Sex, Drugs & the FLSA: Employment Law Update

1. EMPLOYMENT LAW:Sex, Drugs & the FLSA October 3 & 10, 2017 Presented by Matt Veech & Chris James

2. Topics 02 03 01 • Sex Discrimination: • Is sexual orientation now a protected class? • Basics of the FLSA: Is there change on the way? • Medical and Recreational Marijuana: Is it making its way into the workplace?

3. Current Status of Protections for LGTBQ Issues- Gender or Sexual Identity- Sexual Orientation- Sex Stereotyping or Gender Nonconformity

4. “A person’s deeply-felt, inherent sense of being a boy, a man, or male; a girl, a woman, or female; or an alternative gender [such as gender neutral] that may or may not correspond to a person’s sex assigned at birth or to a person’s primary [biological and physiological] sex characteristics.” • Guidelines for Psychological Practice with Transgender and Gender Nonconforming People, American Psychological Association (2015), PDF available at https://www.apa.org/pi/lgbt/resources/sexuality-definitions.pdf; see also Definitions Related to Sexual Orientation and Gender Diversity in APA Documents, American Psychological Association, Pg. 1, available at https://www.apa.org/pi/lgbt/resources/sexuality-definitions.pdf. Sexual or Gender Identity

5. The term sexual or gender “identity” is used to describe whether one feels like a man or a woman; i.e., a biologically-male transgender individual has a sexual identity of female. • “Transgender” is an umbrella term that is used to describe anyone who presents outwardly as one gender, but is biologically born the other gender. The term includes those who have undergone sexual confirmation surgery (transsexuals) and those who have not. Sexual or Gender Identity

6. “Sexual orientation is . . . based on whether someone is attracted to a people of a sex different than their own, the same sex, or both sexes (i.e., heterosexual, homosexual, bisexual).” • Sexual Orientation and Gender Identity, National Education Association (last visited Sept. 25, 2017), available at  http://www.nea.org/tools/18846.htm. Sexual Orientation

7. Also called gender nonconformity, sex stereotyping is a recognized cause of action under Title VII, created by the United States Supreme Court in Price Waterhouse v. Hopkins. 490 U.S. 228 (1989). • It is a violation of Title VII – and it falls squarely within the protected class of “sex” – to discriminate against an individual for failing to conform to the traditional notions of masculinity or femininity.  Id. at 251–52. Sex Stereotyping

8. The majority of circuits do NOT extend Title VII protection to sexual orientation. • First Circuit – Higgins v. New Balance Ath. Shoe, Inc., 194 F.3d 252, 259 (1st Cir. 1999). • Second Circuit – Simonton v. Runyon, 232 F.3d 33, 36 (2d Cir. 2000). • Third Circuit – Bibby v. Phila. Coca Cola Bottling Co., 260 F.3d 257, 265 (3d Cir. 2001). • Fourth Circuit – Wrightson v. Pizza Hut of Am., 99 F.3d 138, 143 (4th Cir. 1996). • Sixth Circuit – Gilbert v. Country Music Ass’n, 432 Fed. Appx. 516, 520 (6th Cir. 2011). • Eighth Circuit – Williamson v. A.G. Edwards & Sons, Inc., 876 F.2d 69, 70 (8th Cir. 1989). • Ninth Circuit – Rene v. MGM Grand Hotel, Inc., 305 F.3d 1061, 1063–64 (9th Cir. 2002). • Tenth Circuit – Medina v. Income Support Div., 413 F.3d 1131, 1135 (10th Cir. 2005). Sexual Orientation Protection

9. The majority of circuits do NOT extend Title VII to protect sexual orientation. • But the Seventh Circuit recently extended protections to include sexual orientation: • Hively v. Ivy Tech Cmy. College of Ind., 853 F.3d 339, 347 (7th Cir. 2017). Sexual Orientation Protection

10. BUT, the Supreme Court and many of these circuits do allow lawsuits that implicate sexual orientation through sexual stereotyping. • Telling an employee she should walk, talk, or dress more femininely, style her hair or wear makeup; • Telling an employee she is too aggressive for a woman or he is too effeminate and not manly enough; • Telling an employee that women cannot be both high-up executives and a good mother; • Telling an employee that he walks like a girl or talks like a girl. Sexual Orientation Protection

11. Executive Order 13672 prohibits discrimination in federal employment based on sexual orientation or gender identity. • Signed by President Obama on July 21, 2014; • Stated goal to “provide for a uniform policy for the Federal Government to prohibit discrimination and take further steps to promote economy and efficiency in Federal Government procurement by prohibiting discrimination based on sexual orientation and gender identity.” • Executive Order 13672 has NOT been revoked by President Trump. • U.S. Equal Employment Opportunity Commission, Executive Order 13672 (last visited September 30, 2017) available at https://www.eeoc.gov/eeoc/history/50th/thelaw/11478_11246_amend.cfm Executive Order 13672

12. In 1964, Congress was surely not considering “sexual orientation” when it added sex into the statute. In fact, sex was proposed at the last minute by a congressman who hoped the addition would cause Title VII to fail entirely. • The Employment Non-Discrimination Act (ENDA) has been proposed to every Congressional Session since 1994 except one. This would amend Title VII to include sexual orientation within the definition section of sex under the definition section. To date, each and every effort has failed. • Courts consider Congress’ refusal to expand “sex” as evidence that it does not mean anything other than the traditional notions of male and female. What does Congress say about this?

13. The EEOC reads Title VII as it is currently written to include protection of sexual orientation. • Baldwin v. Foxx, E.E.O.C. Decision No. 0120133080, 2015 EEOPUB LEXIS 1905, 2015 WL 4397641 (July 16, 2015). • “Discrimination on the basis of sexual orientation is premised on sex-based preferences, assumptions, expectations, stereotypes, or norms. ‘Sexual orientation’ as a concept cannot be defined or understood without reference to sex. . . It follows, then, that sexual orientation is inseparable from and inescapably linked to sex and, therefore, that allegations of sexual orientation discrimination involve sex-based considerations.” What does the EEOC say about this?

14. What do the states say about this?

15. More circuits agree that transgender individuals are covered under Title VII’s protections than homosexual individuals; President Trump has an opportunity to shape the federal judiciary; As of September 20, 2017, there were 144 federal court vacancies – all waiting for Trump appointees; and As of today, Trump has not revoked the Obama-era Executive Order 13672. The Facts Around Sexual Orientation Anti-Discrimination Policies In closing, some interesting facts…

16. The Questions Behind the Legalization of Marijuana

17. The use and non-use of pharmaceuticals and recreational drugs is governed by the federal Controlled Substances Act (CSA), which is a comprehensive regulatory scheme meant to establish uniform nationwide drug policies. It is undisputed that the possession and use of marijuana violates the CSA—regardless of whether it is medically prescribed. It is important to keep clear that any state law that purports to legalize the use of marijuana, for federal purposes, does not. Status of the Law

18. Status of the Medical Marijuana Laws

19. Who has, or who doesn’t have, a medical marijuana card?

20. (1) Is allowing an employee to use medicinal marijuana a required reasonable accommodation? (2) Is an employer’s drug testing (random and during hiring process) policy impacted by the rise in recreational use laws? How should employers handle marijuana issues in the workplace?

21. Does an employer have to allow for the use of medicinal marijuana to comply with the reasonable accommodation requirements of the ADA? Most people who have a prescription for medical marijuana have a disability that is protected under the ADA. • Cancer; • Glaucoma; • HIV; • Hepatitis C; • Crohn’s disease; • Alzheimer's. Reasonable Accommodation under the ADA?

22. The ADA does not require that an employer accommodate by allowing use of medicinal marijuana. • Courts that have directly addressed whether the ADA itself requires permission to use medical marijuana as a reasonable accommodation have all found that the ADA does not mandate that employer allow for the use of an illegal substance as a reasonable accommodation for a disability. • Because even medicinal marijuana is an illegal substance under the CSA, accommodation is not required under the ADA. Reasonable Accommodation under the ADA?

23. Hardin v. CHRISTUS Health Se. Tex. St. Elizabeth, No. 1:10-CV-596, 2012 U.S. Dist. LEXIS 31444, at *14 (E.D. Tex. 2012) • Hardin was a 62-year-old, male nurse with Hepatitis C. • When Hardin was ordered to take a drug test, on the way to the drug test, he picked up a doctor’s note from his physician recommending that Hardin smoked marijuana to ease his Hepatitis C symptoms. • Hardin’s drug test was positive for marijuana and was fired. • Hardin sued for discrimination under the ADA. • Court declined to require accommodation because the ADA does not protect use of illegal substances. Reasonable Accommodation under the ADA?

24. If it is not a required accommodation under the ADA, what do state disability discrimination laws say? 29 states, D.C., Guam, and Puerto Rico have medicinal marijuana statutes; Most state statutes regarding medicinal marijuana do not address whether allowing medicinal marijuana use must be considered as a reasonable accommodation; Because most state disability discrimination and accommodation statutes are modeled after the ADA, most state statutes do not require accommodation for medicinal marijuana; Some of the statutes provide protections to medicinal marijuana card holders and protections from adverse employment action. What about the States?

25. What have state courts said about the obligation to allow medicinal marijuana as a reasonable accommodation? • Massachusetts – Barbuto v. Advantage Sales & Mktg., LLC, 477 Mass. 456 (2017) • Court rejected an employer’s argument that permitting the use of medicinal marijuana is facially unreasonable because its use is a federal crime. • The Court explained that the use of medicinal marijuana would not create criminal risks for the employer (Only person at risk of federal prosecution is the employee) • However, the Court recognized the potential undue hardship on the employer based on considerations such as unacceptable safety risks. • Prior to termination of any such employee, employer must show that it engaged in required “interactive process” to find a workable accommodation. What about the States?

26. If you have an employee with a medicinal marijuana prescription, the employer likely does not have to accommodate by allowing for use of medicinal marijuana. But, the employer should be careful before terminating or taking adverse action because state statutes may provide protections. Likely that more change is ahead with medical marijuana becoming more socially acceptable. What are the takeaways with medicinal marijuana?

27. Recreational Use of Cannabis

28. Because marijuana use remains illegal under federal law – employers have no obligation to allow an employee’s recreational drug use. • Employers may continue to test for the presence of marijuana in a person’s system through random drug testing. • However, challenges likely await employers with the potential for inconsistent enforcement of failed random drug tests as recreational use become more mainstream. What about legal, recreational use?

29. The Basics of the FLSA

30. General rule – all employees must be paid the federal minimum wage and overtime pay for all hours worked over 40 in a given work week. However, the FLSA provides for certain exemptions: • Duties test (Executive, Administrative, Professional); and • “Salary” test – two separate parts: • Must be paid on a “salary basis” – employee is paid a regular, set salary instead of an hourly rate; and • Must meet a minimum “salary level” – employee must be paid a salary of at least $455/week ($23,600 annually). The Basics of the FLSA

31. 1938 – $30 per week for execs and admin; No threshold for professionals; • 1940 – $50 per week for professionals; • 1975 – $155 per week for execs and admin; $170 per week for professionals • 2004 – $455 per week for all FLSA exemptions. History of the salary level test:

32. 2014 – President Obama asks the DOL to “update and modernize the regulations” • The salary level test “has not kept up with our modern economy” – President Obama • 2016 – Proposed Changes – Were to go into effect December 1, 2016 • $913 per week (equivalent of $47,476 annual salary); • Applies to executive, administrative and professional exemptions; • Does not change any of the requirements of the duties tests. Other changes: • Highly compensated employee exemption would be raised from $100,000 per year to $134,004 per year. • Salary level would automatically update every three (3) years. • Updates would aim to keep the salary level to 40th percentile of earnings of all full-time salaried workers. The “Final Rule”

33. 21 states filed a lawsuit against the DOL in the Eastern District TX On 11/22/16 – EDTX enters Preliminary Injunction which enjoined the DOL from implementing the Final Rule on 12/1/16. On 8/31/17 – EDTX grants SJ in favor of the states challenging the Final Rule—determines the DOL exceeded its authority with the Final Rule and that it is invalid. Court found that the new salary level test would in effect “supplant the duties test” and “create[] a de-facto salary-only test.” Challenge to the Final Rule

34. A New “Final Rule?” What could change? How and when? Alexander Acosta – Secretary of Labor – Confirmation Hearing • While Acosta did not support the proposed Obama-era Final Rule, he does support increasing the number of low-income workers who are non-exempt. • Acosta stated that he believes the salary basis test should be adjusted along with inflation – “I believe the figure if it were to be updated would be somewhere around $33,000, give or take.” So what do we expect next on the salary basis?

35. U.S. Department of Labor’s “Request for Information” • On 7/26/17 the DOL issued a request for information regarding potential changes to the Executive, Administrative, Professional, Outside Sales and Computer employee exemptions. • RFI sought input regarding: • Salary level test. • Duties test. • Inclusion of non-discretionary bonuses and incentive payments to satisfy portion of salary level test. • Salary test for “highly compensated employees” (currently any employee over $100,000). • Automatic updating of salary level tests. • RFI period ended 9/25/17. What’s Next?

36. Worker classification. Who’s an “employee?” Employer/Independent Contractor Analysis. Traditional Rule – determination regarding employee/independent contractor classification was based on a multi-factor test focused on determining the amount of “control” exerted by the company over the worker. Other Potential Changes from the Trump Administration

37. DOL Guidance Letter 2015-1 • Obama administration DOL issued a guidance letter which altered the focus of the analysis the employee vs. independent contractor question. • There are still several factors to be considered—but the focus was to be directed at the “economic realities” of the relationship between the company and worker. • The more dependent the worker is on the company for job assignments or income—the more likely the worker could be classified as an “employee.” A Change of Analysis by the Obama DOL

38. The result: • This likely had the impact of increasing the number of workers classified as “employees;” • If more workers found to be employee, more workers are provided with the protections and benefits provided of employees (as opposed to independent contractors); and • The federal government tax base would increase (by increasing the number of workers for whom payroll taxes must be paid). A Change of Analysis by the Obama DOL

39. June 7, 2017 – DOL Guidance Letter 2015-1 is withdrawn by DOL. • No substituted guidance was provided. • No clear indication of how the analysis regarding employee v. independent contractor should be handled going forward. • Likely that the focus by the DOL and courts will go back to traditional rule – looking to “control” exerted by company over worker. What Changed with the Trump DOL?

40. Who is an employee’s employer? – Changes to joint employer analysis. Joint Employment • Occurs when an employee does work for two separate business entities – both of which have potential liability for violations of the law (i.e., FLSA wage and hour violations). A Change of Analysis by the Obama DOL

41. DOL Guidance Letter 2016-1 Expansion of the definition of “employer” in the joint-employer setting. • Required very little control to be exerted over an employee to be an “employer” liable for violations of law. • This is particularly noteworthy for franchisors – under this expanded view of joint employers – franchisor could be liable for franchisee misclassification of employees as exempt; • This guidance letter implied a “vertical” analysis to joint employment relationships – “Vertical joint employment exists where the employee has an employment relationship with one employer (typically a staffing agency, subcontractor, labor provider or other intermediary employer) and the economic realities show that he or she is economically dependent on, and thus employed by, another entity involved in the work.” A Change of Analysis by the Obama DOL

42. June 7, 2017 – DOL Guidance Letter 2016-1 is withdrawn by DOL. • No substituted guidance was provided. • Likely welcome news to many businesses that utilize staffing agencies to place employees and for franchisors. What Changed with the Trump DOL?

43. Employee/Independent Contractor – Is Peer to Peer Employment the Future of Work? Commonly referred to as the “gig” economy – a model in which individuals contract with companies on a short-term or flexible basis to perform “gigs.” • Examples: • Uber; • Lyft; • GrubHub; • TaskRabbit; • Postmates; • Handy; • Dogvacay. Politics aside, what other developments do we expect?

44. There is a burgeoning set of litigation to challenge their classification. • UK – case against Uber where a London Employment Tribunal ruled that Uber drivers were the equivalent of “employees.” • Appeal heard on 9/27/17 – No decision yet. • As an aside – City of London recently stated that they would not be renewing Uber’s city licensing – as of 10/1/17 – Uber no longer allowed to operate in London city limits. • Uber has until mid-October to appeal this decision. • Decision was not related to employment dispute – Rather, was related to “a lack of corporate responsibility in relation to a number of issues which have potential public safety and security implications.” Politics aside, what other developments do we expect?

45. O’Connor v. Uber Techs., No. C-13-3826 (N.D. Cal.) • Consolidated appeal of 11 cases by Uber drivers to determine whether drivers should be considered “employees;” • There is an underlying issue regarding whether the drivers have a right to sue – their agreements with Uber include an arbitration agreement. Lawson v. Grubhub, Inc., Case No. 15-cv-05128 (N.D. Cal.) • GrubHub driver who alleges he is an “employee;” • Lawson is seeking $600 in reimbursement expenses owed to him as an employee; • Verdict is expected this fall. Politics aside, what other developments do we expect?

46. Does our current classification system fit with our current economy? • Does it fit our developing workforce? • Is there a third classification for worker on the horizon? Takeaways for the “Gig” Economy?

47. ANY QUESTIONS?