Monthly Archives: January 2018

January 23, 2018

New HHS Conscience and Religious Freedom Division to Aid Healthcare Workers With Moral Objections

 

Steven T. Collis

By Steven T. Collis

This week, the U.S. Department of Health and Human Services (HHS) announced that it created a new division within its Office for Civil Rights to “restore federal enforcement of our nation’s laws that protect the fundamental and unalienable rights of conscience and religious freedom.” The new Conscience and Religious Freedom Division intends to vigorously enforce existing federal laws that protect healthcare workers who object to performing or assisting with services on the basis of their religious or moral beliefs. With increased attention and support for such objections, healthcare facilities and employers need to be prepared in how to respond when an employee objects or refuses to perform certain procedures.

Conscience and Religious Freedom Protections

The new HHS Division expects to increase enforcement of existing religious protections for health and human services providers. Existing federal laws offer conscience protections to health care providers who refuse to perform, accommodate, or assist with certain health care services on religious or moral grounds. These existing laws include protections related to providing sterilization, abortion, assisted suicide, and related training and research activities.

Existing federal laws also prohibit discrimination in employment for recipients of HHS federal financial assistance, under laws such as the Social Security Act, the Public Health Service Act, and the Family Violence Prevention and Service Act. These provisions protect health care workers from employment discrimination, including religious discrimination, related to federally-funded programs such as the Maternal and Child Health Services Block Grant, Projects for Assistance in Transition from Homelessness, and Community Mental Health Services Block Grant and Substance Abuse Prevention and Treatment Block Grants.

In the prior administration, many of these protections were not prioritized. Under the new rule, the Office of Civil Rights “will have the authority to initiate compliance reviews, conduct investigations, supervise and coordinate compliance by the Department and its components, and use enforcement tools otherwise available in civil rights law to address violations and resolve complaints.” As part of that authority, the Office may require, for certain recipients of federal money, that they keep more robust records; cooperate with investigations, reviews, and other enforcement actions; provide assurances and certifications of compliance; and issue notices to their employees regarding their conscience and anti-discrimination rights.

What This Means For Healthcare Providers and Their Employers

The increased enforcement of religious and moral protections anticipated by the new HHS division may empower more healthcare workers to express objections to perform or be involved with certain procedures or services. Healthcare employers should have a plan in place for how to respond to such objections. That plan should include providing reasonable accommodations to objecting workers, which involves documenting the objection, analyzing how to transfer duties to another worker, determining whether objectors need to be reassigned, and establishing how communications to co-workers will be handled. These can be sensitive discussions so healthcare facilities need to consider how to address these issues in advance. In particular, employers must learn how to accommodate the workers’ objection without adversely affecting their position, as the adverse action could potentially be seen as discriminatory based on the worker’s religious beliefs.

Finally, it will be important that healthcare employers keep proper records regarding their compliance efforts and stay abreast of what notices they are required to provide their workers and the government. Employers should keep a watchful eye to ensure they know precisely what will be required of them in the months ahead.

January 11, 2018

EEOC Reveals Its Strategy For Upcoming Years; Will Review Public Comments

Little V. West

By Little V. West

The U.S. Equal Employment Opportunity Commission (EEOC) recently issued its draft strategic plan for fiscal years (FY) 2018-2022. Because the strategic plan outlines the agency’s priorities for enforcing anti-discrimination laws in the upcoming years, employers can learn a great deal about the types of discrimination and class actions the EEOC will pursue and litigate to further its agenda. Let’s look at highlights of the draft plan to see where the EEOC intends to focus its resources.

Substantive Area Priorities

In its draft strategic plan for upcoming years, the EEOC makes some changes to the substantive areas of law that encompasses its priorities for enforcement efforts. First, it adds two new priorities under the Emerging and Developing Issues area. The agency will look to address discriminatory practices against those who are Muslim or Sikh, or persons of Arab, Middle Eastern, or South Asia descent, particularly protecting members of these groups from backlash following tragic events in the U.S. and the rest of the world. The agency also will look to clarify the employment relationship and the application of anti-discrimination laws to the evolving employment relationships related to temporary workers, staffing agencies, independent contractors, and the on-demand economy (e.g., Uber, Airbnb, freelancers, and other economic models that do not have a traditional employment relationship).

Second, the priorities under the Americans with Disabilities Act will be narrowed to focus on qualification standards and inflexible leave policies that discriminate against individuals with disabilities.

Third, in the area of Immigrant, Migrant, and Other Vulnerable Workers, the EEOC will look to its district offices and the agency’s federal sector program to identify vulnerable workers and underserved communities in their area. For example, the EEOC states that some district offices may focus on employment discrimination against members of Native American tribes, where those groups have local issues of concern.

Fourth, the EEOC proposes to expand its priority on equal pay to go beyond discrimination based on sex, but to address compensation systems and practices that discrimination based on race, ethnicity, age, individuals with disabilities, and other protected groups. Consequently, addressing and remedying pay discrimination is intended to reach all workers, not just those paid differently because of their gender.

Fifth, the agency will focus on preserving access to the legal system and challenging practices that limit workers’ substantive rights or impede the EEOC’s investigative or enforcement efforts. In particular, the EEOC intends to focus on overly broad waivers and releases of claims. It will also target overly broad mandatory arbitration provisions. In addition, the agency looks to focus on significant retaliatory practices that dissuade other employees from exercising their rights.

Finally, the EEOC will continue to make it a priority to prevent systematic workplace harassment. Given the current environment that has shed new light on sexual harassment, the EEOC will look specifically to claims that raise a policy, practice, or pattern of harassment.

Strategy Leads to Priority Handling and Litigation

Because of limited resources, the EEOC will use its strategic priorities to guide its charge handling, investigations, and litigation. If a charge raises a substantive area priority, it will be given priority in charge handling. Cases with strong evidence in substantive priority areas will be given precedence in the selection of cases for litigation. In general, the agency looks to its strategic plan to offer a more targeted approach to its enforcement efforts.

Integrating EEOC Efforts Across The Agency

In addition to the substantive priority areas, the EEOC states that it is committed to using an integrated approach to consider ideas, strategies and best practices across the agency. It looks to reinforce consultation and collaboration between the investigative staff and the EEOC’s lawyers who litigate the cases. It also looks to increase the collaborative efforts between the federal and private sector staff, especially with respect to protecting LGBT workers. It also looks to enhance a coordinated and consistent nation message when it comes to education and outreach activities.

Next Steps

The EEOC accepted comments from interested parties on its draft strategic plan through January 8, 2018. The agency is expected to review submissions and approve its final version of the plan in the coming months.

January 8, 2018

Confidential Sexual Harassment Settlements No Longer Tax Deductible

Steven Gutierrez

By Steve Gutierrez

The recently enacted tax reform bill contains a short provision that could significantly affect whether and how employers settle sexual harassment claims. Section 13307 of the Tax Cuts and Jobs Act states that no deduction is allowed for any settlement or payment related to sexual harassment or sexual abuse if the settlement or payment is subject to a nondisclosure agreement. The new provision also prohibits a tax deduction for attorney’s fees related to confidential sexual harassment settlements or payments.

Deductibility Hinges On Confidentiality of Settlement

The new tax provision eliminates a tax deduction for sexual harassment-related settlements only if the settlement or payment is subject to a nondisclosure agreement. In other words, if an employer requires the alleged victim of sexual harassment or abuse to keep the settlement (and presumably the underlying claim) confidential, then the amount of the payment and any attendant attorney’s fees are not tax deductible. Sexual harassment/abuse settlements and related attorney’s fees remain tax deductible if they are not subject to a nondisclosure agreement.

The policy behind this provision appears to be in response to the recent spate of sexual harassment and abuse claims coming to light. The “#MeToo” campaign has raised significant concerns about companies and their high-level employees hiding behind nondisclosure agreements to avoid public scrutiny about unlawful sexual conduct in the workplace. Repeat offenders often keep their jobs when their employers pay off the victims in secret. By eliminating the tax deduction for confidential settlements and related attorney’s fees, companies will be forced to weigh confidentiality against tax deductibility when deciding whether to settle each claim.

What If Sexual Harassment/Abuse Is Only One of Multiple Claims Being Settled?

One of the questions left unanswered in this new tax reform provision is what happens to the tax deduction for payments that settle more than one kind of employment claim. In many cases, the victim of sexual harassment or sexual abuse brings other claims against his or her employer, such as retaliation, gender discrimination, violation of the Equal Pay Act, or defamation. The language of the provision is unclear as to what is meant by any settlement or payment related to sexual harassment or sexual abuse. One could argue that a retaliation claim that arose from an adverse action following a complaint of sexual misconduct would be related to the sexual harassment claim. But what about an Equal Pay Act claim? Is that related to sexual harassment or sexual abuse?

It is unclear whether confidential settlement payments related to these other types of employment claims will remain tax deductible when lumped in with a sexual harassment settlement. This open question will likely lead employers to separate settlement agreements and payments for non-sexual harassment claims in order to keep the settlement of these other types of claims confidential and tax deductible. It also could lead employers (on likely advice from their attorneys) to structure settlements of multiple claims with an allocation of only a small amount, say $100, to the settlement of the sexual harassment claim, with the remainder of any settlement payment attributed to other types of claims alleged by the victim. Absent any clarification on this issue, we expect this will be the subject of much litigation down the road. In the meantime, companies and their attorneys likely will use creative drafting of settlements to try to separate unrelated claims in order to keep the settlement of non-sexual-harassment claims confidential and retain the deductibility of payments and attorney’s fees incurred for non-harassment matters.

Deductibility of Victim’s Attorney’s Fees

Another open question is whether the denial of deductibility applies only to the companies making settlement payments and their own attorney’s fees related to such settlements, or if it applies to the attorney’s fees incurred by the victim as well. The new provision denying deductibility for settlements subject to nondisclosure agreements amends section 162 of the Internal Revenue Code (IRC) which is the section that allows deductions for ordinary and necessary trade or business expenses paid or incurred during the course of a taxable year. Generally, an individual would not be able to take a business deduction under IRC Section 162. However, the language in the new provision does not make it clear that it applies only to the business’s own attorney’s fees, thus leaving open an interpretation that it also prohibits the victim of sexual harassment or sexual abuse from deducting his or her attorney’s fees related to settlements of such claims. It also could be interpreted to deny the deduction to a business that pays the victim’s attorney’s fees as part of a confidential settlement.

This could hit victims hard as those who sign nondisclosure agreements may have to pay taxes on the entire settlement, including any amounts paid to cover his or her attorney’s fees. Or, it could lead victims to reject any settlement containing a nondisclosure provision in order to avoid paying taxes on the attorney’s fee portion of the settlement payment.  It also may make employers less likely to agree to pay the victim’s attorney’s fees as part of a confidential settlement because the total amount of fees paid to attorneys on both sides would not be deductible as a business expense. It is unclear whether Congress meant to hamstring victims in this way, or if it was the result of inarticulate drafting. We will have to see whether a correction or guidance is issued to clarify how the new denial of deductibility provision affects a victim’s ability to deduct attorney’s fees.

Get Advice Before Settling

The denial of deductibility provision affects any amounts paid or incurred after December 22, 2017 (when the tax reform act became effective). This makes one thing about this new tax deduction provision clear – employers should get advice from competent counsel and tax professionals before settling any sexual harassment or sexual abuse claims. Employers will need to evaluate each case individually to decide whether confidentiality trumps deductibility. Then, after the employer decides whether to impose a nondisclosure requirement on the alleged victim of sexual harassment/abuse, the settlement agreement must be drafted carefully in light of this new provision. If the victim asserts multiple claims, employers may be able to keep the settlement of non-harassment claims both confidential and deductible, if the settlement agreement is drafted correctly.

The bottom line is seek advice early and don’t use boilerplate settlement agreements without considering the tax deductibility consequences of nondisclosure provisions.

January 4, 2018

Tip-Pooling Regulation May Change Under DOL Proposal

Rebecca Hudson

By Rebecca Hudson

The Wage and Hour Division (WHD) of the U.S. Department of Labor (DOL) seeks to rescind a 2011 tip-pooling regulation that prohibits sharing of tips among employees who are not customarily tipped employees. Under a Notice of Proposed Rulemaking issued in early December 2017, the WHD proposes to eliminate restrictions on the sharing of customer tips in certain circumstances.

2011 Tip-Ownership Regulation

Revised in 2011, the DOL regulation at issue limits what employers may and may not do with tips. That regulation states:

Tips are the property of the employee whether or not the employer has taken a tip credit under section 3(m) of the FLSA. The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted in section 3(m): As a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.

29 C.F.R. § 531.52 (2011).

In essence, this provision means that even if an employer pays its tipped employees the mandatory minimum wage (currently $7.25 per hour federally), the employer may not keep any of the tips for itself or set up a tip pool that includes employees who are not regularly tipped.

Proposal To Eliminate Tip Ownership Rule When Employer Pays Full Minimum Wage

The WHD intends to remove the limitations on an employer’s use of tips, but only when the employer pays its tipped employees a direct cash wage of at least the full minimum wage. In other words, if an employer pays its tipped employees at least $7.25 per hour (or a higher applicable state or local minimum wage) for all hours worked, then the employer may reallocate tips as it sees fit. This would allow employers to include non-tipped workers, such as dishwashers and cooks, in a tip pool. It may even allow employers to keep tips for itself.

Notably, the proposed change does not apply to employers who take a tip credit. Under the Fair Labor Standards Act (FLSA), employers of “tipped employees” may pay a reduced federal hourly wage of $2.13 per hour as long as those employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. Employers who take advantage of this tip credit to pay a lower cash wage to its tipped employees would still be subject to the limitation on the sharing of tips under the tip-ownership regulation.

Courts Have Invalidated The 2011 Limits on Tip Ownership

Following the 2011 tip-ownership regulation, employers and employees have been litigating various tip pooling and tip retention arrangements, resulting in numerous courts ruling that the DOL exceeded its authority in enacting the regulation or incorrectly interpreted the FLSA when placing the tip ownership restrictions on employers who paid the full minimum wage. A recent case from the Tenth Circuit Court of Appeals (whose decisions apply to Colorado, Wyoming, Utah, Kansas, New Mexico, and Oklahoma) illustrates the issue. In that case, employer Relish Catering regularly added customer gratuities to the customer’s final catering bill. Relish retained those tips for itself rather than passing them along to its employees who worked at the events. Relish paid its employees $12 per hour for all hours up to forty hours per week, and $18 per hour for overtime, and did not rely on any sort of tip credit to meet the minimum wage.

The Tenth Circuit ruled that the FLSA tip-credit provision does not require that employers turn over all tips to employees in all circumstances. Instead, it held that when an employer does not take the tip credit, the tip-credit provision imposes no restrictions on what the employer may do with tips as long as it pays an hourly wage above the $7.25 minimum. The Court found nothing in the FLSA that directed the DOL to regulate the ownership of tips when the employer does not take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the Court ruled that the DOL lacked the authority to regulate otherwise. Marlow v. New Food Guy, Inc., 861 F.3d 1157 (10th Cir. 2017). Read more >>

January 2, 2018

Sexual Harassment – Employers Should Act Now

By Mark Wiletsky

Roger Ailes, Bill O’Reilly, Harvey Weinstein, Kevin Spacey, Charlie Rose, Matt Lauer, politicians from both sides of the aisle – the list of prominent individuals accused of sexual harassment and assault continues to grow. And as sexual harassment dominates the headlines, workers are coming forward in increasing numbers to describe inappropriate sexual conduct in the workplace.

This heightened awareness by both the public and employees should make every employer pause to consider if it is doing enough to keep employees safe and free from harassment. Here are our recommendations for steps you should take right now to help prevent your organization from appearing in the headlines.

Have a Strong Anti-Harassment Policy

Every employer should have a written policy that prohibits sexual harassment in the workplace. If you do not have one, you should strongly consider implementing one to ensure your employees know that sexual harassment is absolutely prohibited. If you already have one, review it to ensure that it includes the following provisions:

  • zero tolerance for unlawful harassment and inappropriate sexual conduct in the workplace
  • examples of unacceptable physical conduct, such as unwelcome touching, hugging, kissing, groping, and gestures, as well as inappropriate verbal or visual conduct, such as sexual jokes, emails, cartoons, pictures, and propositions
  • requests for sexual favors or demands to engage in intimate relationships will not tolerated
  • policy applies to inappropriate conduct by managers, co-workers, vendors, customers, and others who come into contact with your employees
  • every employee is expected to report any harassment that he or she experiences or witnesses
  • reporting mechanism that offers two or more reporting channels (such as a supervisor and the human resources manager)
  • commitment to take complaints seriously through timely and thorough investigation
  • no retaliation or adverse consequences will occur to those who report sexual harassment or cooperate in any investigation or proceeding
  • employees found to have engaged in sexual harassment or other inappropriate conduct will be subject to discipline, up to and including termination.

Train Both Managers and Employees

A policy does little good if your employees are not aware of it. Take this opportunity to conduct sexual harassment training for your entire workforce. Live in-person presentations may be the best way to train your employees, allowing you to take questions and emphasize your organization’s commitment to preventing and resolving any harassment issues. If live training sessions are impossible, offer video or recorded training. Provide specialized training to your executives, managers, and supervisors so that you can stress their input in creating a culture that is free of harassment, and to help them recognize and learn how to handle harassment scenarios.

Encourage Reporting of Inappropriate Conduct 

Employees won’t report harassment to you if they feel their complaint will fall on deaf ears.
They may, instead, talk to the media or an attorney. Consequently, management and human resources professionals need to encourage reporting of workplace improprieties, no matter who it involves or how sensitive the accusation. If you do not welcome complaints, you will not have an opportunity to nip inappropriate conduct in the bud or resolve situations that could prove highly detrimental to your company. 

Investigate Every Complaint

You must treat every report of sexual misconduct or harassment seriously and conduct a timely, thorough investigation to determine whether the alleged conduct occurred. If the complaint is against your company president or another high-ranking individual, you still must investigate it in the same vigorous manner you would for any other employee accused of the misconduct. Consider whether you need to hire outside counsel or a third-party investigator to preserve privilege and to avoid allegations that the investigator was biased because he or she reports to the person accused of misconduct. Take time now to make sure you have an investigation process in place so that when a report of harassment comes in, you don’t waste time determining who does what. 

Take Prompt, Appropriate Action

As you receive a sexual harassment complaint and begin an investigation, you need to determine what action, if any, should be taken pending the investigation’s outcome. You may need to place the alleged harasser on leave, or you may need to separate workers so that they work on separate shifts or in different locations. Your duty is to stop any harassment from occurring, so take whatever steps may be necessary to do that. Then, when you have sufficient facts about the alleged harassment, determine what action is warranted to resolve it. If you conclude that harassment likely occurred, you need to impose consequences. Depending on the severity, that could mean immediate termination of employment. Remember, zero tolerance means no unlawful harassment goes unpunished.

Preventing and Resolving Sexual Harassment Should Help Keep You Out of the News

Because the topic of sexual harassment is so hot right now, take the time to recommit your organization to preventing and resolving workplace harassment by following the steps above. Your efforts now will go a long way in avoiding surprise allegations in the future.