U.S. Supreme Court Holds that Unaccepted Offer to Settle Per Rule 68 Does Not Moot a Case

Posted in Litigation

In a 6-3 opinion, the United States Supreme Court held yesterday that a defendant’s unaccepted Rule 68 offer of judgment for complete relief does not moot a case. See Campbell-Ewald Co. v. Gomez, 577 U.S. ___ (2016). Justice Bader Ginsburg, writing for the 6-3 majority, explained that “[u]nder basic principles of contract law,” an offer without acceptance is a legal nullity. Therefore, the Court reasoned, if a plaintiff does not accept a defendant’s mid-case settlement offer, the plaintiff gains no entitlement to relief, and “the parties remain[] adverse; both retain[] the same stake in the litigation they had at the outset.”

In so ruling, the Court addressed a question left open by its 2013 decision in Genesis HealthCare Corp. v. Symczyk, 569 U.S. ___; 133 S. Ct. 1523 (2013). In Genesis HealthCare, the majority declined to decide whether an unaccepted offer of complete relief mooted an individual’s claim because the plaintiff failed to preserve that argument. Even though defendant’s Rule 68 offer in Genesis HealthCare (whose lead counsel was Greenberg Traurig) was not accepted, Plaintiff did not argue that her failure to accept the Rule 68 offer prevented dismissal of her individual claim. Rather, she conceded that the offer mooted her individual claim and instead insisted that her case was not subject to dismissal because she brought her claim as a collective action on behalf of a group, and the Company’s offer of judgment provided no relief for that group. Unlike Mr. Gomez, therefore, the plaintiff in Genesis Healthcare never denied that the offer of judgment mooted her individual claim, and thus the majority did not reach the question. Justice Kagan wrote a critical dissent in Genesis HealthCare, explaining that she would have reached the mootness question, and stating that “an unaccepted offer of judgment cannot moot a case.”

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Crossing Borders: Employment Considerations – Locating Your People

Posted in Global Workforce Strategies, Tax

GlobeMany years ago, every evening at 10 p.m. a local television station would present the following public service announcement: “It’s 10 p.m. Do you know where your children are?” Today, HR professionals need to ask themselves a similar question: “It’s 2016. Do you know where your employees are?”

Employees are legal links to their employing entity. Wherever the employee lives and works (in general terms) the employer is also present. The employee is considered to be the legal agent of the employer because the employer controls the work the employee performs. Most countries’ definitions of employment recognize some aspect of dependence in the relationship and look to the employer to provide certain benefits and protections to the employer’s subordinates. Additionally, many countries view the relationship as requiring even more of the employer because of the difference in bargaining power. In these countries, laws and enforcement systems are designed to protect the employee against improper treatment at the hand of the employer.

When countries see an employee working physically within that country’s borders — especially those countries that have strict laws regarding the employer’s obligation – they see that employee as one of its own and looks to the employer to ensure it is compliant with local obligations. Among these local obligations may well be for the employer to have an employing entity present within the country. Other obligations may include expanded leave laws, robust social security payments, strict overtime hour limitations, or generous vacation requirements. If your employee is hired on a U.S.-type benefits package, that employee is likely to learn the differences quickly. She or he may find the local labor inspector to be their new best friend.

In addition to employment laws being triggered, an employee’s presence may also trigger interest by the tax collector. Of course the employee will be required to pay local taxes, but because the employee is the dependent agent of the employer in many instances, the employer may be obligated to pay corporate taxes as well. In hard economic times, tax collectors are just as interested in additional opportunities to collect taxes as companies are in finding ways to avoid additional costs. Allowing employees to work remotely at a lower wage might seem like a way to cut costs, but if the location imputes a corporate tax, this solution is not likely to end well.

Employment and tax laws have historically been designed to address the physical location of objects, work, products and people. The age of the Internet may have changed the ease with which employees can work from “anywhere,” but it hasn’t changed the consequences arising from employees working remotely — especially if the remote location applies different employment or tax laws to the relationship established or the work performed by the employee.

Hence the need to ask the question: Do you know where your employees are?

The Exclusivity Provisions of the Illinois’ Workers’ Compensation Act and Workers’ Occupational Diseases Act Bar a Mesothelioma Plaintiff’s Occupational Exposure Claims Where Diagnosis Is Made After the Expiration of the Statute of Repose

Posted in Litigation, Workers' Compensation Act

Mesothelioma victims are not exempt from the exclusivity provisions and statutes of repose in Illinois’ Workers’ Compensation Act and Workers’ Occupational Diseases Act, according to a recently issued Illinois Supreme Court decision. Thus, common law claims against a former employer for asbestos related diseases are barred, even if the disease does not manifest until after the expiration of the statutes of repose.

In Folta v. Ferro Engineering, plaintiff James Folta sued his former employer, Ferro, for damages associated with his mesothelioma diagnosis. Folta asserted that he was exposed to asbestos while working at a Ferro plant between 1966 and 1970. Forty-one years later, in May 2011, he was diagnosed with mesothelioma. Shortly thereafter he filed his action against Ferro and 14 other defendants, seeking damages for the mesothelioma he allegedly developed as a consequence of his exposure to asbestos while employed by Ferro.

Ferro moved to dismiss the plaintiff’s occupational exposure claims as barred by the exclusive remedy provision of the Workers’ Compensation Act (820 ILCS 305/5(a), 11, and the Workers’ Occupational Diseases Act (820 ILCS 310/5(a), 11. Both Acts provide that so long as the injury and/or disease is covered by the Act, there is no separate or additional common law or statutory right to recover compensation or damages from an employer. In response, Folta argued that his claim fell within one of four exceptions to the exclusivity provisions, as articulated in a 1990 Illinois Supreme Court decision, Meerbrey v. Marshall Field & Co. The four “Meerbrey” exceptions permit a plaintiff to escape the exclusivity provisions of the Acts for injuries which (1) were not accidental; (2) did not arise from the employee’s employment; (3) were not received during the course of employment, or (4) were “not compensable under the Act.”

Relying on the fourth exception, Folta argued that because his diagnosis occurred 16 years after the expiration of the Acts’ respective 25-year statutes of repose, through no fault of his own he never had the opportunity to recover under the Acts, and thus his claim was quite literally “not compensable.” The circuit court disagreed, and granted Ferro’s motion to dismiss.

In June 2014, the First District of the Appellate Court of Illinois reversed the lower court, holding that “compensable” referred to the ability to recover under the Acts. Because Folta’s claims were foreclosed by the Acts’ statutes of repose, he could not recover under the Acts, and this inability to recover rendered his claims “not compensable,” so as to escape the exclusivity provisions.

On Nov. 4, 2015, the Illinois Supreme Court reversed the Appellate Court, and affirmed the circuit court’s ruling dismissing the claim. The Court expressly rejected the Appellate Court’s assertion that “compensable” is synonymous with “recoverable,” holding that “whether an injury is compensable is related to whether the type of injury categorically fits with the purview of the Act[s],” and specifically finding that occupational diseases arising from workplace asbestos exposure are the type of injury within the scope of the Acts. 2015 IL 118070, ¶ 23.

Moreover, the Court held that Folta did not have a valid common law cause of action just because the applicable statute of repose had expired prior to his diagnosis. Focusing on the “plain language” of each Act, and the intended purpose of statutes of repose generally, the Illinois Supreme Court held that the intended purpose of the Acts’ 25-year statute of repose was to “extinguish the employer’s liability for a work-related injury at some definite time.” Id., ¶ 35. That Folta was not at fault for failing to file a claim sooner due to the latent nature of his disease had no bearing on whether or not his claim was exempt from the exclusivity provisions of the Act. Id., ¶ 34.  The Court recognized the “harsh result” of its interpretation, but directed any dissatisfaction with its ruling toward the legislature, noting that the Court’s role is “not to inject a compromise but, rather, to interpret the acts as written.” Id., ¶ 43.

As a result, employers in Illinois are only liable for asbestos-related injuries for a 25-year period after the plaintiff’s last date of exposure, and only for the remedies provided for within the Workers’ Compensation Act and the Occupational Diseases Act.

OSHA Penalties to Increase in August 2016

Posted in Department of Labor, OSHA

The OSHA penalty structure, which hasn’t changed since 1990, is about to get a boost to catch up with current prices. The long-standing maximum penalty amounts of $7,000 for a serious violation and $70,000 for a willful violation may jump to as much as $12,400 and $124,000 respectively. On the other end of the spectrum, in an extreme example of an enforcement action, OSHA, in conjunction with the U.S. Attorney’s Office, recently prosecuted an employer for violations under the OSH Act (and other federal laws), for making false statements to OSHA investigators which carries a maximum sentence of 25 years imprisonment.

The OSH Act of 1970 specified that the maximum penalty for a serious violation was $1,000, and the maximum penalty for a willful violation was $10,000. In 1990, the Omnibus Budget Reconciliation Act increased serious violations to $7,000 and willful violations to $70,000 and no less than $5,000. The Federal Civil Penalties inflation Adjustment Act of 1990 directed some agencies to raise their penalties, but exempted OSHA. For the past 25 years the OSHA penalty amounts have remained static. In November 2015, President Obama signed the budget bill, which included the Federal Civil Penalties Inflation Adjustment Act Improvements of 2015.

The 2015 Act directed the Department of Labor to make a “catch up adjustment” that must go into effect by Aug. 1, 2016, and to make subsequent adjustments thereafter. The “catch up adjustment” is based upon the increase in the Consumer Price Index from October 1990 to October 2015, which was 78 percent. Starting in August 2016, employers should expect to see OSHA penalties of approximately $12,400 for serious, and $124,000 for willful, violations.

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Philadelphia Expands the Reach of Its ‘Ban the Box’ Ordinance

Posted in Employee Policies, Privacy

On Dec. 15, 2015, Philadelphia Mayor Michael Nutter amended the city’s current “ban the box” law to expand the number of employers it covers and increase restrictions on the use of criminal background checks during the hiring process. The amendments take effect in just 90 days and make several noteworthy changes to the city’s original Fair Criminal Screening Standards Ordinance enacted in 2012.

Among the amendment’s most important changes are additional restrictions on when and how an employer may consider a potential employee’s criminal convictions upon application for employment. The amendment also expands the ordinance’s application to all private employers in Philadelphia regardless of the number of employees, and prohibits policies that “automatically exclude[] any applicant with a criminal conviction from a job or class of jobs.” Instead, employers may reject an applicant based on his or her criminal record only when “such record includes conviction for an offense that bears such relationship to the employment sought that the employer may reasonably conclude that the applicant would present an unacceptable risk to the operation of the business or to co-workers or customers, and that exclusion of the applicant is compelled by business necessity.”

This requirement that a connection exist between the applicant’s offense for which he or she was convicted and the specific job sought should be familiar to Philadelphia employers. Pennsylvania state law already prohibits employers from using “criminal history record information” in deciding whether to hire an applicant unless the applicant has a record of a felony or misdemeanor conviction and that conviction “relate[s] to the applicant’s suitability for employment in the position for which he [or she] has applied.” 18 Pa. C.S. § 9125.

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Third Circuit Espouses Fact-Sensitive Inquiries in Considering Joint Employer Liability and Compensation for Meal Periods: What Employers Can Do to Brighten the Lines

Posted in Employee Classifications, FLSA

In a pair of published opinions, raising novel employment issues in this Circuit, the Third Circuit Court of Appeals addressed the test for determining whether a “temporary” worker is an “employee” eligible to assert Title VII claims against the company which contracts their services, and the test for determining whether time spent on meal breaks is compensable under the FLSA. In each case, the Third Circuit adopted fact-sensitive and multi-factor inquiries, rather than articulating bright line tests.

In Faush v. Tuesday Morning, Inc., the Court considered whether plaintiff, a temporary worker who claimed to have experienced racially-motivated “harassment,” was an “employee” who could bring suit under Title VII against the company that contracted with his “technical” employer to provide temporary workers. Considering how common the use of “temporary” workers is in today’s economy, and coming on the heels of the NLRB’s landmark Browning-Ferris decision, Faush is an important decision for employers. In Babcock v. Butler County, the Court adopted the “predominant benefit test” in concluding that corrections officers failed to state a claim under the FLSA for unpaid portions of their meal breaks.

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Crossing Borders: Employment Considerations – Planning Ahead

Posted in Global Workforce Strategies

GlobeCompanies crossed borders in 2015 at an explosive rate. International growth appears to be the business model of the 20-teens. Everyone wants to get in on the action provided by an international market for products, international growth by acquisition or just plain cross-border expansion to take advantage of certain employment markets. As you or your clients are taking advantage of world-wide markets, are you also considering the potential impact these expansions could have on your employment costs? The issues are not just payroll and benefits – those are obvious. The issues are the cost of expatriates creating a corporate tax presence; the cost of purchasing or maintaining expensive benefits plans that cannot be changed; or even the cost of an aging employment population that cannot be terminated.

During the recent economic downturn, countries began looking for low-hanging fruit from which to extract additional revenues. Taxing businesses that do not correctly operate by classifying their employees as “contractors” or that send employees on a business visa to “scout” out the territory have become more prevalent as other tax revenues fail to cover government spending. A country’s need to increase taxable revenue makes this previously “easy” solution to evaluating a new country expansion risky, and opens companies up to significant tax or penalty obligations.

Expansion through acquisition is a favored way of ensuring a market presence and growing a business without having to do so from the ground up. Cross-border acquisition of entities with employees, benefits plans or other perquisites that exceed basic minimums may appear to result in easy solutions or changes. But frequently local laws and local practices often combine to make the process of change exceedingly expensive. In some countries, companies are restricted in making changes to the workforce given local protections of certain classes of employees based on age and social position (i.e., with a family, nearing retirement, etc.).

Business-savvy transnational companies include in their legal budgets the cost of employment compliance to ensure against getting caught in these traps. If companies or clients have not taken a look at these issues in a while, now is the time to prepare for 2016 by putting this topic into the 2016 legal spend. Greenberg Traurig’s Labor & Employment Practice has more than 25 collective years of experience evaluating cross-border employment relationships, decisions and systems with the purpose of working within company structures to avoid potential risks arising from employment relationships that cross borders. We can help.

Fifth Circuit Clarifies and Complicates Choice of Law Analysis of Interstate Restrictive Covenants

Posted in Restrictive Covenants

As companies grow and expand into multiple U.S. states, particularly in our increasingly knowledge and relationship-based economy, determining the applicable law for companywide restrictive covenants can be puzzling. Determining which law applies can make the difference between enforcement or the inability to enforce the covenants.

In Cardoni et al. v. Prosperity Bank (Case Nos. 14-20682 and 15-20005), decided on Oct. 29, 2015, the Fifth Circuit provided a useful roadmap for how a court should analyze various covenants involving interstate parties and interests. Simplifying the facts somewhat, Prosperity Bank in Texas acquired F&M Bank in Oklahoma by merger. In connection with the purchase, Prosperity signed several of the F&M employees to new employment agreements that included noncompete, customer nonsolicitation, and confidential information nondisclosure provisions. These agreements were governed by Texas law and had an exclusive Texas choice of forum provision, even though the employees did most of their work, both before and after signing the agreements, in Oklahoma. Four of the employees later became parties to the litigation. Those four individuals also had been very small shareholders in F&M, and sold their stock in exchange for cash and Prosperity stock as part of the merger transaction; however, the covenants at issue in their new employment agreements were not included in the merger agreement.

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2015 California Employment Law Legislative Update

Posted in Compensation, Discrimination, Immigration, Legislation, State Law, Wage & Hour

At Greenberg Traurig, we live our motto “built for change” and apply it for the benefit of the businesses we serve. Our California Labor and Employment Practice appreciates that although California presents opportunity, it also presents an often unique set of employment risk propositions, and these risks are often just one set among a constellation of others that require management.

We also believe that while employers need to manage that risk, neither a stream of the “sky is falling” communications regarding every court rumination, nor a list of developments so comprehensive that the significant and the idiosyncratic blur together is the correct approach.

We address the developments by issue and add some thoughts on why we think it may matter to your company.

The Statewide Minimum Wage and Minimum Salary for Exempt Status are Going Up.
Although not the product of new legislation, on Jan, 1, 2016, the statewide minimum wage increases to $10 per hour. Because the salary threshold for exempt status must be at least twice the full-time equivalent of the minimum wage, exempt employees will need to make at least $3,466.67 per month or $41,600 per year. Apart from issues of compliance, as the minimum wage continues to increase, the salary cost of preserving the exemption for that lowest level supervisor also increases. At some point that begs the question as to how important the exemption is in context.

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Seasonal Employment: Tips and Traps

Posted in Employee Policies

Whether due to holiday shopping, increased tourism, or winter weather, employers across the country are turning to seasonal workers to help with increased customer demands this time of year. Industry fluctuations may necessitate the use of temporary help to meet your businesses’ short-term staffing requirements. Employers should be aware of some tips and traps when directly hiring and managing seasonal employees.

The Difference Between Part-Time, Temporary and Seasonal Workers

Most states define part-time employees as individuals who work less than 35 hours per week, compared to full-time employees who typically work 40-plus hours per week. Temporary employees are usually hired to provide services for absent employees, temporary job vacancies, or to provide assistance on special, finite projects. Seasonal employees, on the other hand, are generally hired to work on a part-time basis for a particular season, such as at retail stores preparing for increased holiday sales.

Conduct Background Screenings on Seasonal Candidates

Just as with your permanent applicants, follow applicable laws and screen each potential employee before hiring to make sure they will not pose any undue risk to your organization, your brand or your customers.

Inform Seasonal Employees about the Duration of the Work

Applicants for seasonal roles should be advised about the seasonal nature of the position in job postings, during the interview process and at the time of job offer. Also tell them what benefits are not extended to seasonal employees so there is no confusion down the road (e.g. certain fringe benefits such as paid vacation time, insurance or telecommuting options).

Follow Labor Laws

The Fair Labor Standards Act (FLSA) does not define full-time versus part-time employment, and seasonal employees are still subject to the FLSA. Accordingly, unless local laws provide otherwise for seasonal workers, they are entitled to minimum wage and overtime. Moreover, state and federal laws that cover harassment, discrimination, and workplace health and safety apply to seasonal employees, just as to any other member of your workforce. Also be aware that seasonal or temporary employees may factor into the headcount required under state and federal labor laws, such as ADA, WARN and EEOC requirements.

You Must Still Provide Certain Benefits

The specific requirements vary by state, but most jurisdictions require employers to provide unemployment benefits to temporary workers. However, there may be certain exemptions for short term “seasonal employers” (e.g. those who require temporary employees for 10 weeks or less). Likewise, businesses must still withhold part of Social Security and Medicare taxes, as well as provide workers compensation insurance for seasonal employees.

Train Your Seasonal Employees

Seasonal employees must be trained not only on how to do the job, but also on appropriate company standards, procedures and policies. In fact, employment handbooks should clearly state which benefits and policies are not extended to seasonal or temporary staff. Orientation for seasonal employees should include anti-discrimination and anti-harassment training, which should be documented.

Be Prepared to Conclude the Seasonal Employment

When it is time to end the seasonal employment, follow the same procedures as you would with a full-time or permanent employee. Remove the seasonal workers from your payroll and, should they return to your company down the road, treat them as a new employee. Conduct one-on-one sessions and be prepared to explain why the position is not being extended into a permanent role. Also, be consistent in your treatment of employees, and follow your routine procedures with regard to issuing the final paycheck and handling the employee’s return of company property.

Be Mindful of Issues When Using a Staffing Firm

If you elect to partner with a staffing firm to meet your seasonal employment needs, be sure to delineate the agency’s roles and watch for co-employment issues.

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