Our colleague Nancy L. Gunzenhauser has a Technology Employment Law blog post that will be of interest to many of our retail industry readers: “Three States Seek to Bolster Fair Pay Laws.”

Following is an excerpt:

Following on the tails of recent updates in New York and California’s equal pay laws, New Jersey, Massachusetts, and California all have bills pending in their state legislatures that would seek to eliminate pay differentials on the basis of sex and other protected categories. …

While states are leading the charge with updates to equal pay laws, the EEOC is also stepping up equal pay enforcement with their proposal to modify the EEO-1 forms to include pay information. This push to gather more information regarding pay among various categories may lead to an increase in pay-related claims over the next few years. To help avoid such claims, employers should consider auditing job titles and compensation methods to ensure compliance with each jurisdiction’s equal pay laws.

Read the full post here.

In the wake of several high-profile wins for the LGBT community, the U.S. Equal Employment Opportunity Commission (“EEOC”) added employment discrimination protection to the list.  On July 16, 2015, the EEOC ruled that discrimination against employees based on sexual orientation is prohibited by Title VII of the 1964 Civil Rights Act of 1964 (“Title VII”) as discrimination based on sex.

The EEOC held that “[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee’s sex.”  The EEOC noted that sex-based considerations also encompassed gender-based considerations under Title VII. This ruling, if accepted by federal courts, would extend protection under Title VII to decisions made on the basis of sexual orientation. While only the Supreme Court can issue a final, definitive ruling on the interpretation of Title VII, EEOC decisions are given significant deference by federal courts.

Employers across the U.S. should anticipate that overt actions, practices, and harassment that could be construed as discriminatory on the basis of a worker’s sexual orientation will be challenged in federal court and subject employers to potential liability.

On Monday, June 29, 2015, Mayor Bill de Blasio signed into law the bill passed by the New York City Council “banning-the-box.” The law goes into effect on Tuesday, October 27, 2015. As discussed in our earlier advisory, the ban-the-box movement removes from an employment application the “box” that requests criminal conviction history. New York City’s law also imposes additional requirements upon the employer when making an adverse employment decision on the basis of criminal conviction history.

On May 1, 2015, we reported on proposed regulations to the Massachusetts paid sick leave law, which becomes effective on July 1, 2015.  The regulations have not yet been adopted, and in light of the uncertainty about many provisions of the law, the Massachusetts Attorney General’s Office has issued a “Safe Harbor for Employers with Existing Paid Time Off Policies.”  Under the safe harbor, any employer with a paid time off policy in existence as of May 1, 2015, which provides employees with the right to use at least 30 hours of paid time off per year, will be deemed in compliance with the new sick leave law.  The safe harbor will expire on December 31 of this year, and as of January 1, 2016, all covered employers will be required to comply with the provisions of the new law. Our November 10, 2014 Advisory summarizes the law’s provisions and requirements.

The proposed regulations to the paid sick leave law, which would clarify employer obligations under law, remain under review by the Massachusetts Attorney General and during the comment period have been subject to considerable objection.  For this reason, and because the law carries the potential for substantial penalties for non-compliance, several employers and professional organizations have urged postponement of the law’s effective date.  Notwithstanding these objections, the law’s effective date remains July 1, 2015 and employers should prepare to comply.

The AGO has also published the earned sick time notice on its website.

Our colleagues Steven M. Swirsky; Adam C. Solander; Brandon C. Ge; Nancy L. Gunzenhauser; and August Emil Huelle contributed to Epstein Becker Green’s recent issue of Take 5 newsletter.   In this edition, we address important employment, labor, and workforce management issues confronting retailers:

  1. Sick Leaves Laws Are Sweeping the Nation
  2. The NLRB’s New “Expedited” Election Rules Became Effective April 14, 2015—Expect a Major Uptick in Union Activity in Retail
  3. EEOC Proposes Wellness Program Amendments to ADA Regulations: The Impact on Retail Employers
  4. Security Considerations for the Retail Employer
  5. NLRB Issues Critical Guidance on Employee Handbooks, Rules, and Policies, Including “Approved” Language

Read the Full Take 5 here.

As we reported, last November, voters in Massachusetts approved a law granting Massachusetts employees the right to sick leave, starting on July 1, 2015.  The law provides paid sick leave for employers with 11 or more employees and unpaid sick leave for employees with 10 or fewer employees. While the law set forth the basics, many of the details, which have differentiated the various sick leave laws across the country, were not previously specified (e.g., minimum increments of use, frontloading, documentation).  The Massachusetts Attorney General’s Office (“AGO”) has set forth proposed regulations to guide employers in implementing the upcoming sick leave law.

Some of the proposed regulations include:

  • To determine an employer’s size, the number of employees at all locations will be counted, not just those employees in Massachusetts. For example, if a company has 25 employees in New York and three employees in Massachusetts, the employer will be required to provide paid sick leave to the Massachusetts employees because the employer has 11 or more employees in total.
  • Employees may use sick leave in hourly increments. However, if the employer has to hire a replacement, and does so, the employer may charge the employee for the entire missed shift.
  • If an employer decides to pay employees for their accrued, unused sick leave at the end of the calendar year, the employer need only frontload 16 hours in the following calendar year (as opposed to all 40 hours the employee will receive that year).[1]
  • An employer may choose to frontload 40 hours of sick leave per year rather than tracking accrual rates throughout the year.
  • An employer may not request documentation about an employee’s need for leave until the employee has taken 24 consecutive hours of sick leave.
    • At that point, an employee may provide documentation in the form of a doctor’s note or a written statement evidencing the need to use sick leave.[2]
    • If leave is related to domestic violence, an employee may provide alternative documentation.
    • The employee may submit any of the above documentation in any form customarily used to communicate, including via text message, e-mail, or fax.
  • Employers must provide written notice to employees at the beginning of employment as to what constitutes a “calendar year” for accrual and use purposes.
  • Employers must post the notice of the Earned Sick Time Law in the workplace and provide a copy to all employees.

The AGO will be holding six public hearings throughout the state, including one in Boston on May 18, 2015, to entertain comments to the proposed regulations. The deadline for written comments, which may be submitted by mail or electronically, is June 10.  If you would like assistance in preparing any comments, please contact us. We will provide an update upon adoption of the regulations (whether in this form, or revised after the comment period).

[1] This is more employer-friendly than the New York City Earned Sick Time Act, which requires that 40 hours be frontloaded if an employer pays out sick leave at the end of the calendar year.

[2] The AGO will create a model form for this use, but such form has not been posted yet.

By Nancy L. Gunzenhauser 

As we’ve previously advised, make sure you are prepared for interns this summer! This summer there’s a new legal trend about interns. While wage and hour lawsuits are still hot, the new “it” trend seems to be laws that extend protection against discrimination and harassment for interns.  Recently, states and cities have been adding interns to the protected individuals under their human rights laws.

Retailers have long used interns, both to provide training opportunities for the interns and to supplement their workforce over the summer months. Whether an intern should be paid or unpaid (meeting the test of a “trainee”) is a determination that should be made using the federal six-factor test, and any applicable state tests. 

Regardless if the intern is paid or unpaid, certain policies and procedures need to be tailored to interns, and should differ from those given to regular employees. While recruitment efforts and offer letters need to be prepared just for interns, certain benefits and policies may need to be provided to all workers – even unpaid interns.

This year, New York City joined Washington, D.C. and the state of Oregon in passing a law protecting interns from sexual harassment, and other forms of employment discrimination. Now, several other states are seeking to expand those same protections to interns. In the past month, legislatures in California, New York, and Illinois have debated and voted on these bills.

The decision to give interns the same protections against discrimination and harassment as employees could affect how interns are treated under wage and hour laws. While the NYC law states that it applies to both paid and unpaid interns, it doesn’t make any determination as to whether those interns should be classified as employees, to receive minimum wage and potentially overtime.

The proposed New York state legislation addresses such concerns that some employers may have over the decision to extend anti-discrimination protections to interns. The current text of the bill, which has advanced to the third reading within the state Senate, provides that “nothing in this section shall create an employment relationship between an employer and an intern.”

A similar law is pending in Illinois, but it has been amended to only protect unpaid interns who meet a certain set of factors, which are similar to the federal six-factor test:

the person works for the employer at least 10 hours per week; the employer is not committed to hiring the person at the conclusion of his or her tenure; the employer and the person agree that the person is not entitled to wages for the work performed; and the work provides experience for the benefit of the person, does not displace regular employees, and is performed under the close supervision of staff.

The wording of the Illinois bill shows that legislators are aware that granting unpaid interns, who may not qualify as employees under the law, rights typically only afforded to employees could affect their employment status.

As more states continue to address whether interns, paid or unpaid, will be protected under anti-discrimination laws, stay tuned to the Retail Labor and Employment Law blog for any updates. If you’re having interns this summer in NYC, DC or Oregon, make sure policies and procedures are updated and are distributed to all employees and non-employee interns!

By Jeffrey Landes, Susan Gross Sholinsky, and Nancy L. Gunzenhauser

A hot topic for every summer – but particularly this summer – is the status of unpaid interns. You are probably aware that several wage and hour lawsuits have been brought regarding the employment status of unpaid interns, particularly in the entertainment and publishing industries. The theory behind these cases is that the interns in question don’t fall within the “trainee” exception to the definition of “employee” under the federal Fair Labor Standards Act (“FLSA”), as well as applicable state laws. If the intern does fall within this exception, he or she is not subject to wage and hour laws (such as minimum wage or overtime) and the unpaid internship is thus permissible.

Federal and New York State Factors

According to the U.S. Department of Labor (“DOL”), all six of the following factors must be met if an intern can be exempted from wage and hour laws under the “trainee” exception:

  1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment. The more an internship program is structured around a classroom or academic experience as opposed to the employer’s actual operations, the more likely the internship will be viewed as an extension of the individual’s educational experience.
  2. The internship experience is for the benefit of the intern. The intern should get more out of the internship than the employer.
  3. The intern does not displace regular employees, but works under the close supervision of existing staff. If an employer uses interns as substitutes for regular workers or to increase its existing workforce during certain time periods, then they are more likely to be deemed employees.
  4. The employer that provides the training derives no immediate advantage from the activities of the intern and on occasion its operations may actually be impeded.
  5. The intern is not necessarily entitled to a job at the conclusion of the internship. The internship should be of a fixed duration, established prior to the outset of the internship, and should not be used as a “long-term job interview” for employment.
  6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. The parties should enter into a written agreement on this point.

In addition, the New York State DOL has a five-factor test for whether an intern is not an employee.  According to the New York State DOL, all five of these factors must be met, in addition to the U.S. DOL’s six factors:

  1. Any clinical training is performed under the supervision and direction of people who are knowledgeable and experienced in the activity. The intern should be supervised by a person in that field, not by an administrator or HR.
  2. The trainees or students do not receive employee benefits. The intern should not be eligible for health care, vacation, or discounted services.
  3. The training is general and qualifies trainees or students to work in any similar business.  It is not designed specifically for a job with the employer that offers the program. The training must be useful, transferable to any employer in the field, and not specific to that employer.
  4. The screening process for the internship program is NOT the same as for employment and does not appear to be for that purpose. The screening only uses criteria relevant for admission to an independent educational program. There should be a separate application and selection process for interns and employees.
  5. Advertisements, postings, or solicitations for the program clearly discuss education or training, rather than employment, although employers may indicate that qualified graduates may be considered for employment. It should be obvious that a job posting is for an internship and not for employment.

How Are the Courts Interpreting These Tests?

Several federal circuit courts of appeal have addressed this issue applying various tests. At least one court has used the “all or nothing” test, whereby all six U.S. DOL factors must be met if the interns will be considered “trainees.” Other courts have followed the “totality of the circumstances” test. These courts hold that the six factors are relevant to help determine whether an individual is a trainee, but are not “hard and fast” requirements. Still other courts have used an “economic reality” test, similar to that used in classifying employees and independent contractors under the FLSA. Yet another court created a “primary beneficiary” test, which asks whether the employer or employee is the primary beneficiary of the intern’s labor.

Courts in the Southern District of New York have generally followed the totality of the circumstances test in determining whether an intern is an employee or a trainee, but the scope of the analysis has differed. Currently there are two cases pending in the Second Circuit for a joint decision as to the proper analysis, among other issues. Even after the Second Circuit rules, the Supreme Court will likely weigh in on this topic. However, the Supreme Court recently denied a certiorari requested by a party to an intern case in the Eleventh Circuit.

Practical Considerations in Establishing a Compliant Unpaid Internship Program

  • Even if an intern meets the test of being a “trainee,” who is not subject to the FLSA, interns in New York City (and perhaps in other jurisdictions to come) are afforded the same rights against employment discrimination as employees, under the applicable fair employment practices laws.
  • When recruiting interns, use different postings, applications, and screening processes than when recruiting employees.
  • When drafting an offer letter, ensure that the intern knows that he or she will not be paid, and is not entitled to a job at the end of the internship.
  • Review your policies and other benefit plans (for example, vacation/sick leave, workers’ compensation) to determine if interns are included or excluded from coverage.
  • Structure the unpaid internship to include shadowing and classroom learning, and if possible, have interns receive school credit. While receiving school credit is not determinative under any of the tests, it is one of the best indicators that the intern is not an employee.

By Nancy L. Gunzenhauser

On March 13, 2014 President Obama issued a memorandum instructing the Department of Labor (“DOL”) to review and revise overtime regulations under the Fair Labor Standards Act (“FLSA”).  Under the FLSA employees are eligible to receive overtime for all hours worked over 40 per week, unless they fall within certain specified exemptions.  The most common of exempt classifications in the retail industry are executive, administrative, and commission sales.

The executive exemption applies to managers and supervisors who direct the work of others and who earn a salary of at least $455 per week. The administrative exemption applies to employees who (i) earn a minimum weekly salary of $455, (ii) perform non-manual work directly related to the employer’s business operations and (iii) have as a primary duty the exercise of discretion and independent judgment with respect to matters of significance. The commissioned sales person exemption applies to employees who receive more than half of their earnings from commissions.

The upcoming changes to overtime regulations will be the first since 2004, when the threshold for the executive exemption was raised from $250 to $455 per week.

While the exact changes the Obama administration has in mind remain unclear, the impact on the retail industry, and indeed nearly all employers, may be be significant because the express purpose of the mandated review is to increase the number of workers eligible for overtime. One likely change will be a further increase to the minimum weekly salary threshold for executive and administrative exemptions. Inasmuch as many, if not most, exempt employees already have salaries of more than $455 per week, the change to the salary threshold alone might not be significant – depending on the new minimum. But, other changes cannot be ruled out.

The DOL has not indicated when it expects to issue the proposed amendments. A comment period will follow before any rule amendments are adopted, however.   Rulemaking may take a year or more. We will be monitoring the process and will alert you here to developments.

In addition, you may wish to download the EBG Wage & Hour app to your smart phone,  where changes to the regulations will also be posted.

Our Epstein Becker Green colleagues Susan Gross Sholinsky and Nancy L. Gunzenhauser discuss “Five New Challenges Facing Retail Employers” in this month’s Take 5 newsletter. Below is an excerpt:

Retailers face new challenges every day as a result of legislation, litigation, and technology. This Take 5 addresses some of these challenges. …

  1. Pregnancy Accommodation
  2. Releases and Other Considerations Attendant to Layoffs
  3. Racial Profiling
  4. Data Security
  5. Social Media in Hiring

Read the full newsletter here.