Paula Lopez, April 25, 2024

Last week, the U.S. Supreme Court rendered a unanimous decision making it easier for employees to pursue Title VII claims against an employer for a forced transfer even though the employee’s rank and pay are unaffected. In Muldrow v. City of St. Louis, Missouri, the Court’s decision, written by Justice Elena Kagan, rejected the heightened standard followed by the U.S. Court of Appeals for the Eighth Circuit, as well as numerous other circuits, including the U.S. Court of Appeals for the Second Circuit, which has appellate jurisdiction over federal cases filed in New York. The standard rejected by the Court in Muldrow required an employee to show that a forced lateral transfer caused a “significant,” “material” or “substantial” harm in order for the transfer to be considered an actionable adverse employment action under Title VII. In rejecting the heightened standard, the Court clarified that Title VII only requires that an employee show that the transfer caused “some harm” with respect to a term and condition of employment.

Muldrow involved the dismissal of a police officer’s claim against the St. Louis Police Department alleging that her forced lateral transfer was based on gender discrimination in violation of Title VII. Ms. Muldrow, who had worked in a specialized Intelligence Division from 2008 to 2017, alleged that her new supervisor wanted to replace her with a male officer resulting in the forced transfer. Although the transfer did not result in a change to  Muldrow’s rank and pay, she alleged that she was harmed by the transfer because of the changes to the terms and conditions of her employment and that the decision to transfer her was based on her sex. Specifically, Ms. Muldrow went from working as a plainclothes officer in the specialized Intelligence Division where she served as, inter alia, head of the Gun Crimes Unit, was deputized as a task force officer with the FBI, was given FBI credentials, was provided with an unmarked take-home vehicle and worked a set schedule Monday to Friday to a uniformed position in which she oversaw neighborhood patrol officers, was required to work rotating weekend schedules, and lost her FBI credentials and her take-home vehicle.

The district court granted the City’s summary judgment motion and dismissed Ms. Muldrow’s claim, finding that under the precedent in the Eighth Circuit, Muldrow could not meet the heightened standard requiring a showing that the transfer caused “a material employment disadvantage.”  The Eighth Circuit affirmed the dismissal by applying the same heightened standard.

The Supreme Court reversed the dismissal of Ms. Muldrow’s discrimination claim and  resolved a circuit split on the issue of whether an employee challenging a forced transfer under Title VII is required to meet a heightened threshold of scrutiny. The Eighth, First, Second, Fourth, Seventh, Tenth and Eleventh Circuits impose a higher “materiality” standard to determine whether the harm allegedly suffered by the employee bringing the claim is sufficient to state a claim under Title VII. In contrast, the D.C. Circuit’s 2022 en banc decision in Chambers v. District of Columbia, overruled its own prior precedent that the denial or forced acceptance of a job transfer is only actionable under Title VII if the employee suffered an “objective tangible harm” as being unsupported by the language in Title VII.  The D.C. Circuit held that “[o]nce it has been established that an employer has discriminated against an employee with respect to that employee’s ‘terms, conditions, or privileges of employment’ because of a protected characteristic, the analysis is complete. The plain text of Title VII requires no more.”

The Supreme Court’s ruling rejected the district and circuit court’s reasoning that because Muldrow’s rank and pay was not changed by the transfer, she did not suffer a “material employment disadvantage” sufficient to support a Title VII claim. The Court emphasized that the language of Title VII only requires a showing of “some harm respecting an identifiable term or condition of employment” and does not impose the heightened requirement imposed by lower courts of a showing of a “significant”, “serious”, or “material” disadvantage. The Court stated that “[t]o demand ‘significance’ is to add words-and significant words, as it were—to the statute Congress enacted. It is to impose a new requirement on a Title VII claimant, so that the law as applied demands something more of her than the law as written.”

The Court, instead, found that the changes to Ms. Muldrow’s  “responsibilities, perks, and schedule” constitute a sufficient showing of “some harm” caused by the forced transfer to survive a motion to dismiss. In reaching its decision, the Court relied on the express language of Title VII, which makes it unlawful for an employer “‘to fail or refuse to hire or to discharge any individual, or otherwise to discriminate against any individual with respect to his compensation, terms, conditions, or privileges of employment, because of such individual’s race, color, religion, sex, or national origin.’” § 2000e-2(a)(1). Title VII discrimination claims based on forced transfers focus on whether an employee was “discriminated against” with respect to his or her terms and conditions of employment based on race, color, religion, sex or national origin. In this case, Muldrow alleges that the forced transfer was based on her sex and resulted in worse treatment with respect to the terms or conditions of her employment.

Justice Kagan’s ruling rejected the argument made by the City of St. Louis that eliminating the “significant” harm threshold, would open the floodgates to frivolous claims by emphasizing that a plaintiff must still show the existence of “some harm,”  that the harm must relate to the plaintiff’s terms and conditions of employment, and it must be shown that the employer “acted for discriminatory reasons—‘because of’ sex or race or other protected trait.”

By eliminating the higher standard, the Court’s decision makes it easier for employees to avoid an early dismissal of their claim by eliminating a court-imposed evidentiary threshold that is not found in Title VII. Based on the Court’s ruling, employers should carefully review any contemplated changes to an employee’s terms and conditions of employment even if such change will not result in a reduction in pay or rank.

By Andrea Hellman, April 16, 2024

In December 2023, Governor Kathy Hochul signed into law an update to New York State requirements regarding credit card surcharges in sales transactions. The law allows for credit card surcharges but regulates the way in which pricing can be communicated to consumers and limits the additional amounts businesses can charge consumers to pay by credit card rather than cash. The provision, General Business Law Section 518, became effective on February 11, 2024.

The new law provides a credit card surcharge notice requirement for “any seller in any sales transaction imposing a surcharge on a consumer who elects to use a credit card in lieu of payment by cash, check, or similar means.” The broad definition would include, among others, restaurants, retailers, health providers and spas/salons. Sellers charging a higher price to credit card consumers must clearly and conspicuously post the total price for a consumer to use a credit card including the surcharge and may not charge more than the posted price. The information must be provided to the consumer before checkout. The law does not prohibit a “two-tier pricing system” where the credit card price (including the surcharge) is posted next to the cash price.

Additionally, the law caps the surcharge a business can charge a consumer paying by credit card at the actual amount the business must pay to the credit card company for use of the card.

In a letter to New York State local government leaders, the New York State Division of Consumer Protection (“Division”) explained that New York consumers have complained on a widespread basis of retailers, restaurants and service providers imposing a surcharge at the point of sale once a consumer presented a credit card to make payment, with fees ranging from 3% to 5%. The Division distributed “Practical Guidance” to assist local governments in applying the new law, providing examples of both compliant and non-compliant practices.

The following examples were provided as compliant with the law: a business can clearly list both a credit card and cash price; a business can list the higher credit card price and advertise a cash discount (which may be expressed as a percentage); or the business can charge the same price regardless of whether payment is made with a credit card or by cash.

Conversely, the Division provided examples of non-compliant practices such as using signs or price tags advising consumers of an additional fee expressed as a percentage (e.g., “4% credit card processing fee”); building a cash discount into pricing and advising consumers that credit card users will forego this discount, with the adjusted price shown on the receipt; or adding a line item on the consumer’s receipt to reflect a convenience/service/processing, etc. fee for credit card purchasers.

The Division summed up its guidelines with the instruction that businesses can pass along the actual cost of credit card processing fees to consumers but must transparently display the highest total selling price (excluding sales tax) and has posted visual examples of compliant and non-compliant practices here.

Sellers violating the law are subject to a maximum civil penalty of $500 per violation. Enforcement of the law is to be carried out by municipal consumer affairs offices, town/city attorneys, or other lawful designee of city or local government.

New York businesses that charge different prices to cash and credit card consumers should ensure their signage and practices are compliant with the new requirements.

By: Megan J. Muoio

Here are some employment law issues that we are monitoring in 2024. We will continue to post employment law updates on a regular basis.

New York City Creates a Private Right of Action for Violations of its Paid Leave Law

On January 20, 2024, New York City Council amended the City’s Earned Safe and Sick Time Act (“ESSTA”) to create a private right of action for employees to sue their employers for violations of ESSTA without first having to file a complaint with the Department of Consumer and Worker Protection. (“DCWP”). ESSTA provides covered employees with the right to use safe and sick time for the care and treatment of themselves and family members, as well as the right to use safe and sick time to seek legal and social services if they or a family member is a victim of domestic violence. In addition, under ESSTA’s penalties provision, employees who bring suit may be able to recover compensatory damages, injunctive and declaratory relief, attorneys’ fees, and costs. Notably, if an employee files both a complaint with the DCWP and a civil action against their employer for violation of ESSTA, the DCWP may still assess a violation if it determines that the civil action did not resolve the issue, either by judgment or settlement. Employers should be cautious to ensure they are in compliance with all provisions of ESSTA in order to avoid both penalties from DCWP and civil liability. The amendment will go into effect on March 20, 2024.

Appellate Court to Consider Marital Status Discrimination Protections

An action is pending in the Second Circuit Court of Appeals that will test the meaning of New York City’s Human Rights Law (“NYCHRL”), which prohibits discrimination on the basis of a number of protected characteristics, including marital status. Employee Kelvin Hunter sued his employer, the company that syndicated “The Wendy Williams Show,” after he was terminated, alleged because of his impending divorce from host Wendy Williams. Hunter argued that his termination was on the basis of marital status to a particular individual, rather than on the basis of his single or married status. The United States District Court for the Southern District of New York dismissed his claim in September 2023. Hunter appealed to the Second Circuit Court of Appeals, which has recently asked the New York State Court of Appeals to rule on the issue of whether the NYCHRL defines marital status as plainly defined or also in relation to another person. Industry groups have filed amicus briefs, urging the Court of Appeals to maintain the ordinary meaning of marital status and not expand the definition in a way that could affect employers’ anti-nepotism and conflict of interest policies. A decision from the Court of Appeals is expected later this spring.

Department of Labor Rule Narrows Scope of Independent Contractor Classification

In January 2024, the Department of Labor finalized a new rule regarding the classification of workers as independent contractors. The new rule restores an earlier standard that required employers to weigh a variety of factors in order to determine whether a worker was properly classified as an independent contractor, or should have been classified as an employee and provided with all of the benefits associated with that classification. As a result of the new rule, it is expected that the courts will see more lawsuits over the misclassification of workers. Employers and industry groups criticize the return to the old rule, arguing that the result will be the classification of most workers as employees and a decrease in flexibility for workers and employers.

To determine whether a worker is properly classified as an independent contractor, an employer will have to weigh the following factors: (1) the degree to which the employer controls how the work is done; (2) the worker’s opportunity for profit or loss; (3) the amount of skill and initiative required for the work; (4) the degree of permanence of the working relationship; (5) the worker’s investment in equipment or materials required for the task; and (6) the extent to which the service rendered is an integral part of the employer’s business. Employers, when faced with the prospect of a “totality of the circumstances” test, may face confusion and uncertainty in their worker classifications going forward. Employers should take an inventory of their workers and evaluate whether, under the factors set forth above, workers are properly classified.

FTC to Finalize a Ban on Non-Compete Agreements

In January 2023, the Federal Trade Commission proposed a ban on noncompete agreements that restrict employees’ mobility among employers. The FTC’s proposed rule stated that noncompete agreements are a method of unfair competition that violates the Federal Trade Commission Act and concluded that noncompete agreements suppress wages, stifle innovation, and make it harder for entrepreneurs to start new businesses. Although some states have already banned noncompete agreements, New York Governor Kathy Hochul recently vetoed an attempt to ban noncompete agreements. If the FTC’s proposed rule is enacted, the ban would apply nationwide. Employers, however, argue that noncompete agreements allow them to protect their valuable intellectual property and ability to retain key employees. Industry groups have argued that the proposed FTC rule is overbroad. Instead, they have proposed revisions that would either allow noncompete agreements to be enforced against employees who earn more than a certain compensation threshold, or to would limit noncompete agreements to managerial employees, executive-level employees, or employees with access to competitively-sensitive information and prohibit the use of noncompete agreements in specific industries in which such agreements are against public policy. It is expected that the FTC could finalize the rule as soon as April 2024.

Nicholas Fortuna, February 29, 2024

This term the Supreme Court will determine the amount of deference that courts should give federal agencies’ interpretation of laws that they administer. The Court heard two cases, Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo, challenging a federal rule that requires fisheries to pay salaries of compliance observers on their boats. The payment requirement is based on the interpretation of federal law by a federal agency, National Marine Fisheries Service. At issue, is a broader question: Whether the justices will do away with well-established precedent known as the Chevron doctrine that could severely limit the power of federal administrative agencies.

The doctrine is named after the Supreme Court’s 1984 opinion in Chevron v. Natural Resource Defense Council, which upheld a regulation issued by the Environmental Protection Agency. The Court set out a two-part test for courts to use in evaluating an agency’s interpretation of a statute it administers. The court must first determine whether Congress has directly addressed the issue. If it has not, the court will uphold the agency’s interpretation if it is reasonable.

The Supreme Court has already limited Chevron by creating procedural hurdles agencies must clear before invoking it. And in 2022, the Court formally embraced a new principle, the major questions doctrine, which requires agencies to point to clear textual authority before undertaking important policy initiatives.

Agencies do not just do big things; they do lots of small things. That is where the doctrine is most important.  A ruling tossing out Chevron would task judges to referee minor questions – including arcane, deeply technical matters that Congress has not expressly addressed but are the province of experts and specialists in government.

The issue looms large for federal regulators because the Chevron doctrine allows agencies to respond to current industry developments and shifting scientific technologies. For instance, financial regulators who may look to oversee cryptocurrency and artificial intelligence but are relying on statutes that predate the technologies to regulate them. Another example is environmental regulation, with agencies relying on the clean air and clean water acts that were enacted in the 1960s and 70s to address new chemicals, or to combat new pollution threats.

During oral argument, Justice Elena Kagan cited as an example a hypothetical bill to regulate artificial intelligence. Congress, she said, “knows there are going to be gaps because Congress can hardly see a week in the future.” So it would want people “who actually know about AI and are accountable to the political process to make decisions.” Courts, she emphasized, “don’t even know what questions are about AI,” much less the answers.

After oral arguments, it seemed that the Court is likely to limit the application of the Chevron Doctrine. Whether it throws it out completely is up in the air. If it does, Elizabeth Prelogar, the solicitor general of the United States, fears that it would result in an “unwarranted shock to the legal system,” as federal judges would be embroiled in intricate questions for which they lack the scientific, economic, or technical expertise, and the resulting slew of inconsistent lower court decisions leading to many appeals and inaction on important matters regulated by the federal government.

A decision by the Supreme Court is expected by June of this year.

Paula Lopez, February 22, 2024

After vetoing a prior version of bill intended to protect freelancers in New York, on November 22, 2023, Governor Hochul signed into law Senate Bill 5026/Assembly Bill 6040 known as the Freelance Isn’t Free Act (the “Act”). The Act takes effect on May 20, 2024. The Act mirrors New York City’s 2017 Freelance Isn’t Free Act (N.Y.C. Administrative Code §§ 20-927 et seq.), which was the first law passed in the country for the protection of freelance workers. The Act aims to protect freelancers working outside New York City from non-payment and retaliation, as well as to provide freelancers with recourse against businesses who violate the law’s requirements.

The Act defines a freelancer worker as “any natural person or any organization composed of no more than one natural person, whether or not incorporated or employing a trade name, that is hired or retained as an independent contractor by a hiring party to provide services in exchange for” compensation. The definition excludes certain sales representatives, legal practitioners, medical professionals, and construction contractors. The compensation threshold under the Act is “an amount equal to or greater than eight hundred dollars, either by itself or when aggregated with all contracts between the same hiring party and freelance worker during an immediately preceding one hundred and twenty days.”

The law obligates a hiring party, defined as “any person who retains a freelance worker to provide any services,” to enter into a written contract with all independent contractors providing services valued at $800 or more. The definition of “hiring party” excludes the U.S. government, the state of New York, a municipality, and foreign governments.

The Act expressly requires the hiring party and freelance worker to enter into a written contract which includes, at minimum, the following terms:

  1. Names and mailing addresses of the freelance worker and hiring party;
  2. An itemized accounting of all the services to be provided by the freelance worker, the value of the services, the rate and method of compensation for such services;
  3. The payment date;
  4. The date by which the freelance worker must submit a list of services rendered under such contract to enable the hiring party to meet internal processing deadlines for payment.

The Act also provides that the labor commissioner may implement rules requiring additional terms. The labor commissioner will also make sample contracts available to the public on its website. A copy of the written contract must be provided to the freelance worker and the hiring party is required to keep the contract for a period of six years.

The compensation provided for in the written contract must be paid either on or before the date set in the contract, or no later than 30 days after the freelancer completes the services under the contract. The Act further states that, once a freelancer has started performing under the contract, the hiring party cannot condition timely payment on the freelancer accepting less than full compensation.

The Act also includes an anti-retaliation provision prohibiting a hiring party from denying a work opportunity to, discriminating against, or taking any action that penalizes or deters a freelance worker from exercising any right under the Act.  A freelance worker is afforded the right to file a complaint with the commissioner of labor or bring a civil action for violations of rights under the Act. A freelancer must institute an action for non-payment under the contract within six years and an action for failure to provide a written contract within two years.

A freelancer who prevails for claims for non-payment may recover 200% of the underpayment, injunctive relief, reasonable attorneys’ fees and costs. A freelancer can recover statutory damages in the amount of $250.00 for violation of the written contract requirement, and statutory damages in an amount equal to the value of the underlying contract for violations of the anti-retaliation provision. In addition to providing for the recovery of civil and criminal penalties, the Act empowers the Attorney General to commence a civil action and recover civil penalties of up to $25,000 from a hiring party who has engaged in a pattern or practice of violation the Act.

New York businesses engaged in hiring independent contractors should familiarize themselves with the increased obligations and risks imposed by the Act. Businesses should review their contracts and recordkeeping policies to ensure compliance with the requirements of the Act and should periodically monitor the New York Department of Labor website for further guidance on compliance with the Act.