Weekly Update: Handbook Rules, Rounding of Time Entries, Public Sector Union Fees, and National Origin Regulations
In case you’ve missed it in the headlines, there have been some developments in recent weeks, some of which are actually favorable for employers and business! Here are the highlights:
Public Sector Union Fees
Yesterday, the United States Supreme Court issued its opinion in Janus v. AFSCME, dealing a blow to public sector unions by holding (in a 5-4 decision) that public employees who are not members of the union cannot be required to pay “agency fees” (reduced union dues), because this practice violates employees’ First Amendment rights. The factual setting involves state employees who choose not to be a member of the public sector union, but who nonetheless gain some benefits by the union’s negotiation of wages and benefits on behalf of the workers employed in jobs covered by the collective bargaining agreement (benefits that apply to workers employed in those jobs, regardless of whether the workers are union members). Historically, unions have been allowed to require non-member employees to pay reduced union dues (known as agency fees) because of the benefit provided these non-member employees by the union. Well, yesterday, the Supreme Court ruled that this practice was unconstitutional because employees who oppose union beliefs/political positions have First Amendment rights not to be forced to support the union through payment of agency fees. The decision is expected to do significant financial harm to public sector unions, limiting the funds they have available for lobbying and other political efforts. Many also predict a decline in public sector union membership as a result of the ruling.
New NLRB Guidance on Employee Handbook Rules
Earlier this month, the NLRB General Counsel issued new guidance on employer handbook rules, in an effort to provide more clarity to employers on which rules are permissible and which rules will be deemed to violate employee rights under the National Labor Relations Act (NLRA). This has been an area that has plagued many employers before the NLRB in recent years, since the Obama-era NLRB sought to expand its regulation of neutral workplace conduct policies, often finding that standard handbook rules (e.g. on insubordination, recording of conversations, confidentiality, etc.) violate employee rights under Section 7 of the NLRA to engage in “concerted activity” for “mutual aid and protection.”
Since 2004, the test for assessing whether an employer policy violated Section 7 rights was set forth in the Lutheran Heritage case, in which the NLRB held that a workplace policy or rule would be found unlawful if, among other things, employees could “reasonably construe” the rule as prohibiting them from engaging in conduct protected by Section 7. Following Lutheran Heritage, the Obama-era NLRB issued a number of decisions and guidance suggesting that many standard employer policies/rules violate Section 7 based on the NLRB’s overbroad interpretation of the circumstances in which an employee could “reasonably construe” such rules to restrict them from exercising the right to engage in concerted activity for mutual aid and protection.
Finally, in December 2017, the NLRB issued its Boeing decision, overruling the Lutheran Heritage “reasonably construe” test and laying out a new test for assessing whether a facially neutral workplace rule violates the NLRA. Under the new Boeing test, the NLRB reviews a facially neutral workplace rule to determine whether the rule, when reasonably interpreted, would potentially interfere with the exercise of employee rights. If so, the NLRB will engage in a balancing test that weighs the nature and extent of the potential impact on those rights against the legitimate business justifications associated with the rule. When legitimate justifications outweigh a rule’s potential impact on protected rights, it will be found lawful.
While Boeing provided a more positive test assessing employer workplace rules, it still left employers without a lot of clarity on whether specific rules would be lawful or not. This month’s General Counsel guidance was intended to provide more clarity. The guidance describes three categories of rules: (1) generally lawful rules; (2) generally unlawful rules; and (3) rules requiring individualized assessment to determine their lawfulness.
Generally Lawful Rules:
The Guidance states that the following workplace rules are generally lawful and that regional NLRB offices should dismiss unfair labor practice charges alleging that such rules are unlawful:
- Civility Rules: Rules that prohibit rude and disrespectful behavior, or disparagement of company employees.
- Rules Prohibiting Photos/Recordings: Rules that generally prohibit the use of cameras or recording devices in the workplace.
- Insubordination Rules: Rules that prohibit insubordinate conduct, uncooperative behavior, or other conduct that adversely affects operations.
- Disruptive Behavior Rules: Rules that prohibit disruptive or disorderly conduct.
- Confidentiality Rules: Rules that generally protect an employer’s confidential, proprietary, or trade secret information (note, of course, that an employer cannot prevent an employee from discussing their wages or conditions of employment).
- Defamation Rules: Rules that prohibit employees from engaging in defamation, slander, or misrepresentation of facts about the company or its employees.
- Rules Limiting Ability to Speak for Company: Rules that prohibit employees from responding to media requests, commenting on behalf of the company, or otherwise purporting to speak on behalf of the company.
- Employer Logos and Trademarks: Rules that prohibit use of the employer’s logo or trademarks.
- Conflict of Interest Rules: Rules prohibiting certain competitive activities, nepotism, or disloyalty
Generally Unlawful Rules:
The guidance identifies only the following rules that generally will be considered unlawful on their face: (1) confidentiality rules that expressly limit disclosure of information regarding wages, benefits, or working conditions; and (2) rules restricting employees from joining outside organizations or voting on matters concerning the employer.
Rules Requiring Individualized Assessment:
The guidance identifies the following types of rules as ones that need to be assessed on a case-by-case basis to determine lawfulness:
- Broad conflict-of-interest rules that do not specifically target fraud and self-enrichment (generally lawful), and do not restrict membership in, or voting for, a union (generally unlawful))
- Confidentiality rules broadly encompassing “employer business” or “employee information” (as opposed to confidentiality rules regarding customer or proprietary information (generally lawful), or confidentiality rules more specifically directed at employee wages, terms of employment, or working conditions (generally unlawful))
- Rules regarding disparagement or criticism of the employer (as opposed to civility rules regarding disparagement of employees (generally lawful))
- Rules regulating use of the employer’s name (as opposed to rules regulating use of the employer’s logo/trademark (generally lawful))
- Rules generally restricting speaking to the media or third parties (as opposed to rules restricting speaking to the media on the employer’s behalf (which are generally lawful))
- Rules banning off-duty conduct that might harm the employer (as opposed to rules banning insubordinate or disruptive conduct at work (generally lawful), or rules specifically banning participation in outside organizations (generally unlawful))
- Rules against making false or inaccurate statements (as opposed to rules against making defamatory statements (generally lawful))
Employers should review this recent guidance to assess whether their handbook policies need to be revised.
New California Decision Upholding Practice of Rounding Time Entries to Nearest Quarter Hour
This week, a California Court of Appeal issued a published decision in AHMC Healthcare, Inc. v. Superior Court, holding that an employer’s practice of rounding employee time entries to the nearest quarter hour for payroll purposes was lawful and that the employees did not have valid claims for unpaid wages. In this case, two hospital employees filed a class action for unpaid wages based on the employer’s rounding practice, alleging the practice resulted in employees being undercompensated. The employer had an expert conduct an analysis of employee time and pay records at two different hospital locations to determine how the rounding practice operated in practice and whether it had a net effect of overcompensating or undercompensating employees. At one location, rounding caused the majority of employees to be overcompensated. At the other location, the practice had the net effect of undercompensating a very slight majority of employees. As for the two named plaintiffs specifically, the practice resulted in very slight undercompensation. Taking all of these results together, the practice had the net effect of overcompensating employees on the whole. Based on this evidence, the court held that the employer’s rounding practice was lawful and that the employer was entitled to judgment as a matter of law on the employees’ claims for unpaid wages.
This is another favorable decision on the use of rounding practices in California. However, it also demonstrates that the use of such practices makes an employer an easy target for class action litigation, and the employer will only prevail in such litigation if it can establish, through expert analysis of its pay records over a period of time, that the rounding practice did not have a net effect of undercompensating employees. This is an expensive task, and most employers will not know how the results will turn out. If the results are unfavorable (reveal net underpayment of wages), the employer may well be staring at class liability for unpaid wages (and attorneys’ fees of course). For these reasons, the use of rounding practices in California still poses costly litigation risk to employers. Employers who use rounding practices should audit those practices to determine the net effect of the practice on wages.
Reminder That California’s National Origin Regulations Take Effect July 1, 2018
California’s Fair Employment and Housing Council recently passed regulations clarifying prohibitions on national origin discrimination under FEHA. These regulations take effect July 1, 2018. Here are the most significant aspects of these new regulations:
Definition of National Origin
The regulations clarify that the definition of "national origin" includes an applicant’s or employee’s actual or perceived:
- Physical, cultural, or linguistic characteristics associated with a national origin group;
- Marriage to or association with persons of a national origin group;
- Tribal affiliation;
- Membership in or association with an organization identified with or seeking to promote the interests of a national origin group;
- Attendance or participation in schools, churches, temples, mosques, or other religious institutions generally used by persons of national origin group; and
- Name that is associated with a national origin group.
The new regulations provide that English-only workplace rules are presumptively illegal unless the employer can establish (1) that the rule is justified by business necessity; (2) that the rule is narrowly tailored; and (3) that the rule is clearly explained to employees. To meet this test, the employer must be able to prove that the language restriction is necessary to the safe and efficient operation of the business; that the restriction effectively fulfills the business purpose it is supposed to serve; and that there is no alternative practice to the language restriction that would accomplish the business purpose equally well with a lesser discriminatory impact. Promoting “business convenience” or “customer or co-worker preference” is not sufficient to justify an English-only rule. Additionally, even where an employer can justify an English-only rule, such a rule cannot be applied during an employee’s non-work time, including breaks, and unpaid employer-sponsored events.
Employment discrimination based on an applicant’s or employee’s accent is unlawful unless the employer proves that the individual’s accent interferes materially with the applicant’s or employee’s ability to perform the job in question.
Discrimination based on an applicant’s or employee’s English proficiency is unlawful unless the English proficiency requirement at issue is justified by business necessity (i.e., the level of proficiency required by the employer is necessary to effectively fulfill the job duties of the position.) In determining business necessity in this context, relevant factors include, but are not limited to, the type of proficiency required (e.g., spoken, written, aural, and/or reading comprehension), the degree of proficiency required, and the nature and job duties of the position.
It is not unlawful for an employer to request from an applicant or employee information regarding his or her ability to speak, read, write, or understand any language, including languages other than English, if justified by business necessity.
Height and/or Weight Requirements
The new regulations indicate that height and weight requirements may have the effect of creating a disparate impact on the basis of national origin. Where an adverse impact is established, such requirements are unlawful, unless the employer can demonstrate that they are job related and justified by business necessity. Where such a requirement is job related and justified by business necessity, it is still unlawful if the applicant or employee can prove that the purpose of the requirement can be achieved as effectively through less discriminatory means.
Recruitment and Job Segregation
The new regulations provide that it is an unlawful employment practice for an employer or other covered entity to seek, request, or refer applicants or employees based on national origin or to assign positions, facilities, or geographical areas of employment based on national origin, unless pursuant to a permissible defense.
The new regulations reiterate that it is unlawful to inquire about an applicant’s or employee’s immigration status other than as required by federal law. The regulations further limit employers’ ability to require applicants/employees to hold or present a driver’s license. An employer may require an applicant or employee to hold or present a driver’s license only if possession of a driver’s license is required by state or federal law, or is required by the employer and is permitted by law. An employer policy requiring applicants or employees to present or hold a driver’s license may be evidence of a violation of FEHA if the policy is not uniformly applied or is inconsistent with legitimate business reasons (i.e., possessing a driver’s license is not needed in order to perform an essential function of the job).
Employers should review their policies and practices to ensure compliance with the new regulations.