Articles Posted in Employment Law

The COVID-19 pandemic brought all professional sports to a sudden and unprecedented stop; Major League Baseball (“MLB”) paused its season during spring training, the National Hockey League (“NHL”) paused shortly before its playoffs were set to begin, and the National Basketball Association (“NBA”) paused its season, notably just after a player was diagnosed with the virus. Since that time, management and unions for players within those leagues have engaged in extensive discussions about how to best resume their seasons. It has been a true test of labor laws and work collaboration necessitating decisive action in a time of great uncertainty, and some fared better than others.

Indeed, many leagues expedited their processes and had relatively smooth negotiations.  The NBA is planning to resume a portion of its regular season and then playoffs in a bubble in Orlando Florida starting July 30, though many key players may not return for the season.  The NHL has announced its plan to have a 24-team playoff in late May.  MLB, however, slow rolled the reopening process, with both Owners and the Players’ Union introducing and fouling off proposals on restarting the season without forming a consensus. Surprisingly, and disappointingly, most of the negotiation revolved largely not around safety issues, but around economics which many believe is an attempt by both sides to set the tone for contract bargaining next year.

The Owners, during this time, used the exigent circumstances to push for bargaining items they wanted in the past but were unable to get through.  The Owners’ wish-list for negotiations included curbing players’ salaries and revamping (and eliminating) many minor league teams.  At one point, the Owners proposed a reduction in games to 82 with accompanying salary proration.  They also took aim at the minor leagues – a dangerous position in that the minors are often the only way for baseball fans in smaller towns to watch live games of professional or amateur players and to grow the sport. Some even took aim at the lowest paid members of the baseball community.  For example, in the Washington Nationals’ minor league system, the lowest paid players are currently on stipends of $400 per week.  The team decided to cut pay there anyway by 25 percent, thinking this was the best way to save funds during the pandemic.  Major League players, led by Sean Doolittle, a reliever for the Nationals, announced he and other players would cover the reduction in the minor leaguers’ salaries.  This announcement caused the Nationals’ Owner to quickly reverse his decision.

Recently, the United States Equal Employment Opportunity Commission (EEOC) provided employers guidance as to how best manage vulnerable employees and how these employees should be accommodated in the wake of COVID-19.  The EEOC suggests that as part of every employers’ “re-opening” plans, employers should take great care to implement social distancing and other good safety measures in their workplace.  Greater protections may need to be implemented for immunocompromised and other vulnerable employees (those suffering from respiratory, heart diseases, diabetes, etc.) that may be at disproportionate risk of infection and serious illness if exposed to COVID-19.

In its guidance, the EEOC has stressed the need for an employee to inform his or her employer of the need for an accommodation if health risks are at play.  Furthermore, employees should be able to provide medical documentation and answer questions from employers regarding the need for an accommodation.  As in any instance of disability accommodation under the Americans with Disabilities Act (ADA), the employer must ultimately determine whether a vulnerable employee’s medical condition can be reasonably accommodated.

Furthermore, in its guidance the EEOC indicated that it is impermissible for an employer to prohibit an employee from working, even where the employer knows the employee is at higher risk for severe illness if exposed to COVID-19.  However, it will be permissible for employers to prohibit an employee from entering a workplace where the employee presents with COVID-19 symptoms and this poses a “direct threat” to coworkers.  The decision of whether a “direct threat” exists requires a highly individualized, objective assessment where employers will have to consider the duration of risk, the nature and severity of potential harm, the likelihood and imminence of such harm, and whether the employee “notwithstanding the risk [can] perform the essential functions of the job without threatening his/her health, with or without accommodation.”  An employee’s pre-existing medical condition will not constitute a direct threat if the threat can be reduced or eliminated through reasonable accommodation.  Such accommodations may include, but are not limited, to relocating or reassigning an employee, allowing an employee leave time or the option to work remotely.

The COVID-19 pandemic has led state and local governments to order businesses throughout their states closed in order to reduce the spread of the virus and its strain on healthcare systems.  The electric carmaker Tesla was one such business and, as has been widely covered in the news, recently sued Alameda County in California because it prohibited Tesla from reopening its factory.  Earlier this month Elon Musk, Tesla’s CEO, dramatically announced that Tesla’s factory in Alameda County would reopen and begin manufacturing again in defiance of the County’s order.  This position put Tesla directly at odds with the County in which it operates and offers an interesting intersection between employment, government and constitutional law.

Tesla’s decision was met with strong opposition and the threat of criminal prosecution from the County because it directly violated the County’s lockdown order.  Tesla’s chief argument was that the County’s decision violated Tesla’s rights under the constitution.  In particular, Tesla pointed out that Alameda County wrongfully declared its own county rules as superseding California’s state order to carry on with “critical infrastructure activities.”  According to Tesla, the County was thus not acting under existing authority of local health officials, but rather issuing policies that were more restrictive than the baseline policies outlined by Governor Gavin Newsom’s stay-at-home order.  Thus, Tesla claimed that the County was acting beyond the authority of the state.  Musk went so far as to threaten to shutter his California manufacturing facilities and relocate them to more business friendly states such as Texas and Nevada should Tesla not be allowed to reopen.

In its complaint, Tesla made three overarching arguments.  First, it argued that the County’s order violated the Fourteenth Amendment’s right to due process as the order failed to give reasonable notice in addressing forbidden conduct and expressly prohibiting and subjecting to criminal prosecution that which was permitted under the California Governor’s orders.  Second, Tesla alleged that the County’s order violates the Fourteenth Amendment’s Equal Protection Clause as the County discriminated against “identically situated parties without any rational basis.”  The equal protection argument is grounded in the fact that manufacturers, who are considered “essential” businesses throughout California, are permitted to operate in neighboring counties while Tesla’s facility was forced to close.  Third, continuing on constitutional grounds, Tesla alleged that the County violated the California Constitution when it enforced laws that directly conflict with the laws of California.

The unique challenge presented by the Coronavirus (“Covid-19”) pandemic has resulted in a flurry of legislative responses from the federal and state governments to mitigate the disruptive effects the pandemic will have on individuals and businesses.  Part of the federal effort is the Coronavirus Aid, Relief and Economic Security Act (“Act”), which was signed into law on March 27, 2020.

This new law allocates billions of federal dollars for small and large businesses to alleviate the strain Covid-19 has caused as they confront the present crisis.  Notably, the Act provides a paycheck protection program, employee retention tax credit incentives for employers, offers deferred payroll taxes and also offers direct lending for businesses.  Given the magnitude of the law, it is quite possible that this will be the final, significant federal measure for some time though there is talk of a stimulus plan to follow.  The effectiveness of the Act is yet to be determined, and as of this writing many major banks are still working on implementation logistics.  The most notable aspects of the Act’s protections for businesses are listed below.

Paycheck Protection

The Coronavirus (COVID-19) remains a challenge for the world and, in particular, the greater New York metropolitan area.  The spread of the virus has required businesses to shut down or reduce their services in unprecedented numbers, which has led the Federal and State governments to scramble to find ways to respond to the pandemic and mitigate the economic fallout.  Below is a short sampling of the employment-law related responses of the Federal government, and the states of New York and Connecticut to this hardship.  Many of these legal changes are productive, well-reasoned and a fine example of our government working to deal with these unexpected and difficult developments.

The below changes are all accommodations relating to employee rights.  This coming week, indeed in the next few days, a stimulus package relating to businesses is likely to be announced.  These business accommodations will be reported in a subsequent blog as they become effective.

The Federal Government COVID–19 Response

The Coronavirus (COVID-19) has directly affected governments, businesses, and individuals since it originated in China only a few months ago.  Challenges  will likely become more prevalent in the weeks to come.  We write briefly here to discuss best practices for employers and to identify employee rights in this time of concern.

Generally, employers are required to maintain safe workplaces, which includes a workplace free from contagions.  Employers can meet this requirement in a variety of ways, including, but not limited to, imposing quarantines on employees who have returned from high risk countries, educating employees on prevention, and permitting work from home or sick leave for affected employees.

There is no one size fits all option for dealing with these concerns and employers should be flexible in their approach.  The absence of one employee as a matter of extra caution may be a work challenge, but the potential for the absence of several if the virus is transmitted in the office is likely to be more significant.  This principle, of course, applies for almost all instances when an employee is sick -and has served as the basis for many to adopt unlimited sick leave policies which have become more popular in recent years.

The global law firm, Jones Day, is currently embroiled in a gender and discrimination class action lawsuit brought by former associates against the firm.  The former associates, all of whom are women, allege various instances of discrimination which the firm vigorously denies.  It is alleged in the suit that Jones Day maintained a discriminatory parental leave policy, a gendered pay scale system, and altered female associates’ profile photographs on its website to make them look more attractive.

One of the more novel issues presented in the case is whether, in employment discrimination cases, members of the class should be permitted to join the suit anonymously to prevent public backlash, retaliatory conduct, and reputational harm.

Currently, federal law generally requires plaintiffs in an action to file publicly, which means they must disclose their identities.  This remains the case even in sexual harassment or retaliation cases, because the available legal justifications for filing under a pseudonym are limited to severe cases of physical danger, reputational or psychological harm.  As Jones Day was quick to point this out in its opposition to a Plaintiff’s anonymity request, allowing a plaintiff to proceed under a pseudonym is a “rare dispensation” and must outweigh the fairness to the opposing party.

California is again making waves in the employment community with its new freelance law which took effect on January 1, 2020. The law, Assembly Bill 5 (“AB 5”), imposes several requirements on employers who hire freelancer workers.  While AB 5 has many supporters, including gig economy workers and Democratic lawmakers, it also has detractors including Uber, Lyft, and — somewhat surprisingly — some of the people the law is designed to protect.  Although the true effects this law will have are unclear, AB 5 demonstrates how states are grappling with protecting the rights of independent contractors in an ever evolving and expanding “gig economy.”

AB 5 creates a rebuttable presumption that a person is an employee rather than an independent contractor and places the burden on the employer to prove that a worker is an independent contractor.  The employer must do this by satisfying a three-part test. First, the employer must prove that the person “is free from the control and direction” usually associated with employment.  Second, the Employer must show that the “person performs work that is outside the usual course of the hiring entity’s business.”  Third, the Employer must demonstrate that the person “is customarily engaged in an independently established trade, occupation, or business of the same nature as that involved in the work performed.” This high standard will likely result in the reclassification of many independent contactors as employees.  Such workers would, as a result, become eligible for benefits and protections including, among other things, the minimum wage protection and unemployment insurance.

Companies opposed to the legislation, including Uber and Lyft, are committed to fighting and overturning this legislation.  Those companies, which rely on independent contractors, see this law as a mortal threat to their businesses and say it will cause them to lay off thousands of drivers.  According to the New York Times, some companies pledged $90 million in support of a ballot initiative to exempt themselves from the legislation.  Uber and Postmates even filed for an injunction on December 30, 2019 to prevent the law from coming into effect.  Some drivers for the ride sharing companies opposed the legislation as well, noting that it would decrease the flexibility of their driving schedules.  Other professional organizations, including the National Press Photographers Association, filed suit against California arguing that the legislation is unconstitutional.  The legislation, on the other hand, is the result of concerns about worker exploitation through the independent contactor model.

In the aftermath of the two disasters involving 737 MAX aircraft which led to the tragic death of over 300 passengers, Boeing CEO Dennis Muilenburg was recently forced out in.  Despite the problems that have plagued Boeing under his management, Muilenburg is departing with a significant severance package – potentially upwards of $60 million -because of a “golden parachute” provision in his employment contract which is to provide a “soft landing” for the young CEO.

The amount of Muilenburg’s severance is largely dependent on how Boeing characterizes the context of his departure.  Muilenburg receives more if his departure is deemed to be a retirement or layoff, but he gets less if the departure is designated as a simple resignation.  Either way, according to public filings, Muilenburg may be entitled to a significant amount, including more than $20 million of vested stock, a pension worth more than $11 million, a severance payment approximately worth $7 million, and a benefit plan worth more than $30 million.[1]  This windfall is in addition to the over $70 million in compensation already pocketed by Muilenburg during his relatively brief tenure as Boeing CEO.

On December 23, 2019, Boeing announced that it intended to classify the CEO’s departure as a resignation, suggesting that Muilenburg’s severance will be more like a termination-based severance.  He would, as such, likely not receive the most lucrative of the severance benefits. Nevertheless, the news of this severance has stirred public outrage, especially among the families of those killed in the two 737 MAX crashes.  This anger stems largely from the fact that Muilenburg could potentially walk away with approximately 270 times what Boeing is paying to those families that lost a loved one in the crashes (on average these families receive a mere $144,000 as compensation for their loss).

California recently enacted legislation aimed at allowing collegiate athletes to make money off their images and likeness.  This legislation has the potential to upend the infrastructure of college sports, governed primarily by the National Collegiate Athletics Administration (“NCAA”), and the way amateur athletes both choose colleges or pursue professional careers.

By way of brief background, the NCAA, a non-profit organization, takes in revenue in the billions of dollars with some individual universities making tens or hundreds of millions of dollars in sports-related revenue.  Meanwhile, student athletes are prohibited from using their name, image, or likeness to earn compensation for themselves and are largely prohibited from earning income from their athletics while in school, other than scholarships and various stipends.

This disparity has been a point of criticism for the NCAA for years, with critics noting that schools and businesses in the industry make millions off these student athletes, while the students themselves make nothing and may never earn if they do not go on to compete professionally because of injury or otherwise.  New legislation in California, home to some of the largest collegiate sports programs such as the University of Southern California, the University of California Los Angeles, and University of California Berkley, aims to allow students to profit, or at least earn some income, through their role as collegiate athletes.