Employment Law Update – What Employers Need to Know in 2017

1. Employment Law Update – What Employers Need to Know in 2017 William T. (Tommy) Simmons Legal Counsel to Commissioner Ruth R. Hughs Commissioner Representing Employers Texas Workforce Commission tommy.simmons@twc.state.tx.us Book: www.twc.state.tx.us/news/efte/tocmain2.html Web app: texasworkforce.org/tbcapp 1-800-832-9394; 1-512-463-2967

2. Increased Agency Enforcement • DOL & IRS: teamwork to discourage misclassification of employees as independent contractors • DOL has hired hundreds of new wage and hour investigators • USCIS / ICE have ramped up their I-9 audits – less lenience toward I-9 violations (even clerical errors) • OSHA is getting more aggressive toward retaliation issues • EEOC issued new regulations for the ADAAA – focus is on reasonable accommodation, not whether something is a disability • EEOC is also looking closely at discrimination against the unemployed

3. EEOC Guidelines on Use of Arrest and Conviction Records • http://www.eeoc.gov/laws/guidance/arrest_conviction.cfm • If criminal background exclusion has disparate impact, EEOC requires “targeted screen”: • Nature/gravity of crime, time passed, specific duties • Excluded applicants get the following: • Individualized assessments (is the hiring standard “job-related & consistent with business necessity”?) • Opportunity to explain why exclusion should not be applied • Consideration by employer of whether any new information from the applicant justifies an exception • Remember FCRA requirements: prior notice and written authorization

4. Sexual Orientation/Gender Identity Issues • Discrimination on the basis of sexual orientation and gender identity is included in the category of gender discrimination • EEOC and courts generally follow the “failure to conform to gender stereotypes” rationale (Macy v. DOJ (Appeal No. 0120120821 - 2012); EEOC v Boh Brothers Const. Co., L.L.C., 731 F.3d 444 (5th Cir. 2013))

5. NLRB on Social Media NLRB has questioned employer policies regarding employees’ comments about the work or the company on social media sites No real changes to the labor laws – what was protected activity before is still protected, while what was unprotected before is still unprotected NLRB’s focus is on the primary intent of the posting – if it relates to the terms and conditions of employment, chances are it will be protected The law does not protect violations of others’ rights, such as statements that are themselves defamatory, discriminatory, or create a hostile work environment that would violate EEO laws Theft of company secrets is of course not protected activity

6. New Test for Interns Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. 2015), amended by 2016 WL 284811, at *5 (2d Cir. Jan. 25, 2016) gives a new seven-part test focused on internships: • No expectation or promise of compensation whatsoever • Training similar to that given in an educational environment, including clinical and other hands-on training • Tied to the intern's formal education program by integrated coursework or the receipt of academic credit • Accommodation of the intern's academic commitments by corresponding to the academic calendar

7. New Test for Interns (cont’d) • Duration is limited to the period in which the intern receives beneficial learning • Intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern • No expectation by either party that the internship will turn into a paid job at the conclusion of the internship • This seven-part test was adopted by the 11th Circuit in Schumann v. Collier Anesthesia, P.A., 803 F.3d 1199 (11th Cir. 2015)

8. Other Significant Court Cases • Damages for pain and suffering and punitive damages are not recoverable under the ADEA for either age discrimination or retaliation – Vaughan v. Anderson Regional Medical Center, 2016 U.S. App. LEXIS 22412 (5th Cir. 2016) • Damages for emotional distress are recoverable in retaliation claims under the FLSA – Pineda v. JTCH Apartments, L.L.C., 2016 U.S. App. LEXIS 22569 (5th Cir. 2016) • Proof of replacement with non-minority individual not met in case involving merger of one job into another job with higher requirements – Dallas I.S.D. v. Allen, 2016 WL 7405781 (Tex. App. - Dallas 2016)

9. Other Significant Court Cases - 2 • Whistleblower protections: reports to internal investigators are not to “appropriate law enforcement authorities”, but reports to a school district’s own police department are – Connally v. Dallas I.S.D., 2016 WL 7384188 (Tex. App. – El Paso 2016) • Whistleblower protections: “adverse personnel action” can stem from an “employee coaching” form that was unreasonable in various ways and also from an adverse change in the employee’s work schedule - 2017 WL 511196 (Tex. App. – Dallas 2017)

10. Other Significant Court Cases - 3 • Proof of bias: EEOC’s offer to prove that the employer’s hiring officials were motivated by bias against those with hearing impairments, on the basis that such bias is held by many in society, was unsuitable in the absence of proof that any of the employer’s employees harbored such bias – EEOC v. S&B Industry, Inc., 2017 U.S. App. LEXIS 9259 (N.D. Tex. 2017) • FMLA leave / availability for work: non-working employee out on FMLA leave who files an unemployment claim is not “able and available” for work, as every claimant must be – TWC v. Wichita County, Texas 2016 WL 7157247 (Tex. App. – El Paso 2016)

11. Action on Proposed Salary Rule • New U.S. Department of Labor regulations pertaining to salaried exempt employees were scheduled to take effect on December 1, 2016, but a federal court issued a nationwide injunction on November 22, 2016 preventing DOL from enforcing the rule • New minimum salary for white-collar exempt employees would have been $913/week ($47,476/year) • The court ruled that DOL exceeded its authority • That rule is unlikely to return in that form anytime soon

12. Exempt White-Collar Employees • Executive, administrative, professional, outside sales representative, computer professional • Both salary and duties tests must be satisfied • Minimum salary - $455/week • Duties test – focus is on “primary duty” of exempt work – exempt employees customarily and regularly perform an exempt duty as their primary duty • Discretion and independent judgment as to the details of the work

13. Salary Basis Test • True salary of at least $455/week • No partial-day deductions • Partial-week deductions only if specifically allowed (absences due to personal business, medical reasons, unpaid suspensions) • Special exception for FMLA • Special rules apply for governmental employers • Extra pay for extra work is OK

14. Problem: Improper Wage Payments • Failure to pay minimum wage • Failure to properly track all time worked • Failure to pay overtime • Improperly classifying non-exempt employees as exempt in order to save on overtime pay • Allowing employees to work “off the clock” - never allowed, even if employee “agrees” • Failure to pay according to the wage agreement that was in effect when the work was performed • Failure to pay fringe benefits that are promised in writing • Failure to get written authorization for wage deductions that are not ordered by a court or specifically mandated or authorized by a law

15. Minimum Wage – Allowable Deductions • payroll taxes and other legally-required deductions • court-ordered garnishments (child support) • meals, lodging, and other facilities • voluntary wage assignments, loans, and advances • vacation pay advances • uniforms and uniform cleaning costs * • tip credits • union dues • cash losses due to misappropriation * • Keep the Texas Payday Law in mind!

16. Hours of Work • Includes all time during which the employee is at the disposal of the employer, i.e., “suffered or permitted to work” • Waiting or on-call time • Breaks (rest breaks = work time; meal breaks ≠ work time if the employee is relieved of duties) • Sleeping time • Preparatory and concluding activities • Time spent in meetings and training programs • Travel time – includes travel between jobsites and extra travel time out of town • Time worked does not include paid leave or paid holidays

17. Voluntary or Unauthorized Overtime • If overtime is worked, employer must pay for it • Whether it was authorized or wanted is irrelevant • Employer may handle unauthorized overtime as a disciplinary matter • Employees may not voluntarily give up the right to overtime pay– agreements to contrary are void • No working “off the clock” allowed

18. Calculating Overtime Pay • Hourly: time and a half over 40 hours • Salary: salary ÷ number of hours the salary is intended to compensate = regular rate • Regular hours < 40: add regular rate for each hour up to 40, then pay time and a half for hours over 40 • Regular hours = 40: time and a half • Regular hours > 40: pay hours from 40 up to regular schedule at half-time, then time and a half past that • Irregular hours: regular rate = salary ÷ total hours, then pay half-time for all hours over 40 • Other pay methods: regular rate = total pay ÷ total hours; add half the regular rate for each overtime hour

19. Pay Agreements • verbal or written • hourly, daily, weekly, monthly, piece, job, book, or commission rates, or a combination of those • the more complicated the arrangement is, the more important it is to put it in writing • methods and rates of pay may be changed, but never in such a way that a retroactive pay cut results

20. Paying on Time • No specific penalty for paying late • Employer cannot hold paycheck pending return of items or repayment of loans • Employer cannot hold paycheck pending submission of timesheets, unless there is no way to calculate pay otherwise • Excessive late payments may lead to bonding requirement or administrative penalties in repeated cases

21. Final Pay • Must include all components of final pay • Layoff or discharge: within six calendar days of discharge • Voluntary quit: by next regularly-scheduled payday • Exception: commissions, bonuses, and fringe benefit payments covered by written contract, policy, or agreement – simply follow the agreement and the timeline in it • Nature of work separation is determined by TWC’s rules on unemployment claims

22. Final Pay – Things to Avoid • Do not “hold” the final paycheck past the pay deadline • Make only the deductions that are mandatory or that have been specifically authorized • Installment payments: lump-sum deductions of loan, wage advance, or overpayment balances are allowed only if the written wage deduction authorization agreement allows them (thus, be careful before ever loaning or advancing money to employees)

23. Minimizing Risk of Wage Claims • Have clear written wage agreements • Best evidence rule: whoever has the best evidence of the wage agreement or of time worked will prevail on those points • Written wage agreement and good time records avoid confusion and misunderstandings • Get written authorization for any deduction that is not ordered by a court or required by a law • Keep documentation or get receipts for all wage payments, especially cash!

24. Federal Legislation • HR 122 - minimum wage would be based on the federal poverty threshold for a family of 4, as determined by the Bureau of the Census • HR 1180, S 801 - would amend the FLSA to allow compensatory time for employees in the private sector • HJR 42 - invalidated the rule submitted by the Department of Labor relating to drug testing of unemployment compensation applicants (signed into law on March 31, 2017); DOL will probably draft a completely new regulation • S 44, S 345 - would enhance the existing non-retaliation provisions relating to equal pay requirements

25. 2017 Bills:Civil Rights - Discrimination • HB 192 – no housing discrimination due to sexual orientation or gender identity or expression • HB 225, SB 165 – no employment discrimination due to sexual orientation or gender identity or expression • HB 290 – extensive pay discrimination legislation • HB 1018 – no insurance discrimination on basis of sexual orientation or gender identity or expression • SB 223 – adoption of federal statute of limitations for pay discrimination claims into Texas law by inserting language similar to federal law (Lily Ledbetter Fair Pay Act) into Chapter 21 of the Texas Labor Code to align Texas law more closely with federal law

26. 2017 Bills:Employee / Family Leave • HB 88 – equal leave rights for foster parents (passed the House) – effective September 1, 2017 • HB 656 – family and medical leave for employees; wage replacement benefits paid by the state; new payroll tax on employees to pay for the benefits • HB 718 – FMLA-style leave for employees – substantial penalties for non-compliance • SB 191 – school and career-related leave for employees with respect to children and grandchildren • SB 285 – time off from work to obtain an election ID (“voter ID”)

27. 2017 Bills:Human Resources – General • HB 252 – food and general retail store employers must give two weeks’ advance notice of work schedules • HB 317, HB 334 - no consideration of credit reports in employment decisions • HB 548 – would “ban the box” on job applications, i.e., prohibit questions on criminal history until a tentative job offer has been made • HB 577 – would ban “ban the box” ordinances statewide

28. 2017 Bills:Human Resources – General - 2 • HB 742 – strengthens existing breastfeeding rights laws • HB 1104 – protects from liability any cosmetologists who report sexual assault or domestic violence they hear about • HB 1987, SB 75 – parental consent required for a minor to join a labor union (SB 75 passed the Senate – stopped in the House) • SB 745 – excludes services of temporary staff from temporary help firms from the sales and use tax (sent to the Governor for signing)

29. 2017 Bills:Immigration / E-Verify • HB 765 - political subdivisions must use E-verify • SB 23, SB 254 - state contractors must use E-verify (SB 23 has passed the Senate – stopped in the House) • HB 1453 - state contractors and political subdivisions must use E-verify • HB 3792 – prohibits knowing employment of unauthorized workers and allows suspension of licenses for knowingly employing unauthorized workers • SB 85 - state contractors and state grant recipients must use E-verify; certain licenses held by private employers can be suspended for knowingly hiring unauthorized workers

30. 2017 Bills:Pay / Benefits / Wage and Hour • HB 202, SB 462 – TWC database of wage law violators • HB 253, - extends time for filing a wage claim to one or two years • HB 285, HB 475, HB 992 – increase minimum wage to $15/hour • HB 924, HB 937 – increase minimum wage to $10.10/hour • HB 373 – enhancement of bad-faith penalties against employers • SB 70 – earnings statement required each pay period • SB 473 – rest breaks required for construction employees • SB 476 – substantial penalties for wage claim retaliation and bad-faith violations of the Texas Payday Law

31. 2017 Bills:Regulatory / Criminal • HB 665 – contractors on public works must verify compliance with wage payment laws when submitting bids or contracting with public entities • Five-year lookback on past violations • Could include pay stub violations • Violations within past five years disqualify a bidder • SB 283 – extends existing protection of employee voting rights to early voting

32. 2017 Bills:Regulatory / Criminal - 2 • HB 3769, SB 7 - designed to curtail rehiring of school staff who have been suspended or discharged due to improper relationships with students; regulation of social media contacts; regulation of job references (SB 7 is effective on September 1, 2017) • HB 3309, SB 1498, SB 2065 - would remove the temporary common worker employer industry from licensing and regulation by TDLR and give local governments the authority to regulate such companies pursuant to various changes made within Chapter 92 of the Labor Code (SB 1498 passed the Senate, but was stopped in the House; SB 2065 has been sent to the Governor for signing)

33. 2017 Bills:Unemployment Insurance • HB 230 – school bus drivers would be eligible for UI benefits during breaks between school terms • HB 463 – a claimant who gives notice of quitting and is "terminated" by the employer prior to the effective date of the notice is disqualified, regardless of whether the employer pays the employee through the end of the notice period • HB 1432 – TWC may cash a check with a restricted or conditional endorsement w/o settling for that amount • HB 1433 – three-year statute of limitations is suspended during a lawsuit to collect UI taxes • SB 592 – new penalties for misclassification of workers

34. 2017 Bills:Workers’ Compensation • SB 474 - contractors and sub-contractors would have to provide workers’ comp coverage for each of their employees and furnish proof of coverage to the public entity with which they contract

35. Employment at Will – Right to Work – Which Is It? • “Right to work” means that employment cannot be conditioned or denied based on membership or non-membership in a union – 24 states have such laws • “Employment at will” means that either party in an employment relationship may alter or terminate the relationship at any time, for any reason, with or without notice, as long as the change does not violate an express contract or specific statute (some exceptions exist for public policy reasons)

36. Best Practices • Hire for fit - train for skills • Classify workers correctly • New hire paperwork • Keep actions fair, job-related, and as consistent with known policies as possible • Signed, written wage agreements with each employee • Pay an hourly or performance-based rate unless an employee clearly fits a salaried exemption category

37. Best Practices (cont’d) • Get signed, written authorization for any pay deduction that is not ordered by a court or required by a law • Give as much advance written notice as possible of pay and benefit changes • UI claims: file timely claim responses and appeals, present testimony from firsthand witnesses, and present clear documentation of warnings, policies, and other relevant facts

38. I-9 Requirements • Main problem: “document abuse” (going beyond I-9 requirements) - possible national origin / citizenship discrimination charges • Not for applicants - only for new hires • Employer has three business days following hire to get the information • Use only the latest version of the form • Accept only unexpired documents to begin with • Copies of documents are not required, but keeping them helps show they were reviewed • Keep I-9 documentation for three years after hire or one year after employee leaves, whichever comes last

39. New Hire Paperwork • I-9, W-4 forms, notice of workers’ comp coverage • Don’t allow work to begin without at least a signed W-4 • New hire report – within 20 days of hire – include the date of hire or rehire • Acknowledgement of receipt of policy HB • Consent for drug testing / search policy, if applicable • Consent for video surveillance, if applicable • Consent for background checks, if not already obtained • Agreements regarding pay, benefits, schedule, work location, and so on (with employment-at-will disclaimers)

40. Thanks! Thanks for your attendanceandGood Luck! Remember the toll-free hotline for employers: 1-800-832-9394tommy.simmons@twc.state.tx.us www.twc.state.tx.us/news/efte/tocmain2.html Web app: texasworkforce.org/tbcapp