Court Holds Religious Freedom Restoration Act Is Defense To Firing Of Transgender Employee

Last year the United States Supreme Court held that the Religious Freedom Restoration Act (“RFRA”) allowed Hobby Lobby to avoid providing health insurance coverage under the ACA for methods of contraception because doing so violated the sincerely held religious beliefs of the company’s owners. Last week in EEOC v. R.G. and G.R. Harris Funeral Homes, Inc. the United States District Court for the Eastern District of Michigan held that RFRA could provide a defense to a sex discrimination case under Title VII.

In Harris Funeral Homes it was undisputed that the Funeral Home fired a male employee, Stephens, because Stephens intended to “dress as a woman” while at work. Stephens is transgender and transitioning from male to female. The EEOC alleged that the termination violated Title VII because Stephens was terminated due to his transgender status or his gender identity. The court rejected that argument because transgender status and gender identity are not protected classes under Title VII. The EEOC also argued that Stephen’s termination was sex discrimination because Stephens did not conform to the Funeral Home’s sex/gender based stereotype.

The Funeral Home argued that it was entitled to an exemption under RFRA because allowing Stephens to dress as a woman at work would impose a substantial burden on its ability to conduct business in accordance with its sincerely held religious beliefs. RFRA prohibits the government from substantially burdening a person’s exercise of religion. After the RFRA defense was asserted the burden shifted to the EEOC to show that its efforts to prevent the Funeral Home from enforcing its dress code were (a) in furtherance of a compelling governmental interest and (b) the least restrictive means of furthering that compelling governmental interest.

The court held that the EEOC failed to show filing suit for sex discrimination was the least restrictive means of furthering the compelling governmental interest. For example, the court reasoned that if the EEOC’s interest was truly eliminating gender stereotypes, it could have proposed a gender neutral dress code as a less restrictive means of furthering the governmental interest.

Some take aways for employers:

  1. Transgender and sexual orientation are not protected classes under Title VII. However, they might be protected under applicable state or local law;
  2. Discrimination based on the failure to conform to a sex stereotype (e.g. a male employee is not masculine enough) is sex discrimination under Title VII;
  3. For RFRA to apply the government must be taking action against the employer. A suit by an employee, for example, would not be subject to a RFRA defense;
  4. RFRA also requires that an employer’s sincerely held religious belief be impacted by the action in question. This is more likely to be the case when the employer is a closely held corporation; and
  5. The Harris Funeral Homes decision may be appealed to the Sixth Circuit where it could be reversed.

E-Verify Soon Required For Some Tennessee Employers

Thanks to an amendment to a Tennessee law  some Tennessee employers will soon be required to use E-Verify.  Effective January 1, 2017 private employers with fifty (50) or more employees must use E-Verify to verify the work authorization status of all employees hired on or after that date.  This is a change to the Tennessee Lawful Employment Act, which currently allows all employers to choose between using E-Verify or collecting one of eleven specified identification documents in order to comply with the law.

Penalties for noncompliance with the TLEA include a $500 penalty plus $500 per employee or non-employee not verified, or a copy of appropriate verifying documentation not maintained, for the employer’s first offense.  Those amounts increase to $1000 for a second offense and $2500 for a third offense.

The TLEA allows first time violators to receive a warning in lieu of a penalty if the employer remedies the violation within 45 days of receipt of the notice and initial order from the Tennessee Department of Labor.  Employers previously had 60 days to achieve compliance, but the amendment shortened the time to 45 days.  Also, if the employer fails to remedy the violations within 45 days the initial order shall be deemed a final order not subject to further review.

All Tennessee employers should review their verification documentation now by conducting an “I9 Audit” to make sure they are in compliance with the TLEA and applicable federal law.  Tennessee employers with 50 or more employees can enroll in E-verify now, or wait until January 1, 2017 to do so, but make sure you enroll.  The failure to do so can be costly!



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The New DOL Overtime Rules Are Here: What You Need to Know

After much anticipation ( and likely some dread from employers) the DOL released its new overtime rules last night.  The Final Rule makes changes to the salary test for the Executive, Administrative and Professional (EAP) Exemptions as well as the Highly Compensated Employee Exemption.

* Key Provisions of the Final Rule *

The Final Rule focuses primarily on updating the salary and compensation levels needed for EAP workers to be exempt. Specifically, the Final Rule:

  1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
  2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
  3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
  4.  Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.  A “catch up” payment can also be made in an effort to satisfy the new salary level, provided it does not exceed 10 percent of the new minimum salary. However, HCE employees must still receive at least the full standard salary amount each pay period on a salary or fee basis without regard to the payment of nondiscretionary bonuses and incentive payments.
  5. The Effective Date is December 1, 2016.

Significantly, the Final Rule made no changes to the current duties tests for these exemptions.

Employers  have almost 6 months to prepare before these changes become law.  Use that time wisely to consult with employment law counsel, audit your employees currently classified as exempt and analyze your business to determine the best way to respond .


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Will the New Salary For The White Collar Exemptions Be Lower Than Expected?

Employers are anxiously awaiting the new DOL rules for the executive, administrative and professional  exemptions, which are also known as the “white collar exemptions”.  The proposed new rule would increase the annual salary for these exemptions to $50,440.  But rumors are circulating that the final rule will set the new annual salary at $47,000.  This would be almost exactly double the current salary threshold of $23,660 per year.

We should have the final rule later this month.  Stay tuned for further developments!

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Individual Liability Under The FMLA

A little known fact about the FMLA is that it can provide for individual liability in certain circumstances.  Recently, the Second Circuit Court of Appeals in Graziadio v. Culinary Institute of America served a loud reminder of that fact.

The FMLA defines “employer” as “any person who acts, directly or indirectly, in the interest of any employer to any of the employees of such employer”.  That is a convoluted way of saying an individual can be liable under the Act.  This definition came directly from the FLSA, and in certain FLSA cases individual liability is imposed.

What are the circumstances which can result in individual liability? The Second Circuit adopted a nonexclusive four factor “control” test. The four factors the court recognized are:

  1. The power to hire and fire;
  2. Supervising and controlling employee work schedules or conditions of employment;
  3. Determining the rate and method of payment to employees; and
  4. Maintaining employment records.

In Graziadio the court applied this test and held that there were disputed factual issues as to whether the company’s HR Director met the definition of employer and ruled that a jury will have to decide the question.

This case may lead to plaintiffs suing both the company and an HR Director or some other member of management under the FMLA, particularly if there is some question about the solvency of the company.  Only time will tell.

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Who Owns A Social Media Account Created By An Employee?

Some employers may allow, or even encourage, employees to establish social media accounts identifying them as representatives of the employers. But who owns these social media accounts after the employment relationship ends? The cases that have been decided thus far make it clear that if the employer wants to establish ownership of the accounts it is best to have a policy in place that addresses the issue.

In Eagle v. Morgan Dr. Linda Eagle was fired from her position at Edcomm, and thereafter Edcomm attempted to take control of her LinkedIn account. Once EdComm took control of her LinkedIn account, Dr. Eagle sued. In ruling for Dr. Eagle and rejecting EdComm’s counterclaims the court noted that Edcomm had no policies regarding employee use of LinkedIn, that Edcomm did not pay for employee LinkedIn accounts, and that LinkedIn’s User Agreement states that the account is between LinkedIn and the individual user. Thus, the court held that Edcomm had no ownership rights in the account even though the account was created using Edcomm’s email system and computers and was created to represent Dr. Eagle as an employee of Edcomm.

In Ardis Health, LLC v. Nankivell, Nankivell was terminated by her employer, CYC, and refused to turn over company “Access Information,” which included passwords and other login information for social media accounts and websites, and content on those accounts and websites. When she began working at CYC, the company had her sign a “Work Product Agreement” which provided that all work created or developed by Nankivell was the property of CYC. The court concluded that CYC owned this Access Information and forced Nankivell to return the Access Information to CYC.

In BTS, USA, Inc. v. Executive Perspectives, LLC, the defendant, Bergmann, posted about his new position with a direct competitor to his old company, BTS, USA, Inc. (“BTS”), on his LinkedIn page. Those “linked” with Bergmann could see his postings about his new job. Amongst those “linked” with him included several clients and contacts he developed while at BTS. BTS sued claiming Bergmann’s LinkedIn postings violated the non-compete agreement he entered into with BTS. In holding that this was not a breach of his non-compete agreement the court noted that “BTS had no policies or procedures regarding employee use of social media, did not request or require ex-employees to delete BTS clients or customers from LinkedIn accounts; did not discuss with Bergmann his LinkedIn account in any fashion,” and allowed employees to maintain LinkedIn accounts without monitoring or restriction.

Based on these cases, employers who want to establish ownership of a social media account created by an employee should adopt a policy which expressly states that the employer owns the account. Remember, an ounce of prevention is worth a pound of cure.

New Year’s Resolutions To Avoid Employment Litigation


2016 is here.   Perhaps you made individual resolutions for the New Year. A New Year’s resolution all employers should make is to review their policies and practices to ensure they are following the best practices to avoid employment litigation.

Some of the best practices to follow include the following:

1.                  Confirm that all written employment offers state that the employment relationship will be terminable at will.

2.                  Review and, if necessary, revise personnel manuals and employee handbooks to ensure that they comply with all applicable changes in the law.

3.                  Ensure that your employment application and personnel manual or employee handbook contain a disclaimer which states that the employment relationship is at will and that the document cannot be construed as a contract.

4.                  Instruct everyone who interviews potential employees not to promise “life long” or “permanent” employment, or make other similar promises of job security which might alter the employment at will relationship.

5.                  Conduct harassment training for all employees.

6.                  Train employees who interview potential employees on questions that are prohibited under state and federal law.

7.                  Review and, if necessary, revise job descriptions to ensure they list all essential job functions, including often overlooked mental capabilities such as concentrating, multitasking and communicating in a clear and persuasive fashion.

8.                  Review your exempt and nonexempt classifications to ensure compliance with wage and hour law, particularly in light of the changes in wage and hour law that are coming later this year. (For more on these changes see my December 2015 post).

9.                  Train supervisors on the company’s duty to reasonably accommodate employees with disabilities, including how to respond when an employee claims that he or she cannot do the job because of a physical or mental impairment.

Employers who commit to a New Year’s resolution to follow these best practices will be taking steps to make 2016 a Happy New Year!

Prepare For Upcoming FLSA Changes Now

Last month the Department of Labor announced that the final rule changing the Executive, Administrative and Professional Exemptions under the FLSA, the so called white collar exemptions, is expected to be released in July 2016. After the final rule is released the changes will likely become law 60 to 90 days later. The proposed changes will increase the annual minimum salary for these exemptions from $23,660 to $50,440. And, while there has been no announcement yet, it is still possible that the final rule will change the duties test for these exemptions which could greatly impact what employees qualify as exempt.

Now is the time for employers to begin planning on how to deal with these changes. Certainly, if there is a change to the duties test the change will likely be to narrow the exemption. Employers should conduct an analysis to determine whether it is more economically beneficial to increase the salary of some exempt employees, or reclassify them as nonexempt and pay them overtime. If the decision is made to continue to treat the employees as exempt employers should analyze whether any of that increase in salary can be passed on to their customers and if so, how much.

The analysis should also focus on the duties of every employee that is currently classified as exempt. If there is doubt about whether a particular employee is properly qualified as exempt the employer should determine whether that employee can be given additional duties and responsibilities to remove doubt about the exemption. If that is not possible the employer should consider how to best go about reclassifying the employee.

Reclassification may be viewed as an insult to some employees, so this must be considered in determining how to approach and resolve the issue. Also, employers must determine whether they will increase the pay of reclassified employees, in an effort to soften the blow of reclassification.

Proactive employers who conduct these analyses now will save themselves headaches in the future and be well positioned to comply with the new law as soon as it takes effect.

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Pay Transparency On The Horizon For Federal Government Contractors

Certain federal government contractors who enter into new federal contracts or subcontracts, or modify existing covered contracts on or after January 11, 2016, will have to comply with a new pay transparency rule. The covered contractors are those that hold a single federal contract, subcontract or federally assisted construction contract in excess of $10,000.00, have federal contracts or subcontracts that have a combined total in excess of $10,000.00 in any 12 month period, or hold government bills of lading, serve as depositories of federal funds, or are an issuing and paying agency for U.S. Savings Bonds and Notes in any amount.

The new pay transparency rule will prohibit employers from discharging or discriminating against employees or applicants who inquire about, discuss, or disclose their own compensation or the compensation of another employee or applicant. Additionally, the rule requires that employers post and disseminate a policy, explaining employees’ rights to discuss their compensation. The rule applies to all employees, including supervisors and managers.

The rule sets forth two defenses for employer’s accused of violations: The “workplace rule” defense and the “essential job functions” defense.

The workplace rule defense applies where a contractor disciplines an employee for a violation of a consistently and uniformly applied workplace rule. For example, an employee who publishes confidential business information to a third party could be disciplined for violating a rule prohibiting the publication, even if the publication included compensation information.

The essential job functions defense applies to employees who have access to compensation information and disclose that information to individuals who do not otherwise have access to the information. This defense will likely apply to employees who work in human resources or employee benefits that have access to compensation information as part of their essential job functions. The employees would not be protected by the pay transparency rule if they disclose or discuss compensation information obtained through the performance of their job.

Covered federal government contractors should begin taking steps to comply with the new pay transparency rule. These steps should include drafting a policy which complies with the rule and educating their managers and supervisors on what conduct is protected under the rule.

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Tennessee Supreme Court Refuses To Recognize A Claim For Retaliatory Failure to Hire

In Yardley v. Hospital Housekeeping Systems, LLC the Tennessee Supreme Court declined to recognize a cause of action under the Tennessee Workers’ Compensation Act for retaliatory failure to hire.  Beginning in 1998 Ms. Yardley had worked as a housekeeping aide for a hospital in Lebanon.  In 2010 Ms. Yardley was injured on the job and began receiving workers’ compensation benefits.  In January 2012 the hospital entered into a contract with Hospital Housekeeping Systems (“HHS”) whereby HHS would provide housekeeping services for the hospital.  Ms. Yardley applied for employment with HHS and was not hired.

In an email an HHS Vice-President stated in pertinent part that “Ms. Yardley had been out on workers’ comp with the hospital . . . that her shoulder was hurting her again, and that bringing her onboard would seem to be a workers’ comp claim waiting to happen.”  After not being hired Ms. Yardley filed suit claiming that the failure to hire her stated a claim under the Tennessee Workers’ Compensation Act.

In declining to recognize a cause of action for retaliatory failure to hire the Supreme Court relied on the plain language of the Workers’ Compensation Act.  Based on the plain language of the Act, Ms. Yardley was not an employee of HHS and HHS was not her employer.  The Supreme Court also noted that the employment at will doctrine is a bedrock principle of Tennessee Employment Law.  Thus, the Tennessee Supreme Court declined to recognize another exception to the employment at will doctrine.

The biggest take away from the Yardley case for employers is, even though Ms. Yardley cannot state a claim for retaliatory failure to hire under the Tennessee Workers’ Compensation Act, she may very well be able to state a claim for disability discrimination under the American’s With Disabilities Act (“ADA”) and the Tennessee Human Rights Act (“THRA”).  Ms. Yardley may be able to prove that she was not hired because of an actual disability or because HHS regarded her as being disabled.  If she is successful under either theory she would be able to prevail under both the ADA and THRA.

To avoid failure to hire claims under the ADA and THRA do not base hiring decisions on an applicant’s medical condition or disability unless the condition prevents the applicant from performing the essentials functions of the job with or without reasonable accommodation.  Additionally, do not ask questions about an applicant’s medical history unless you have extended the applicant a conditional offer of employment, the same questions are asked of all applicants for that position who have received a conditional offer of employment and the questions are narrowly tailored to the essential functions of the job in question.

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