United States: Five Employment Issues Boards Should Be Thinking About

Last Updated: November 7 2018
Article by Lynne C. Hermle and Jessica R. Perry

Now into the second half of 2018, corporate boards of directors should be focused on some key employment law developments that have transpired so far this year. While there are many recent developments in the employment law sphere, the five issues discussed below are some of the most notable and important for boards to focus on as they consider company policies and procedures. These issues touch on areas like compensable time for hourly employees, employee classifications, arbitrations, #MeToo, and religion in the workplace—areas all directors should be familiar with in order to manage the day to day affairs of the company and mitigate potential risk. Below are the employment law developments sophisticated corporate boards need to consider before the year ends.

(1) Review "De Minimis" Off-the-Clock Work

In Troester v. Starbucks Corp., the California Supreme Court held that employers must compensate California workers for the time they spend on certain routine tasks after clocking out, and rejected application of the federal de minimis doctrine. The Supreme Court noted that California employers bear the burden of instituting appropriate practices to prevent off-the-clock work. The Court concluded that, under California law, an "employer that requires its employees to work minutes off the clock on a regular basis or as a regular feature of the job may not evade the obligation to compensate the employee for that time by invoking the de minimis doctrine." This is because, as the Court noted, "a few extra minutes of work each day can add up."

ACTION TO CONSIDER: Companies with operations in California should review their timekeeping practices to determine whether any off-the-clock work occurs—especially on a regular basis. For example, work that's performed by employees before and after scheduled shifts. If necessary, these companies should consider new timekeeping tools or other means to ensure that employees are paid for all time worked. In some instances, it may be wise for companies to restructure jobs so that it is no longer necessary for employees to complete any job tasks before or after clocking out. In determining the best course of action, companies should consult with experienced counsel regarding practical steps to ensure compliance and to discuss any unintended consequences of proposed changes.

(2) Revisit Employee/Non-Employee Classifications

In Dynamex Operations West, Inc. v. Superior Court of Los Angeles, the California Supreme Court established a new, three factor "ABC" test to determine who is an employee for purposes of wage and hour laws. This test puts the burden of showing that a worker in California is not an employee squarely on the company. The ABC test examines whether: (a) the worker is free from the direction and control of the hirer in connection with the performance of the work; (b) the worker performs work that is outside the usual course of the hiring entity's business; and (c) the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

ACTION TO CONSIDER: Companies with operations in California should review their current classification of contractors under this new test and consult with experienced counsel regarding any potential reclassifications. In the event that such reclassifications are necessary, companies should consider all tax obligations.

(3) Update Arbitration Agreements to Include Class Action Waivers

In Epic Systems Corp. v. Lewis, the U.S. Supreme Court ruled that employment arbitration agreements with class action waivers do not violate federal labor law. Employers may require that, as a condition of employment, employees agree to individually arbitrate their disputes rather than proceed by class action in court.

ACTION TO CONSIDER: Companies should engage counsel to evaluate their current arbitration agreements and discuss whether to include class action waivers. The inclusion of such waivers may protect companies from resource-draining litigation in the years ahead. However, as part of this evaluation, companies should also consider what class action waivers may not cover, i.e., PAGA representative actions, state and federal charges of discrimination, government audits, unemployment, and workers' compensation. And they should be drafted carefully given the evolving and ever changing law at a state level.

(4) Update Sexual Harassment Policies in the Wake of #MeToo

In the wake of #MeToo, state and local laws across the country are changing. The California legislature has responded to the #MeToo movement with several proposed bills—one of which has been signed into law to protect sexual harassment victims from defamation suits. Other bills, if passed, would change employers' obligations to prevent harassment and respond to harassment allegations. Additionally, the EEOC is supporting the #MeToo movement with a Select Task Force on Harassment and a public meeting titled "Transforming #MeToo Into Harassment-Free Workplaces," and by aggressively pursuing cases in federal courts throughout the U.S.

ACTION TO CONSIDER: In such a rapidly changing legislative environment, companies should engage counsel to examine their sexual harassment policies and procedures to make sure they are effective, updated, and comply with newly enacted legislation. In addition, companies should consider working with experienced counsel to create sex harassment training specifically geared to addressing questions and concerns raised by the #MeToo movement at all levels of the company. Periodically reviewing these policies and procedures on an ongoing basis is advisable given the latest developments at a federal, state and local level.

(5) Revisit Religious Accommodation in the Workplace

In Masterpiece Cakeshop Ltd., et al. v. Colorado Civil Rights Commission, et al., the U.S. Supreme Court ruled in favor of a cake shop owner who refused to make a wedding cake for a same-sex couple because of the shop owner's religious beliefs. Although the case dealt with a store owner and customer, it reminds us that similar situations may arise between employers and employees. Employers must balance accommodating employees' religious beliefs, on the one hand, and preventing discrimination and harassment, on the other.

ACTION TO CONSIDER: Companies should review religious accommodation policies in the context of recent case law regarding sexual orientation and gender expression discrimination by considering the following questions: (a) Do the policies consider both the employee's religious accommodation request and the company's own business needs, thereby allowing the company to evaluate whether the requested accommodation creates an undue hardship, including with respect to customers or other employees? (b) Will accommodating an employee's religious belief or expression interfere with other employees' rights? (c) Would allowing the accommodation allow discrimination against other employees on the basis of sexual orientation?  Balancing these factors can be challenging, and the legal landscape is continuing to develop. Companies would be wise to engage experienced counsel to review these policies and consider any unique characteristics of the company, workforce, and customers in drafting compliant and forward looking policies.

As employment law continues to shift during 2018, boards of directors that review these recent employment law developments and take appropriate action may mitigate against lawsuits in 2019 and beyond. Taking a proactive approach may not only help to ward off lawsuits, but may put board members in a better position to make clear headed, tough decisions before any employment conflicts or reputational harm arise. In addition to lowering risk to shareholders and potential liability, early intervention could allow boards to be more transparent and strategic in adopting new policies and procedures—moves that may not only reduce liability and risk, but improve the long term success of the company.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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