U.S. Court of Appeals for The Second Circuit Says Title VII Covers Discrimination Based on Sexual Orientation
Nicholas Fortuna, March 7, 2018
The Second U.S. Circuit Court of Appeals ruled last week that Title VII of the Civil Rights Act of 1964’s prohibition against sex bias in the workplace also prohibits discrimination against gay employees, becoming the second federal appellate court to do so. The case was first decided by a three-judge panel of the Circuit Court and then reargued at a rare en banc hearing – before all the judges of the court. The three-judge panel ruled against extending Title VII’s reach to include sexual orientation and the full court reversed. The decision creates another avenue to bring the issue back to the U.S. Supreme Court, which declined to hear a similar case last year.
The 10-3 ruling by the Second Circuit came in the case Zarda v. Altitude Express. The employer, Altitude Express, dismissed a sky-diving instructor, David Zarda, in 2010. While Mr. Zarda was preparing for a tandem sky-dive with a female student, he told her that he was “100 percent gay.” Her boyfriend later complained to the school about the comment.
Mr. Zarda said he had made the remark to soothe the woman, who seemed uncomfortable with being so tightly strapped to him during the dive. Mr. Zarda filed a lawsuit, claiming that his firing violated Title VII. Two courts in New York, including a three-judge panel of the Second Circuit, ruled against him.
The majority opinion, written by Chief Judge Robert Katzmann, acknowledged that the view of the law around the issue had changed. Last year, the Seventh Circuit issued a decision in favor of sexual orientation protections in the workplace under Title VII.
Also, while Zarda’s claims were pending, the EEOC decided Baldwin v. Foxx, holding that “allegations of discrimination on the basis of sexual orientation necessarily state a claim of discrimination on the basis of sex.” The EEOC identified three ways to describe what it called the “inescapable link between allegations of sexual orientation discrimination and sex discrimination.” The specific examples the EEOC provided to illustrate this point were: (1) suspending a female employee for displaying a photo of her female spouse while not suspending a man for displaying a photo of his female spouse; (2) an employee alleging discrimination on the basis of sexual orientation because her employer treated her differently for associating with a person of the same sex; (3) and, discrimination based on “gender stereotypes,” most commonly “heterosexually defined gender norms.” Zarda unsuccessfully attempted to get the district court to rely on the EEOC’s decision in Baldwin to support his Title VII claims.
Chief Judge Katzman wrote that the determinative inquiry is whether an employee’s sex is necessarily a motivating factor in discrimination based on sexual orientation. The Court found that sexual orientation is a sex-dependent trait and sexual orientation discrimination will be considered “a subset of actions taken on the basis of sex,” and subject to protections under Title VII.
Accordingly, the legal framework in this Circuit for evaluating Title VII claims has evolved substantially. Traits that operate as a proxy for sex are an impermissible basis for disparate treatment of men and women. Discrimination based on sex stereotypes and association with the same sex are prohibited in the workplace.
The issue of sexual orientation discrimination has gotten enough traction to warrant intervention by the Supreme Court. If for no other reason, then to resolve the differing opinions issued by the Courts of Appeals. In the meantime, employers covered by the Second Circuit (New York, Connecticut, and Vermont) should update their policies and practices to ensure compliance with this decision.
Nicholas Fortuna, February 8, 2018
On January 29, 2018, the United States Court of Appeals for the District of Columbia sent the appeal of The Daily Grill, a restaurant chain, back to the National Labor Relations Board (NLRB) for reconsideration of its decision that the chain’s workplace rules violated federal law.
In the matter of the Boeing Co., the NLRB established a new standard governing workplace rules and policies in December 2017. In that case, the employer, the Boeing Company had a rule that prohibited employees from using camera-enabled devices to capture images or video without a valid business need and a company approved camera permit. Under the old standard, established in 2004 in the case of Lutheran Heritage, Boeing’s no-camera rule would have been unlawful. In Lutheran, the NLRB found that employers violated the National Labor Relations Act (NLRA) by maintaining workplace rules that would be “reasonably construed” by an employee to prohibit the exercise of NLRA rights.
In place of the Lutheran Heritage “reasonably construe” standard, the NLRB in the Boeing case established a balancing test for evaluating a facially neutral policy, rule or handbook provision. It will look at (i) the nature and extent of the potential impact on NLRA rights, and (ii) legitimate justifications for the rule. When legitimate justifications outweigh a rule’s potential impact on protected rights, it will be found lawful. Additionally, to provide clarity in this area, the Board provided three categories into which rules will be placed in future cases: (i) lawful (always valid); (ii) subject to case-by-case scrutiny (applying the Board’s balancing test to determine if the rule is lawful); and (iii) unlawful (the rule prohibits protected activity and is always unlawful).
The NLRB’s decision in The Boeing Co. strongly criticized the rational for the standard set in Lutheran Heritage. A majority of the NLRB pointed out that failing to consider the legitimate justifications associated with employer rules conflicts with U.S. Supreme Court rulings and the Board’s own precedents. Also, the troublesome standard of Lutheran Heritage provided that employer policies cannot be either too broad or simply stated because of a risk they might imply a restriction on protected activities. This strict standard which require an employer to consider all hypothetical permutations of protected activities concerning a given subject prior to implementation of workplace rules made managing the workplace unwieldy.
In The Daily Grill, the Board relied on the old Lutheran Heritage standard to find that the restaurant chain violated the NLRA. The Daily Grill proffered a number of workplace rules that were considered too broad and could be interpreted by employees as discouraging union activity. The rules included a “positive culture” rule that required employees to interact with management respectfully, a timekeeping rule that barred employees from loitering on the employer’s premises, and a rule governing relationships outside work. Now that the new Boeing Co. standard is being used, the DC Circuit Court of Appeals granted the NLRB’s request to send the case back for reevaluation.
The Boeing Co. standard radically changes the way the Board evaluates employer rules, including rules pertaining to conduct in and out of the workplace, such as use of social media. By balancing considerations favoring maintenance of rules, the new standard will expand the scope and type of rules the Board will find lawful and improve employers’ ability to tailor rules to suit their business needs.
Nicholas Fortuna, July 17, 2017
Bucking the national trend, Idaho is making it easier for employers to enforce employee non-compete agreements that prevent employees from leaving to go to work for a competitor. The State passed new legislation that provides, if a court finds a key employee or a key independent contractor breaches a non-compete agreement, a rebuttable presumption of irreparable harm to the employer is imposed. The burden of overcoming that presumption shifts to the former employee to show that their employment with a competitor does not adversely affect their former employer’s legitimate business interests.
Nationwide, state lawmakers have been considering whether to make it easier or harder for companies to block workers from jumping to competitors. For the most part, states have concluded that it is better for the local economy to make it easier for employees to move from job to job.
From a business prospective, the impact of strict enforcement of non-competes falls disproportionately on start-ups and high growth companies because it makes it harder for them to recruit workers with relevant experience. Given the choice of locations, such companies will shy away from establishing or moving to jurisdictions where the ability to hire employees is limited.
California does not recognize non-competes and, in part, attributes the rise of Silicon Valley and technology businesses to this policy. Massachusetts, which recognizes non-competes, has a technology sector known as the Route 128 corridor outside Boston that never could reach the economic level of Silicon Valley, despite its strong start in the early 1980s. Economists attribute California’s freedom from the burdens of non-competes, which allows new companies to open and permits employees to move to different jobs, as an important factor in its dominance of the technology industry there.
Boise, Idaho has been looking to be a center for high growth technology companies and startups. The consensus, however, is that the enhanced enforcement of non-competes will be an impediment to developing a thriving technology sector. While older established companies favor strict enforcement because they are trying to protect their position and insulate themselves from the demands of the marketplace, new companies will stay away.
At the federal level, the White House published a report on non-compete contracts in May that concluded that they impose substantial costs on workers, consumers and the economy. The Treasury Department also issued a report criticizing excessive use of non-competes.
An economic study examined the impact of non-competes of people in the state of Michigan who registered at least two patents from 1975 to 2005. In 1985, Michigan reversed a longstanding policy of prohibiting non-compete agreements. The study found that the rate of emigration of inventors from Michigan was twice that of states which prohibited non-competes. The authors concluded that enforcement of non-competes in Michigan after 1985 resulted in a brain drain. Worse, the most talented inventors were found to be the ones most likely to flee.
While proponents of non-competes continue to argue that companies must protect their investment in training and development of employees through the use of such agreements, the evidence suggests that they harm growth, limit opportunities for entrepreneurs, and workers, causing talented people to seek more accommodating jurisdictions.
Paula Lopez, July 10, 2017.
New York City’s recently passed package of bills, referred to as “Fair Work Week” laws, impose significant scheduling and notice requirements on certain businesses operating in New York City. The laws will go into effect on November 26, 2017. Employers covered by this law include retail businesses and fast food establishments, which are known for subjecting employees to changing work schedules.
A “fast food establishment” covered by the new law is defined in the same way as a “fast food establishment” subject to New York State’s fast food minimum wage requirements, which is one that:
- Primarily serves food or drinks, including coffee shops, juice bars, donut shops, and ice cream parlors; and
- Offers limited service, where customers order and pay before eating, including restaurant with tables but without full table service, and places that only provide take-out service; and
- Is part of a chain of 30 or more locations, including individually owned establishments associated with a brand that has 30 or more locations nationally.
The new law defines “retail business” as any entity with 20 or more employees that is engaged primarily in the sale of consumer goods at one or more stores within New York City. Full-time, part-time, and temporary employees are counted in calculating the number of employees working for a retail business. The law defines “consumer goods” as “products that are primarily for personal, household, or family purposes, including but not limited to appliances, clothing, electronics, groceries, and household items.” Examples of covered retail businesses include clothing stores, shoe stores, department stores, grocers, and retail pharmacies.
New York City’s Department of Consumer Affairs, Office of Labor Policy & Standards (“OLPS”) will be responsible for enforcing the law and has been authorized to impose monetary penalties against employers found to have violated the law. OLPS will also be publishing posters detailing the rights afforded by the new law and which covered employers are required to conspicuously post in the workplace. Employers are prohibited from retaliating against employees who assert their rights under the law. Aggrieved employees have the right to either file a claim with the OLPS or file an action in court against an employer for violations of the law within two years of the alleged violation.
The requirements of the laws differ for fast food establishments and retail business.
Beginning November 26, 2017, retail businesses are prohibited from scheduling “on-call” shifts for all employees (salaried or non-salaried), and must provide at least 72 hours’ notice of an employee’s work schedule and any change to the schedule. The work schedule must be posted in the workplace 72 hours prior to the earliest scheduled shift. An employer who makes any changes to the posted schedule must note the changes directly on the posted schedule AND directly notify the affected employees. This includes sending a copy of the schedule by electronic means, if the parties customarily communicate in such a manner.
The restriction prohibiting an employer from canceling a scheduled shift with less than 72 hours’ notice will not apply in circumstances where the employer cannot operate due to emergencies (natural disasters, fires, floods, public transportation outages, etc.) An employee can waive the restriction prohibiting an employer from requiring an employee to work a shift with less than 72 hours’ notice by providing written consent. Also, the law does not prevent employers from permitting employees to swap shifts or from granting requests for time off.
The law contains a record-keeping component, which requires employers to maintain and provide an employee, upon request, with a written copy of that employee’s work schedule for any week the employee worked during the prior three years, along with a copy of the most current work schedule for all retail employees at the work location.
Fast Food Employers
The scheduling requirements under the new law apply only to non-salaried fast food employees whose duties include customer service, cooking, food or drink preparation, delivery, security, stocking supplies, cleaning or routine maintenance. Employers are required to do the following with regard to scheduling:
- Provide each new hire with a “good faith” estimate of the employee’s work schedule in writing (estimated number of hours expected to work in a week, times expected to work, and location of the work.) If an employer makes any long-term changes to the employee’s anticipated schedule, it must provide the employee with an updated good faith estimate, before the schedule change goes into effect.
- An employer must provide each employee with 14 days’ advance notice of the work schedule covering a period of at least 7 days (containing all regular and on-call shifts for an employee).
- An employer must also conspicuously post the work schedule at the workplace 14 days in advance of the start of the schedule.
- If a fast food employer makes changes to an employee’s schedule with less than 14 days’ notice, it must pay the employee a schedule change premium (the amount of which varies based on the type of change and amount of notice given), in addition to the employee’s regular pay for shifts worked.
Amount of Premium
-$10.00 for each change made with at least 7 days’ notice where hours or shifts are added or the start and end time of a shift changes but there is no loss of hours. $15.00 for the same changes if made with less than 7 days’ notice.
-$20.00 for each change made with at least 7 days’ notice where hours are subtracted from a shift or a shift is cancelled. A $45.00 premium must be paid for the same changes if made with less than 7 days’ notice.
-$75.00 for each change made with less than 24 hours’ notice where hours are removed from a shift or a shift is cancelled.
Exceptions to Employer’s Obligation to Pay Change Premium
-Schedule change is requested by employee in writing or a result of a voluntary shift swap by employees.
-The employer is required to pay the employee overtime for the added shifts/hours.
-The change in schedule is due to an inability of the employer to operate because of an emergency (natural disasters, fires, floods, public transportation outages, etc.)
- The law prohibits an employer from scheduling an employee to work a closing shift followed by an opening shift where the two shifts are less than 11 hours apart unless the affected employee requests or consents, in writing, to working the two shifts. Absent the employee’s written consent, an employer who schedules an employee to work a consecutive closing/opening shift must pay a $100 premium to the employee.
- The law requires a fast food employer to first offer additional work shifts to existing employees at the location where the shifts are available, and then at other locations before hiring new employees to fill the available shifts. This requirement does not apply if existing employees have already rejected the additional shifts, or an employer would be required to pay the existing employee overtime for the additional shifts.
- The law also imposes a 3-year record-keeping requirement on the employer with regard to employee work schedules. Upon request of an employee, an employer must provide an employee with a copy of an employee’s work schedule for any week during the prior 3 years and a copy of the most current version of the work schedule for all fast food employees at the same location.
In addition to the various scheduling requirements, the new law permits all fast food employees (salaried and non-salaried) to make voluntary contributions to a registered not-for-profit organization through payroll deductions. This imposes a requirement on fast food employers to set up a payroll deduction process to withhold wages and pay them directly to the not-for-profit organization requested by the employee. An employer is not required to honor an employee’s contribution request if it is less than $3.00 (weekly) or $6.00 (bi-weekly). Also, an employer can request the not-for-profit to reimburse it for the costs associated with the deduction and remittance of the contribution as per DCA’s rules. In processing an employee’s contribution request, employers must remain cognizant of New York’s Labor Laws and ensure that the requested deductions do not bring the employee’s hourly wage below the minimum wage rate, and may refuse to honor the employee’s contribution request if it would result in a violation of New York’s minimum wage laws.
Employers in the retail and food establishment industry should familiarize themselves with the various requirements imposed by the Fair Work Week laws and contemplate the operational and payroll changes that will need to be implemented to comply with the various requirements.