2017 Insight – What is on the Horizon?
A week before the Presidential Election a partner of our office was preparing for a speech to the local SHRM organization. His talk was to be focused on the continuation of the Obama modus operandi – aggressive and expansive enforcement of workplace laws and regulations through administrative agencies and executive orders. All that preparation for the speech was for naught after the presidential election results were tallied. With two days before his speech, he had to rethink his approach and go back to look through the crystal ball.
In the days after the inauguration, the crystal ball is still cloudy. Although hardly an exact science, we can attempt to deduce what changes may transpire through Trump’s campaign rhetoric and, more telling, his appointments.
THE FEDERAL HORIZON
A. Secretary of Labor Nominee Andrew Puzder
On the Federal front, the President-elect’s appointments provide some insight. Trump’s choice of Andrew Puzder to serve as Secretary of Labor in his upcoming administration signals relief from the recent actions of the National Labor Relations Board (NLRB) and Department of Labor (DOL). Nominee Puzder served as the CEO of CKE Restaurants Holdings, Inc. CKE owns, operates and franchises fast food restaurants, including the Carl’s Jr.®, and Hardee’s® brands.
Puzder was a vocal opponent of the NLRB’s attempt to rework and expand the joint employment relationship concept. He opined that the NLRB’s actions would be detrimental to the franchise model. One could expect that his management philosophies will spill over to other offices under his purview, including the Occupational Safety and Health Administration (OSHA), Wage & Hour and the Office of Federal Contract Compliance Programs (OFCCP). But for now, the Obama administration is staying its course as evidenced by the DOL filing a claim against Google for not providing compensation data as part of an OFCCP audit. OFCCP v. Google, Inc., complaint filed 1/4/17.
More importantly, Trump’s nomination of Mr. Puzder is a signal that the new Administration will reverse course and roll back what it considers to be the Obama Administration’s attempt to hamper the growth of the gig economy with heightened examination of franchisor-franchisee relationships as well as independent contractor status. Trump will more than likely relax governmental enforcement efforts of certain employment laws and curtailment of the use of independent contractors in the workplace.
The DOL under Puzder may use its rule-making authority to effectuate change, but then it will have many procedural hoops to jump through to make change. Thereafter, any proposed changes will likely ignite legal challenges by the pro-labor forces.
B. Supreme Court Nominee
The United States Supreme Court will obtain full strength with a Trump appointment and confirmation. With the selection of an expected Scalia-esque ideological judge, some of the recent issues that have ended in a basic “tie” may be revisited. For example, last term the Supreme Court ruled on Friedrichs v. California Teachers Association. The Justices split 4-4 which is a win for unions in a case they feared. In Friedrichs, the Court was to address whether public employees who did not join a union can be charged an “agency” or “fair share” fee to pay for other costs that the union incurs – for example, for collective bargaining. The pipeline already has a case in waiting that gives the Court an opportunity to review the matter - Janus v. AFSCME. The Janus case originates in the battle between Illinois’ Governor Rauner and AFSCME. On the other hand, the appointment of a conservative does not always mean “conservative” justice. In 1990, President Bush thought he was appointing a conservative jurist with Justice Souter and things turned out differently.
The appointment will also be critical in the Court's decisions of class action waiver cases, which may significantly impact the future and growth of class actions in wage and hour cases and discrimination cases. This is also a part of the EEOC Strategic Enforcement Guidance. In the Guidance, the EEOC promised to focus on waivers or releases that limit substantive rights, deter or prohibit filing EEOC charges, or deter or prohibit employees from providing information or assistance to the EEOC. The EEOC notes that overly broad waivers, releases, and arbitration clauses typically involve class “systemic” cases. On January 13, 2017, the Supreme Court agreed to decide this issue. One case involves whether the arbitration agreements that prohibit employees from pursuing class or collective actions are unlawful under the National Labor Relations Act and unenforceable under the Federal Arbitration Act (NLRB v. Murphy Oil USA, Inc. U.S., No. 16-307, cert. granted 1/13/17). The other cases deal with class waivers in the wage and hour and employment law context. Ernst & Young, LLP v. Morris, No. 16-300, on the employer’s petition for review of a Ninth Circuit ruling concerning a class action waiver (834 F.3d 975, 26 WH Cases 2d 1460 (9th Cir. 2016)), and Epic Systems Corp. v. Lewis, No. 16-285, on a petition for review of a Seventh Circuit ruling (823 F.3d 1147, 206 LRRM 3293 (7th Cir. 2016)).
C. Campaign Clues
Cutting through the campaign rancor and hyperbole, one can further expect:
- Reversal of Obama’s Executive Orders
- Trump’s immigration policy likely to focus on enforcement
- EEOC pay data collection efforts may be in jeopardy
- Paid Maternity Leave instituted
- Potential moratorium on new regulations and overall decrease of federal enforcement in the workplace
1. Executive Orders
Obama’s use of the Executive Order to act without Congressional support is nothing new, but those Orders are now are in jeopardy. Trump could simply rescind Obama’s Orders – including: Establishing Paid Sick Leave for Federal Contractors; Nondiscrimination of Qualified Workers Under Service Contracts (requires contractors and subcontractors taking over an existing federal government contract to offer employment to the prior contractor’s employees); Economy in Government Contracting (disallows reimbursement of costs for any activities by a federal contractor or subcontractor undertaken to persuade employees to exercise, or not to exercise, the right to organize into a union and the right to collectively bargain with their employer); and Notification of Employee Rights Under Federal Labor Laws (new legal obligation on federal contractors and subcontractors to post a notice to employees advising employees of their legal rights under the National Labor Relations Act); and Fair Pay and Safe Workplace (which includes “blacklisting” federal contractors with past labor law violations).
Trump has promised Nationwide E-Verify, a system that allows businesses to ensure that their employees are eligible to work in the U.S. and an increase in the prevailing wage for H-1B visas (highly skilled visas and “Preferential” treatment for Americans for jobs).
3. EEOC Pay Data Collection
How Will Trump affect the EEOC’s ability to collect Pay Data from employers and federal contractors? As it stands now, the revised pay data report must be filed by March 31, 2018. The report requires employers who have 100 or more employees to report summary compensation data in categories of race, ethnicity and gender. Again, if the regulatory-burden rhetoric is any indication, one could see a roll back of this requirement.
4. Maternity Leave
Trump also campaigned about adding maternity leave to the Federal protections. He campaigned that he would put forth a plan that would provide six weeks of paid maternity leave for mothers. Whether this campaign promise will receive resistance from an otherwise Trump – friendly Congress or be forgotten by the Administration as mere campaign hyperbole remains to be seen.
5. Moratorium on New Regulations and Overall Decrease of Federal Enforcement
If campaign rhetoric is to be believed and his appointments are any indication, a Trump administration will not offer any significant new regulations and will decrease funding for federal enforcement. This would affect the EEOC’s Strategic Enforcement Plan for 2017-2021, although it remains important for employers to take notice of the plan as it provides insight as to what the agency sees as important, even if left with more scarce resources. One area that may see some muting is the directive of ‘clarifying’ the employment relationship in cases involving temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.
D. The FLSA Final Overtime Rule Injunction
As we discussed in previous alerts, the Fair Labor Standards Act Final Overtime Rule was blocked by a federal district court on Nov. 22, 2016. The Government has appealed that ruling to the 5th U.S. Circuit Court of Appeals. The Trump administration may withdraw that appeal and allow the preliminary injunction to become permanent. The final briefs are due after Trump's inauguration on January 20, 2017.
II. 2017 Insight – What is on the Horizon in the States of Illinois and Iowa?
Turning to our neighboring states of Illinois and Iowa, here is what is on the horizon:
The year 2016 has passed, the Cubs have won the World Series and one of the most contentious political seasons has wreaked havoc on the prognosticators of what we should expect in the labor and employment law field. While times are changing in Washington, D.C., Illinois continues to layer the workplace with regulations. In 2016, Illinois added the Employee Sick Leave Act, Freedom to Work, Child Bereavement Leave, amended the Victims' Economic Security and Safety Act and amended the Personal Information Protection Act. Also on the horizon is the legislature’s attempt to raise the minimum wage.
The Illinois Employee Sick Leave Act took effect January 1, 2017. The Act applies to employers, regardless of size, and requires that employers who provide sick leave benefits to employees make those benefits available for employees to use for the illness, injury or medical appointment of a family member (spouse, domestic partner, child, grandchild, parent, parent in-law, grandparent, stepparent or sibling). Note, the Act does not require employers to provide any sick leave benefits, but if they do its use must be expanded. Employers can limit the sick leave for which the expanded use applies to the amount of sick leave benefits an employee accrues over a six-month period. The Act also prohibits an employer from retaliating against an employee for exercising rights under the Act. This non-retaliation provision will now create a new protected activity which could result in an increase in litigation due to the frequency of employee use of sick leave.
Not to be outdone, the City of Chicago and Cook County have put their respective mark on sick leave, applying ordinances to all employers, not just those who offer sick leave. The Cook County Board has passed an ordinance requiring all Cook County, Illinois, employers to provide employees with up to 40 hours of paid sick leave each year. This comes on the heels of Chicago's enactment of its own paid-sick-leave law, with the Cook County ordinance nearly mirroring Chicago's legislation. The new law is slated to go into effect on July 1, 2017, and will draw hundreds of suburban employers into the paid-sick-leave territory.
The Chicago City Council unanimously passed the Chicago Minimum Wage and Paid Sick Leave Ordinance (the “Ordinance”). The Ordinance will take effect on July 1, 2017, and will allow employees to accrue up to 40 hours of paid sick leave in a 12-month period that is based on the date the employee begins to accrue sick leave.
The Illinois Freedom to Work Act took effect January 1, 2017. This Act applies to employers of any size. It prohibits Illinois employers from entering a covenant not to compete with low wage employees and declares any such agreements void and illegal. A low wage employee is defined as any employee earning no more than the greater of $13.00/hr. or the applicable federal, state or local minimum wage law (as Illinois and federal minimum wage rates are well below $13.00 an hour the $13.00 hourly rate is applicable). The Act defines a covenant not to compete, for specified low wage employees, as an agreement that restricts a low wage employee from performing: "any work for another employer for a specified period; any work in a specified geographical area; or work for another employer that is like such low wage employee's work for the employer that is included as a party to the agreement." The Act does not apply to agreements entered prior to January 1, 2017 or to employees earning more than an hourly rate of $13.00 per hour.
The Illinois Child Bereavement Leave Act became effective on July 29, 2016. The Act applies to those employers covered by the FMLA (private-sector employers, with 50 or more employees in 20 or more workweeks in the current or preceding calendar year). Illinois employers must provide up to ten (10) working days of leave for the death of a child. The employee must provide at least forty-eight hours’ advance notice to take bereavement leave, unless doing so would be unreasonable or impracticable. Leave under the Act is unpaid. However, employees may elect to substitute paid leave they have accrued, such as sick or personal days, for the bereavement leave. Unlike the FMLA, employers may not require employees to do so.
The Illinois Victims' Economic Security and Safety Act ("IVESSA")was amended effective January 1, 2017 expanding the it to cover all employers, not just those with 15 or more employees. The IVESSA entitles employees who are victims of domestic or sexual violence or whose family members or household members are victims of domestic or sexual violence to take unpaid leave to address issues related to the domestic or sexual violence. The existing law provides employees with 8 workweeks of unpaid leave in any 12-month period if they work for an employer with 15 to 49 employees, and 12 workweeks of unpaid leave in any 12-month period if they work for an employer with 50 or more employees. Effective January 1, 2017, employees who work for an employer with no more than 14 employees will be entitled to 4 workweeks of unpaid leave in any 12-month period to address issues related to domestic or sexual violence.
Illinois also amended the Personal Information Protection Act. The amendments are effective January 1, 2017, and employers are prohibited from asking, requiring or coercing employees or applicants to provide access, passwords or other related account information for accessing their personal online accounts. Further, employers cannot:
- Require or coerce employees and applicants to invite employers to join groups affiliated with their personal online accounts.
- Require or coerce employees and applicants to join employers' online accounts or add employers or employment agencies to contact lists for their personal online accounts.
- Retaliate against an employee or applicant for refusing any of the above activities.
The Amendments address inadvertent disclosures, such as when an employer stumbles upon information that would enable the employer to gain access to the employee's personal online account through an employer-provided device for network security or data confidentiality provision. In such instances, an employer is not liable for having this information, unless the employer uses the information or enables a third party to use the information, or fails to act affirmatively to delete the information as soon as reasonably practicable once the employer becomes aware that such information was received.
The minimum wage in Illinois is in a state of flux. Chicago continued to phase in its new minimum wage law. The City's ordinance raised the hourly minimum wage to $10 in 2015 and $10.50 in 2016. This year the ordinance raises the minimum wage to $11, $12 in 2018, and $13 in 2019, indexed annually to the Consumer Price Index (CPI) after 2019. The ordinance also increased the minimum wage for tipped employees from the current state minimum of $4.95 to $5.45 in 2015 and $5.95 in 2016, indexed annually to the CPI after 2016.
Following suit, Cook County enacted a minimum wage ordinance. The County’s first increase, to $10 an hour, takes effect July 1, 2017. The wage rises to $11 a year later and to $12 in July 2019. It hits $13 an hour in 2020, and subsequent annual increases will be at the rate of inflation, not to exceed 2.5 percent. The suburbs will be a year behind the city, which will reach $13 an hour by July 2019. The County’s ordinance has caused problems within municipalities that are divided between Cook and other counties, for example Barrington which is split between Cook and Lake counties.
Illinois currently has two competing proposals as part of a budget package being considered in the Senate, members proposed raising the minimum wage, currently $8.25 an hour, by 50 cents each year until reaching $11 in 2021. Meanwhile, a House bill would raise the minimum wage to $15 an hour by October.
The Illinois Freedom To Work Act, 820 ILCS 90, prohibits Illinois employers from entering into a covenant not to compete with low wage employees on or after January 1, 2017 and declares any such agreements void and illegal. The Act defines a low wage employee as any employee earning no more than the greater of $13.00/hr or the applicable federal, state or local minimum wage law (as Illinois and federal minimum wage rates are well below $13.00 an hour the $13.00 hourly rate is applicable).
Iowa is the state of peace and tranquility as compared to its neighbor to the east, Illinois. That may change as for the first time in almost 20 years Republicans control the House, Senate and Governor's office. Even with the Democrats in the minority role, one would suspect that they will try to hold onto the status quo. Many news organizations are reporting that the legislature will entertain many labor reforms. Included in those reforms is a focus on public unions, including requiring unions and other organizations that represent public employees to hold annual certification votes among members.
Also, there is an interest in a uniform Iowa minimum wage being voted into law. In 2017, minimum wage increases will take effect in Johnson, Linn, Polk and Wapello counties. To combat this patchwork of local ordinances, legislatures are considering a bill to override those local ordinances.
The only certainty is change. What form that change will take depends on the national, state and local governments and their respective forays into the workplace. While we may see a marked reduction in the number of employment regulations and the allocation of enforcement resources at the federal level, how quickly and to what extent this will materialize remains to be seen and such change is sure to create unforeseen challenges and ambiguities in steering compliance efforts. We will, of course, continue to keep you advised of the ongoing developments at the federal, state and local level and how your workplace may be impacted.