.

+31 USCS § 3729.

The terms knowing and knowingly mean that a person:

  • Has actual knowledge of the information;
  • Acts in deliberate ignorance of the truth or falsity of the information; or
  • Acts in reckless disregard of the truth or falsity of the information.

The FCA does not require proof of fraudulent intent.

The FCA allows individuals who blow the whistle regarding fraud occurring against the government to file a lawsuit. +31 USCS § 3730. As an incentive, these individuals - called "relators" - are entitled to a share of any monetary recovery. The FCA has a "first-to-file" bar - only the first relator to file a lawsuit may reap any percentage of a court's monetary award.

In Cochise Consultancy, Inc. v. US ex rel. Hunt, the Supreme Court clarified the statute of limitations for relators. +2019 U.S. LEXIS 3400. Relators have six years after the statutory violation occurred in which to file a claim under the False Claims Act. However, if the government declines to intervene, a relator has three years after the federal government has knowledge of the case but declines to intervene, but not more than 10 years after the violation, to file the claim. +31 USCS § 3731(b)(2).

In Cochise Consultancy, the Court clarified that private relators are not required to investigate or prosecute a FCA action.

The FCA contains an anti-retaliation provision, which protects employee conduct in furtherance of a protected activity under the FCA, including:

  • Investigation for a claim;
  • Initiation of a claim;
  • Testimony for a claim; or
  • Assistance in a claim.

In addition, the anti-retaliation provision protects other efforts to stop one or more FCA violations. +31 USCS § 3730.

The FCA has a number of state and local counterparts.

Internal Revenue Service Awards Program

The IRS offers an awards program for whistleblowers. If the IRS proceeds with any administrative or judicial action for tax law violations or tax fraud based on information brought to the IRS's attention by an individual, the individual may receive as an award between 15 and 30 percent of the proceeds collected as a result of the action or from any related settlement. The determination of the amount of the award by the Whistleblower Office depends on the extent to which the individual contributed to the enforcement action.

For less substantial contributions, the Whistleblower Office may award up to 10 percent of the proceeds collected as a result of the action or from any settlement, taking into account the significance of the individual's information and the role of the individual and the individual's legal representative in contributing to the action.

For information provided after July 1, 2019, the IRS may disclose to an individual providing information under the awards program:

  • Return information related to the investigation of any taxpayer on whom the individual has provided information, but only to the extent that the disclosure is necessary in obtaining information not otherwise reasonably available with respect to the correct determination of tax liability or the amount of tax to be collected.
  • Updates on whistleblower investigations. The IRS must disclose the following information to an individual providing information:
    • Within 60 days of a referral, a notice that a case for which the individual has provided information has been referred for an audit or examination.
    • Within 60 days of a payment, a notice to an individual providing information that a taxpayer has made a tax payment with respect to tax liability.
    • On a written request by the individual:
      • Information on the status and stage of any investigation or action related to such information; and
      • In the case of a determination of the amount of any whistleblower award, the reasons for the determination.

Sec. 1405 of +116 H.R. 3151, amending +26 USCS § 6103 and +26 USCS § 7623.

Enforcement Initiatives

In addition to individual employee claims, employers should monitor regulatory efforts in enforcing employment laws, either through investigations or the courts. Because of the heightened regulatory focus, employers should conduct a self-review or audit, especially in major areas such as:

  • Employee misclassification;
  • Internal investigation processes and procedures;
  • Whistleblower retaliation; and
  • Retirement plan investment options and fees.

Additionally, employers should strongly consider whether to adopt and implement a social media policy. An employer setting its social media rules must proceed with caution.

See Employee Handbooks - Work Rules - Employee Conduct: Federal; How to Draft and Enforce a Social Media Policy in the Workplace; Social Media Policy.

Major enforcement initiatives of the Department of Labor, the Equal Employment Opportunity Commission and the National Labor Relations Board are set forth below.

US Department of Labor Initiatives

Joint Employment Liability

Joint employment exists when a person is employed by two or more employers such that the employers are responsible, both individually and jointly, for compliance obligations.

Joint employment concerns arise when an employer chooses to use contingent workers. Contingent workers run the gamut from independent contractors to part-time, temporary, seasonal, casual or leased employees.

There are different tests to determine joint employment, and this employment law area continues to evolve. An employer should make conscientious management decisions in order to avoid liability as a joint employer. See How to Manage Contingent or Temporary Workers.

The DOL enforces a number of statutes that may give rise to joint employment liability, including: the FLSA, the FMLA, and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA).

Specific cases continue to be litigated and shaped in the courts. The courts and the DOL examine the economic realities of the relationship to determine if a joint-employer relationship exists. An employer may wish to consider:

  • Whether the services provided are integral to an employer's business;
  • The permanency of the working relationship;
  • The worker's investment in facilities and equipment;
  • The opportunity for profit and loss; and
  • The control the employer exercises over the worker.

The FLSA and the MSPA broadly define employment, "to suffer or permit to work." Joint employment may occur if an employee has two or more technically separate but related or associated employers (or horizontal joint employment). See +29 C.F.R. 791.2 (FLSA regulation). In addition, joint employment may be found if one employer provides labor to another employer and the workers are economically dependent on both employers (or vertical joint employment). +29 C.F.R. 500.20(h)(5) (MSPA regulation).

A determination that an employer is a joint employer may result in awards of back wages and damages for minimum wage and overtime violations under the FLSA.

The joint employment standard employed by the DOL differs from the analysis implemented by the NLRB. See National Labor Relations Board (NLRB) Initiatives.

The US Department of Labor (DOL) plans to publish a Notice of Proposed Rulemaking (NPRM) to update and clarify its interpretation of joint employment status under the Fair Labor Standards Act (FLSA). See Overtime: Federal.

The DOL's proposed regulation considers two joint employment scenarios:

  1. When two employers simultaneously benefit from an employee's work; and
  2. When one employer employs a worker for one set of hours in a workweek, and another employer employs the same worker for a separate set of hours in the same workweek.

DOL Budget Initiatives

The Secretary of Labor has identified a number of initiatives, including the following:

  • Providing an additional $1.5 billion for workforce development grants;
  • Providing a paid parental leave benefit within the UI program to new parents, including adoptive parents;
  • Investing in apprenticeships, and enhancing outreach, training and assistance to employers to ensure workplace safety; and
  • Refocusing and reforming the structure of the DOL.

See Department of Labor Budget in Brief.

Equal Employment Opportunity Commission (EEOC) Initiatives

The EEOC enforces the following laws:

  • Title VII of the Civil Rights Act of 1964 (Title VII), which prohibits employment discrimination on the basis of race, color, religion, sex, or national origin, +42 U.S.C. § 2000e ;
  • The Age Discrimination in Employment Act of 1967 (ADEA), which prohibits employment discrimination against individuals 40 years of age and older, +29 U.S.C. § 621;
  • The Equal Pay Act of 1963 (EPA), which prohibits discrimination on the basis of sex in compensation for substantially equal work performed under similar conditions, +29 U.S.C. § 206(d);
  • Section 501 of the Rehabilitation Act of 1973, which prohibits employment discrimination against federal employees with disabilities, +29 U.S.C. § 791;
  • Title I and Title V of the Americans with Disabilities Act of 1990 (ADA), which prohibits employment discrimination on the basis of disability in the private sector and in state and local government, +42 U.S.C. § 12101; and
  • The Genetic Information Nondiscrimination Act of 2008 (GINA), which prohibits employment discrimination based on genetic information, +110 P.L. 233.

Most of these laws apply to private, state and local government employers with 15 or more employees, labor organizations, employment agencies, and the federal government. The ADEA applies to employers with 20 or more employees. There is no minimum employee requirement under the EPA.

See EEO - Discrimination: Federal; EEO - Harassment: Federal; EEO - Retaliation: Federal.

Title VII and Executive Order 12067 also authorize the EEOC to coordinate and lead federal efforts to combat workplace discrimination.+43 F.R. 28967. Charges alleging retaliation under all the statutes the EEOC enforces have been the most numerous, followed by discrimination claims based on race, sex, disability and age.

The EEOC's enforcement of the ADA produces monetary relief in the tens of millions. Back impairments, orthopedic impairments, depression and diabetes are frequently cited impairments under the ADA. The EEOC has received a number of charges under GINA, which prohibits discrimination on the basis of genetic information, including family medical history. GINA case law is still developing.

The EEOC implements strategies in order to reduce employment discrimination and to remedy discriminatory practices. The EEOC is strategically targeting its efforts to ensure the strongest and broadest impact possible in its efforts to stop unlawful employment discrimination.

The EEOC will be setting a minimum percentage of cases in its litigation docket to be systemic cases. Systemic cases are those that address a pattern, practice or policy of alleged discrimination and/or class cases where the alleged discrimination has a broad impact on an industry, profession, company, or geographic area. In addition, investigations of systemic discrimination will be vigorously pursued.

The EEOC will seek equitable relief, when possible, which may include training for supervisors and employees, development of policies and practices to deter future discrimination, and external monitoring of employer actions, as appropriate.

Therefore, employers would be well advised to:

  • Invest in training for supervisors and employees;
  • Develop policies and procedures that address discrimination, harassment and retaliation;
  • Ensure the accessibility of their premises and provide reasonable accommodations to employees; and
  • Preserve the confidentiality of sensitive employee information to the extent possible, including information acquired through an internal investigation.

EEOC Strategic Plan

The EEOC has approved its strategic plan for 2017 to 2021. The EEOC will continue to focus on the following national priorities:

  • Eliminating barriers in recruitment and hiring;
  • Protecting vulnerable workers, including immigrant and migrant workers, from discrimination;
  • Addressing selected emerging and developing issues;
  • Ensuring equal pay protections for all workers;
  • Preserving access to the legal system; and
  • Preventing systemic harassment.

However, the updated SEP adds two areas to the emerging issues priority:

  • Issues related to "complex employment relationships" in the workplace, alluding to the current gig economy and focusing specifically on temporary workers, staffing agencies and independent contractor relationships; and
  • Issues related to backlash discrimination against those who are, or who are perceived to be, Muslim or Sikh, or persons of Arab, Middle Eastern or South Asian descent.

Regarding its priority on barriers to recruiting, the EEOC will focus on a lack of diversity in technology and the increasing use of data-driven screening tools. The EEOC also continues to focus on gender-based pay discrimination.

National Labor Relations Board (NLRB) Initiatives

Social Media Initiatives

The NLRB has focused on employer social media policies and employees' social media interactions. The National Labor Relations Act protects employees' concerted activity regarding the terms and conditions of their employment. The NLRB has sought to clarify its position with respect to the extent to which employee communications on social media sites are concerted and, therefore, protected under the National Labor Relations Act. To that end, the Office of the General Counsel issued its third report on social media.

In certain cases involving the use of Facebook, the NLRB has found that the employees were engaged in lawful concerted activity. In other cases, the NLRB found that the employers' social media policies were unlawfully overbroad.

Essentially, the NLRB's findings have been focused on the following areas:

  • Employer policies which prohibit discussion of wages or working conditions among employees are too broad and sweeping and are, therefore, illegal;
  • Employees engage in "protected concerted activity" when they discuss terms and conditions of employment with coworkers on social media sites; and
  • Employees' comments that are nothing more than mere gripes made in relation to group activity among employees are not protected.

Even though the law in this area may be developing, an employer may use a variety of tools to enforce its policies while still respecting its workers' rights.

See Employee Handbooks - Work Rules - Employee Conduct: Federal; How to Draft and Enforce a Social Media Policy in the Workplace; and Social Media Policy.

Employer Rules

NLRB decisions have addressed whether certain work rules or employee handbook statements would be reasonably construed to prohibit or restrict employees from engaging in concerted activities protected under Section 7 of the National Labor Relations Act (NLRA), such as discussions of terms and conditions of employment and union organizing.

These decisions provide lawful and unlawful examples of the following rules and policies frequently at issue:

  • Confidentiality rules;
  • Employee conduct/professionalism rules;
  • Third party/media communications rules;
  • Logos, copyrights and trademark rules;
  • Photography and recording rules;
  • Rules restricting employees from leaving work; and
  • Conflict of interest rules.

With regard to workplace rules, the NLRB has set forth a two-part test to determine whether "facially neutral" rules, or rules that are not explicitly labor-related, are lawful under the NLRA. The Boeing Co., +365 NLRB No. 154 (Dec. 14, 2017). To determine whether a facially neutral rule could reasonably be interpreted to interfere with the exercise of NLRA rights, the NLRB evaluates:

  1. The nature and extent of the potential impact on NLRA rights; and
  2. Legitimate justifications associated with the rule.

The Boeing decision results in a balancing test between a rule's impact on NLRA rights and the lawful business justifications for implementation.

In addition, the NLRB General Counsel issued Memorandum GC 18-02 in December 2017, which explains that while many NLRB rulings of "lawful" and "unlawful" language still stand, the Board will reexamine employer rules in cases going forward, and may shift its stance on these issues.

Joint-Employer Standard

Employers, whether in a unionized, partially unionized or union-free workplace, must meet certain NLRB requirements arising from applicable joint-employment obligations. The NLRB may find a joint-employment relationship exists even if an employer has indirect, and not direct, control over the terms and conditions of employment or simply reserves the right to exercise such control. Browning-Ferris Industries of California, Inc., +2015 NLRB LEXIS 672 (N.L.R.B. Aug. 27, 2015). (The Hy-Brand Industrial Contractors, Ltd., +365 NLRB No. 156 (Dec. 15, 2017), which briefly overturned Browning-Ferris, has been vacated).

The NLRB determines whether:

  • Two or more entities are both employers within the meaning of the common law definition of joint employers; and
  • They share or generally co-determine the matters governing the essential terms and conditions of employment.

The NLRB has expanded what it considers essential terms and conditions of employment in holding an entity to be a joint employer.

Essential terms and conditions of employment generally concern the core subject of wages, hours, hiring, firing and discipline. However, the NLRB may also interpret these to include:

  • Delivering the number of workers to be supplied;
  • Scheduling;
  • Assigning overtime;
  • Assigning work; and
  • Evaluating the manner and method of work performance.

If an employer is held to satisfy the requirements of the NLRB's joint-employer standard, then the employer:

  • May be subject to the NLRB election process;
  • Have joint bargaining obligations;
  • Have expanded liability for unfair labor practices and breach of collective bargaining agreements and union activities (e.g., picketing).

Future Developments

There are no developments to report at this time. Continue to check XpertHR regularly for the latest information on this and other topics.

Additional Resources

GAO Report, "Employee Misclassification Improved Outreach Could Help Ensure Proper Worker Classification"

IRS Pub. 15-A Employer's Supplemental Tax Guide

EEOC Enforcement and Litigation Statistics