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UNITED STATES OF AMERICA

January 25, 2021

By Kenneth Gage, Emily Wood and Sara Kalis

Back to International Employment Law

USA

KEY DEVELOPMENTS FOR 2020


 

Legislation enacted to limit the use of non-disclosure agreements

In the wake of the #MeToo movement, critics have taken aim at the use of non-disclosure provisions in settlement agreements that prevented victims from later divulging the facts and circumstances of those attacks. As a result, some states and cities have sought to limit employers' use of non-disclosure agreements in settlements of harassment and other claims. For example, New York recently enacted legislation that prohibits New York employers from requiring non-disclosure of the underlying facts and circumstances of any claim of discrimination unless non-disclosure is the complainant's preference. New York's law sets forth a number of procedural requirements to establish whether non-disclosure is the complainant's preference, including that the provision must be provided to the complainant in writing in the complainant's primary language, and that the complainant must be given 21 days to consider the provision and seven days to revoke their agreement to it.


 

Joint Employer rules

On 26 February 2020, the National Labour Relations Board announced its new final rule governing joint-employer status under the National Labour Relations Act. The new formulation of the joint-employer standard requires a company to exercise "substantial direct and immediate" control over one or more "essential terms and conditions of employment “in order to be considered a worker's employer. The final rule defines these key terms in detail, effectively restoring the joint employer standard that was applied for decades prior to the 2015 Browning-Ferris decision, but with greater guidance. The final rule came into effect on 27 April 2020.

The Department of Labor ("DOL") has introduced a new rule redefining joint employer status, which came into effect on 16 March 2020. The rule provides that an entity will be considered a joint employer a joint employer "if that entity is acting directly or indirectly in the interest of the employer in relation to the employee". To determine whether an entity meets the joint employer requirement, the DOL will apply a four-factor balancing test analysing whether the potential joint employer: (i) hires or fires the employee; (ii) supervises and controls the employee's work schedules or conditions of employment to a substantial degree; (iii) determines the employee's rate and method of payment; and (iv) maintains the employee's employment records. The DOL also provides for joint employer liability in the circumstances of indirect control, which the DOL explains as mandatory directions given by the purported joint employer to the employer that directly controls the employee. It is anticipated the Equal Employment Opportunity Commission ("EEOC") will also be releasing a new rule according to the EEOC's agenda released in 2019.


 

Title VII recognises discrimination on the basis of sexual orientation and gender identity

On 15 June 2020, the United States Supreme Court issued a ruling in Bostock v Clayton County, consolidating three cases where, in each situation, an employee claimed that their employer violated Title VII by firing them because of their sexual orientation or transgender status. The question before the Court was whether Title VII's prohibition on discrimination "because of … sex" covered sexual orientation and gender identity. Gerald Bostock, the case's namesake, was fired from his nearly decade long role with the county court system for "conduct unbecoming of a county employee" only months after he joined a gay softball league. Skydiving instructor, Donald Zarda, was fired after he had told a customer that he was gay, for the stated reason of failing to provide an enjoyable experience for the customer. Finally, Aimee Stephens was fired two weeks after telling her employer that she would be transitioning to female after having been hired as male-presenting, for the express reason of her transition.

In this ground-breaking decision, the Supreme Court held that both sexual orientation and gender identity are "inextricably bound up with sex . . . because to discriminate on these grounds requires an employer to intentionally treat individual employees differently because of their sex." The majority leaves open the possibility that Title VII's now-clarified protections for LGBTQ people may be superseded by religious liberty claims brought under Title VII's ministerial exception or the Religious Freedom Restoration Act. These claims were not before the Court in Bostock. Finally, the Bostock decision may affect interpretation of the numerous other federal statutes prohibiting discrimination because of sex, but these implications are yet to be seen.

 

KEY DEVELOPMENTS FOR 2019


 

Sexual harassment and #MeToo

In response to the #MeToo movement that surfaced in 2017, many states and cities have enacted or proposed legislation to address sexual harassment in the workplace. For example, New York State now requires employers to provide anti-harassment training on an annual basis, and to adopt investigation procedures for handling complaints of harassment. New York employers are no longer authorized to require that the underlying facts and circumstances of a sexual harassment claim be kept confidential as part of a settlement of such a claim. New York employers not covered by the Federal Arbitration Act can no longer require pre-dispute arbitration agreements covering such claims. The #MeToo movement has also prompted some employers voluntarily to discontinue arbitration as a means of resolving certain employee disputes.


 

Arbitration

The U.S. Supreme Court continues to make decisions rejecting efforts to invalidate employers’ pre-dispute arbitration agreements. In May 2018, the Court held in a 5-4 majority decision that arbitration agreements must be enforced as written, and that class- and collective-action waivers in employment arbitration agreements are permissible under the National Labor Relations Act. In reaction to the Supreme Court’s decision, some lawmakers have introduced bills to forbid class and collective-action waivers in employment arbitration agreements, and some major employers have indicated that they will no longer require employees to sign arbitration agreements.


 

New test for determining whether a worker is an employee

In May 2018, in the case of Dynamex Operations West, Inc. v. Superior Court, the California Supreme Court replaced the old test for determining whether a worker is an employee or an independent contractor with the three-part “ABC” test. The “ABC” test requires the employer to establish the following:

  • that the worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact;
  • that the worker performs work that is outside the usual course of the hiring entity's business; and
  • that the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed.

As a result, many businesses in California will need to examine their use of independent contractors, including any independent contractor agreements, to ensure compliance with the new California “ABC” test.

 

KEY DEVELOPMENTS FOR 2018


 

U.S. Supreme Court to Rule on Class Action Waivers in Employment Arbitration Agreements

The U.S. Supreme Court is expected to rule in the first quarter of 2018 on whether employers may lawfully include class action waivers in arbitration agreements with employees. The effects of the decision will be widespread, particularly for employers with class action waiver arbitration programs currently in place.


 

Salary History Bans Enacted to Address Pay Equity

In response to a growing concern that pay inequity among men and women is in large part due to systemic disparities, many states and localities have enacted laws that prohibit employers from inquiring about prior compensation as part of the recruitment process. Some laws prohibit prior salary history being relied on as a factor in setting compensation for a new hire, while others make it an unlawful employment practice to inquire about prior salary.


 

#Metoo and Increased Focus on Sex Discrimination

The “me too” movement will continue into 2018. 2017 will be remembered as the year in which prominent men in the media, politics and other industries have been accused of sexual harassment and even assault, resulting in the termination of their employment and, in some cases, lawsuits. This movement has, however, had an impact broader than just an uptick in claims. Tax reform legislation eliminates the deductibility of confidential settlements of sex harassment or abuse claims. Multiple bills are pending in Congress that would preclude employers from using pre-dispute arbitration agreements for sex discrimination claims under Title VII and one would effectively preclude pre-dispute arbitration agreements in the employment setting altogether. This movement has also driven a continued focus at the federal, state and local level on the enforcement of pay discrimination laws.

 

KEY DEVELOPMENTS FOR 2017


 

President Trump’s election spells big changes

President Trump campaigned on overturning the Affordable Care Act, cancelling President Obama’s Executive Orders, and rolling back federal regulations. Details on such policies remain pending. Of note, two of President Obama’s policies hang in the balance. First, a Department of Labor final rule increasing the threshold salary for the white collar exception to the Fair Labor Standard Act’s minimum wage and overtime pay protections was supposed to go into effect last November but is currently stayed by a federal court. Second, President Obama’s Fair Pay and Safe Workplaces Executive Order requiring prospective federal contractors to report labor law violations and pay transparency data was supposed to be operational last October but is currently stayed by a federal court. It is not yet known how President Trump will proceed with either litigation or the regulations generally. President Trump will have the opportunity to appoint members to the National Labor Relations Board and the Equal Employment Opportunity Commission in 2017.


 

Pay equity laws implemented in many states

Various states have enacted laws prohibiting employers from paying employees wage rates that are less than what they pay employees of the opposite sex for “substantially similar” work. Many states have increased reporting requirements and record retention requirements. In 2017, states and cities will also be considering wage inquiry bills that would prohibit an employer from asking a prospective employee about her prior earnings.


 

States are raising minimum wages

The California and New York legislatures have enacted legislation to raise the minimum wage. On election day, voters approved ballot measures that will raise state minimum wages beginning on January 1, 2017 in Arizona, Colorado, Maine, and Washington.

 

KEY DEVELOPMENTS FOR 2016


 

The Dodd-Frank Whistleblower Program of the SEC offered huge awards to whistleblowers this year

The Dodd-Frank Whistleblower Program awarded multi-million dollar awards to individuals who voluntarily provided original information about possible violations of federal securities laws.


 

Restroom access for transgender workers

Under President Obama, various federal agencies required, or recommended, that bathroom access be provided to match an employee’s stated gender identity. Six states have laws requiring that employees have the right to use facilities consistent with their gender identities. In contrast, eleven states sued the federal government over similar guidelines for public school facilities.


 

The Defend Trade Secrets Act is in effect

The Defend Trade Secrets Act provides trade secrets with the type of protection afforded to other types of intellectual property. Wrongful acquisition or wrongful use or disclosure of trade secrets violates the law.

The Act contains whistleblower protections. Employers must provide notice of the immunity in any new or updated agreements that govern trade secrets or confidential information.

Contributors

Image: Suzanne Horne
Suzanne Horne
Partner, Employment Law Department
Image: Kenneth W Gage
Kenneth W Gage
Partner, Employment Law Department
Image: Sara B Kalis*
Sara B Kalis*
Of Counsel, Employment Law Department
Image: Emily R Pidot
Emily R Pidot
Partner, Employment Law Department
Image: Kirsty Devine
Kirsty Devine
Associate, Employment Law Department