Welcome to the latest edition of the International Employment Law Review, presented by Dechert’s Labor and Employment Practice. In this issue, we examine the most significant employment law developments in Belgium, England and Wales, France, Germany, Russia and the United States focusing on both new legislation and case law developments.
Leap Forward to Blur the Historical Distinction Between Blue and White Collar Workers: the Unique Status of Worker ( by Karla Vuyts)
The Law of December 26, 2013, concerning the introduction of a unique status between white collar and blue collar workers in terms of notice of termination, "carence-day" and accompanying measures was published in the Official Gazette of December 31, 2013.
The provisions of this law bring forth, as from January 1, 2014, an almost complete overhaul of the rules regarding the termination of employment.
New Rules Concerning the Length of the Notice Period
From now on, fixed notice periods apply to all workers, whether blue collar or white collar. These notice periods are now expressed in weeks and the notice always starts on the Monday following the notification instead of on the first day of the following month.
Transitional rules apply for the purpose of determining the length of the notice period to terminate the employment agreement of a worker who was hired prior to January 1, 2014, and provide a two step calculation:
First one must determine the length of the notice period in consideration of the seniority acquired up until December 31, 2013, at one month per begun year of seniority for a white collar worker whose salary exceeded 32.254 Euros;
For the seniority acquired since January 1, 2014, the notice period resulting from the new rules, for example a notice period of two weeks during the first three months, will be added.
The new rules clearly provide that new individual or collective agreements cannot modify the length of the notice period fixed in the law.
For existing agreements concerning the length of the notice periods which provide for longer or shorter periods, the law contains no specific provision. There are however serious arguments to plead for the application of such existing agreements for the determination of the length of the notice period in consideration of the seniority acquired before December 31, 2013, in the abovementioned two step calculation.
Expansion of the Entitlement to Outplacement Services
Since January 1, 2014, employees younger than 45 years of age are now also entitled to the benefit of outplacement services provided they are entitled to a notice period of at least 30 weeks.
Abolition of the Trial Period
With the introduction of the new rules on the determination of the length of the notice period, which results in shorter notice during the first three months, the advantage of the short notice period during the trial period has been abolished. Trial periods which started before January 1, 2014, continue to be valid and enforceable.
Abolition of the “Carence-Day”
The first day of a period of incapacity to work by reason of sickness or an accident not exceeding 14 days was called the “carence-day” for blue collars because it was not remunerated.
In practice, this means that from now on, all workers are entitled to their “guarantee-salary” from the first day of their incapacity to work.
The Collective Bargaining Agreement nr 109 of February 12, 2014, Introducing an Obligation to Motivate the Termination of the Employment Agreement
The Law of December 26, 2013, also provided that the social partners were to conclude a collective bargaining agreement ("CBA") concerning the motivation of a termination of employment and “good HR-policy by termination.”
The resulting CBA will enter into force on April 1, 2014, and apply to all terminations taking place after that date.
The worker will be entitled to know the reasons for his dismissal and request to be informed in writing of said reasons. The worker shall have to send his request by registered mail and up to two months after the termination of his employment agreement. The employer has two months to reply unless he already spontaneously motivated the dismissal.
Failure or refusal by the employer to communicate the reasons for the dismissal is sanctioned with a penalty equal to two weeks' salary.
The communicated motive of dismissal will be reviewed against a new notion of “manifest unreasonable dismissal," that is a dismissal that is not based on reasons relating to the suitability or the attitude of the worker, or that is not based on the necessities of the operations of the enterprise or service and that would never have been decided upon by a normal and reasonable employer.
If the court finds the dismissal manifestly unreasonable, it can condemn the employer to the payment of lump sum damages equal to three weeks' salary up to 17 weeks' salary, depending on the degree of unreasonableness of the dismissal.
The CBA nr 109 also adopts a sort of “split” burden of proof:
When the employer has motivated the dismissal, each party carries the burden of proof for his allegations;
When the employer has not spontaneously or correctly motivated the dismissal, he can still prove that the dismissal was not manifestly unreasonable; and
When the worker has omitted to request communication of the reasons for the dismissal, he will have to prove the elements that indicate the manifest unreasonableness of his dismissal.
England and Wales
Fees in Employment Tribunals (by Charles Wynn-Evans and Georgina Rowley)
In an effort to move the burden of funding the employment tribunals (which adjudicate statutory employment claims in the UK) away from the taxpayer and onto those using the service, fees were introduced into the tribunal system with effect from July 2013. Claimants now have to pay fees at two stages: upon issuing their claim a fee is payable of either £160 or £250, depending on the complexity of the claim; at a later stage prior to the full hearing a fee is payable of either £230 or £950, again depending upon the complexity of the claim. The employment tribunal will have the power to order the unsuccessful party to reimburse the fees of the successful party. Claimants will be excused from paying fees if they provide proof either that they are in receipt of certain permitted state benefits, or that their household income is below a certain threshold. It is hoped that the introduction of fees will deter claimants from bringing poor claims and encourage the early settlement of disputes.
Cap on Unfair Dismissal Compensation
The cap on compensation for unfair dismissal has been changed to the lower of £74,200 or 52 weeks’ gross pay, effective July 29, 2013. Historically, the cap on compensation for unfair dismissal has been a pure monetary amount with no reference to earnings. For many years the median compensation awarded by the tribunal for unfair dismissal has been around £5,000, so the revised limits may not always be relevant, save where a lower paid employee seeks to recover loss for an extended period of employment.
Confidential Pre-Termination Discussions
From July 29, 2013, discussions between employers and employees about terminating employment (known as “confidential pre-termination discussions”) may not be relied upon by either party in a subsequent unfair dismissal claim. Previously, such discussions were only confidential if they were "without prejudice", in other words, if there was a dispute in existence between the parties and the discussion was had in a genuine attempt to resolve that dispute. The new regime is intended to make it easier for employers and employees to discuss parting ways by enabling a truly “off the record” dialogue to be commenced without the need to establish a dispute.
There are, however, some important exceptions to the new rule:
Excluded claims: Confidential pre-termination discussions are only protected in relation to "normal" unfair dismissal claims. They will be admissible as evidence in the many potential claims arising from dismissal other than "normal" unfair dismissal, such as claims for wrongful dismissal and breach of contract, as well as (potentially highly valuable) discrimination claims.
Improper behaviour: In conducting pre-termination discussions, the parties must not engage in “improper behaviour”, such as unlawful discrimination and all forms of harassment, bullying and intimidation, physical assault, and putting undue pressure on the other party. In cases of improper behaviour the employment tribunal will have to determine on the basis of what is just the extent to which the relevant discussions can be excluded from the employee’s claim.
Changes to Whistleblowing Legislation
In June 2013 some important changes were made to the UK whistleblowing legislation (which provides for a right to compensation if an employee is subjected to a detriment because of, and for dismissal to be automatically unfair if an employee is terminated due to, whistleblowing):
Public interest: In order to qualify for the protection of the whistleblowing legislation, disclosures must, in the reasonable belief of the worker, be made in the public interest. This is designed to prevent workers from making a whistleblowing claim at an employment tribunal in respect of purely private matters.
Good faith: The previous requirement for a disclosure to be made "in good faith" has been removed. However, where a disclosure is not made in good faith, any compensation the employee recovers may be reduced by the employment tribunal by up to 25%.
Victimisation: The Government has sought to provide greater protection from victimisation for whistleblowers by making employers vicariously liable for detrimental treatment towards the whistleblower by other workers.
Dismissal for Political Opinions or Affiliations
Following a finding by the Court of Justice of the European Union in Redfearn v United Kingdom in 2012 that the UK was in breach of the European Convention on Human Rights, section 108 of the Employment Rights Act 1996 has been amended to provide that the qualifying period needing to be satisfied to be able to claim unfair dismissal (currently of two years) does not apply if the reason (or, if more than one, the principal reason) is, or relates to, the employee's political opinions or affiliation.
Changes to Collective Redundancy Consultation
On April 6, 2013, there were three key changes to the rules on collective consultation:
Timetable: Where an employer is proposing to dismiss 100 or more employees at one establishment within 90 days, it must now begin consulting with the appropriate representatives at least 45 days before the first dismissal takes effect. This represents a reduction from the previous requirement to consult for 90 days before dismissal.
HR1: Where an employer is proposing to dismiss 20 or more employees at one establishment within 90 days, the employer must notify the Secretary of State of its redundancy proposal, using an “HR1” form. In the case of 20-99 redundancies, the Secretary of State must be notified at least 30 days before the first dismissal takes effect. However, where 100 or more employees are being dismissed, the Secretary of State must be notified at least 45 days before the first dismissal.
Fixed term employees: Where an employer is proposing to dismiss 20 or more employees at one establishment within 90 days, the collective redundancy consultation obligations will not apply to those individuals who are employed under a fixed term contract unless (a) the employer is proposing to dismiss the employee as redundant; or (b) the dismissal will take effect before the expiry of the specific term, the completion of the particular task, or the occurrence (or non-occurrence) of the specific event that the employee was employed for.
In a 2013 decision the Employment Appeal Tribunal held that the requirement for the dismissals to be “at one establishment” should be disregarded as it is incompatible with the European Directive from which the UK registration derives. That decision has been appealed to the Court of Appeal.
Legislation (by Philippe Thomas and Sabrina Chekroun)
Decree of the Law on Employment Security
Further to the law on employment security passed on June 14, 2013, a decree detailing the maximum time limits applying to the works council to issue its opinion and to its expert to render its report on various consultations cases, as long as an agreement is not reached between the works council and the employer providing for shorter or longer consultation process’ duration was adopted on December 27, 2013. These time limits do not apply on collective redundancies projects since they were already provided by the law dated June 14, 2013.
Cass.soc., May 23, 2013, n°12-13.015- Burden of proof and compliance with daily rest provisions
According to the European directive n°2003/88/CE of November 4, 2003, which has been implemented in French law, all French employees are entitled to a daily rest of at least 11 consecutive hours. In case of breach of these provisions, employees can file a claim against their employer to obtain damages.
In May 2013 the Supreme Court decided that for such claims, even though the burden of proof when dealing with overtime lies with both the employee and the employer, the burden of proof of respect of provisions on daily rest lies only with the employer. This is due to the fact that the daily rest is provided by European Union legislation which aims to ensure the health and security of employees. Furthermore, the French Supreme Court also judged that breach of the daily rest necessarily causes a prejudice to the employee, which thus has to be compensated. In a previous case, the Supreme Court ruled in a similar way about a breach of the rules on weekly rest (Cass.soc., October 31, 2012, n°11-20.136).
Cass. soc., June 5, 2013, n°11-21.255- Adaptation training obligation and impact on redundancy
The employer has the obligation to provide his employees with training to ensure that they remain suitable to perform their job positions and adapt to changes in the business. In case of breach of this obligation, employees may be awarded damages. In addition, redundancies can be notified only when the employer made all required training efforts. In June 2013 the Supreme Court faced a case where the employee was hired without any specific skills or experience. He only trained at his arrival to carry out his duties as process operator. During his 16 years employment, the employee did not benefit from any training to ensure his adaptation at work. The French Supreme Court ruled that by offering no training to his employee during such a large period of time, the employer breached its obligation vis-à-vis its employee, no matter that the employee’s duties were not subject to any particular development and that the employee did not seek the benefit of any training. The employees could thus claim damages. In this case, the employee did not invoke this breach to challenge the validity of his redundancy, but he could have done so and obtained damages for unfair termination on top of separate damages for breach of the training obligation.
CE, July 3, 2013, n°349496- Violent behavior relating to mental disorder and limitation of the employer’s disciplinary authority
An employee displayed violent and aggressive behavior towards his supervisor. Being an employee representative, the employer requested the authorization from the labor inspector to dismiss him for fault. Once the labor inspector delivered his authorization to dismiss the employee, this latter appealed the decision before the administrative court for the authorization to be considered null and void. The administrative court ordered a medical expert to provide a report which revealed that the employee’s violent behavior was due to a mental disorder. The French Administrative Supreme Court decided that there was a link between the employee’s dismissal and his health condition and that therefore, his dismissal was null and void. This decision is particularly harsh for the employer: its only valid option would have been to obtain a certificate from the labor doctor attesting that the employee was unfit to work. Such solution would have, at least, required that the employer be aware of its employee’s health condition at the date of the dismissal.
Cass. soc., September 25, 2013, n°12-21.747- Suspension of reorganization project and incomplete information received by the health and safety committee
The French Labor Code provides that before making any important management decision, the employer must consult the health and safety committee which will consider the impact of the considered measure on the employees’ working conditions and health and safety. In this case, a hospital decided to reorganize one of its units and thus submitted this project to the prior consultation of the health and safety committee. In this framework, the hospital provided the committee with an 8-page power-point which only briefly outlined the content of the project. This document did not contain any of its foreseeable consequences on employees’ working conditions. The committee considered that it was not in a position to issue its opinion since it was not sufficiently informed on the project. The committee thus filed summary proceedings for the project to be suspended. The French Supreme Court considered that the committee indeed received incomplete information relating to the consequences of the reorganization on working conditions and thus decided to suspend the implementation of the reorganization project until the committee received full and complete information on the project.
Cass. soc., October 23, 2013, n°12-23.457- Equality of treatment of employees included in a statutory job protection plan
The principle of equal treatment between employees must be complied with at every step of the working relationship, including when a social plan is adopted. Pursuant to this principle, advantages may be granted to a limited number of employees only if they are granted to all employees being in a similar situation and if the terms and conditions of allocation of such advantages are objectively defined.
In this case, the closure of one establishment was contemplated and in this framework, the social plan provided that the impacted employees working within the establishment subject to the closure will receive an additional indemnity amounting to 10,000 Euros while other impacted employees will be excluded from this payment. For the French Supreme Court, belonging to an establishment about to be closed down does not constitute a justification which may validly justify excluding other employees from the benefit of an additional indemnity provided by the social plan.
Cass. soc., November 20, 2013, n°12-20.074- Non-compete clause and resignation
After having resigned, a commercial engineer, having a non-compete clause in his contract, was exempted from work by his employer during his notice period from October 23, 2009. On November 2, 2009, this employee joined a competitor. The previous employer thus filed a claim to obtain damages for breach of the non-compete clause, even though he did not pay the financial compensation to which the employee was entitled. The French Supreme Court ruled in favor of the employer. The court first considered that the new duties carried out by the employee were the same as the ones carried out for his previous employer. Then, the court judged that in consideration of the brief period of time existing between his two job positions, the employee cannot invoke that the non-payment of the non-compete indemnity could be considered as a renunciation to the non-compete on the part of his previous employer.
Election of New Works Councils During March 1 Through May 31 (by Giovanni Russo)
The works council is the employees’ representative body which is provided with extensive information and consultation rights. The works council is established by the employees on their own initiative through a predetermined election process. Regular re-elections of the works council members are generally held every four years from March 1 through May 31 respectively. 2014 is a re-election year. The election process requires as a first step the establishment by the existing works council of an election committee (Wahlvorstand) which has to consist of at least three employees. The election committee is then in charge of officially initiating the process through issuing an invitation to all employees with information on the various steps of the election process, the employees’ rights, the date and time of casting of votes and many other aspects relevant to the election process. Violations of the statutory regulations governing the election process can render the election of the new works council void. All costs related to the election process have to be borne by the employer.
Cut Off Date as Condition for Pay-Out of a Bonus Is Not Permissible
The Federal Labour Court (Bundesarbeitsgericht) confirmed in a recent ruling dated November 13, 2013, that the pay-out of a performance rewarding compensation element cannot be made conditional upon the continued employment of the employee on a certain cut-off date (10 AZR 848/12). In the case that had to be decided the employment contract provided for a “Christmas allowance” (Weihnachtsgeld) which was annually payable in November and was sought to reward company loyalty on the one hand but also the employee’s performance during the ongoing financial year on the other hand. According to the contract any right to receive the Christmas allowance was forfeited if notice of termination of the employment was served by December 31 of the ongoing year. The court held that the forfeiture provision would inadequately discriminate the employee and that it is therefore void. According to the court the Christmas allowance had to pay on a pro rata basis taking into account the period worked by the employee until the termination date.
Dismissal for Operational Reasons - No Requirement to Alternatively Offer Job in a Company’s Operation Outside Germany
In a judgement dated August 29, 2013, the Federal Labour Court ruled that there is no obligation for an employer to offer to an employee who is to be dismissed for operational reasons (aus dringenden betrieblichen Gründen) a vacant job in an operation run by the employer outside of Germany (2 AZR 809/12). The ruling finally clarified that the ultima ratio requirement imposed by the German Protection against Dismissal Act (Kündigungsschutzgesetz), meaning that the employer is obliged to consider any and all alternatives, including continued employment on other vacant positions available within the company, before terminating an employment relationship, does not include consideration of vacant job positions outside Germany.
No Obligation to Inform Employees About Possibility to Convert Part of Salary Into Contributions to a Pension Scheme
The Federal Labour Court (Bundesarbeitsgericht) ruled on January 21, 2014, that there is no legal obligation for employers to inform employees about their right to convert part of their compensation into contributions to a pension scheme (betriebliche Altersvorsorge). According to § 1a(i) of the Company Pension Act (Gesetz zur Verbesserung der betrieblichen Altersversorgung) employees are entitled to convert part of their salary into contributions to a pension scheme which is usually operated by a pension insurance. For 2014 the maximum annual amount that can be converted into contributions to the pension scheme is EUR 2,856.00. Those contributions are tax exempted and not subject to any social security contributions. In the case decided by the court an employee claimed damages from the employer arguing that he had not been informed about his right to convert part of his salary into contributions to a pension scheme. The Federal Labour Court ruled that employers do not have an obligation to inform employees about these rights and that, as a consequence, there is no right for the employee to claim damages.
Conclusion of Civil Law Contracts With Employees Is Prohibited (by Evgenia Korotkova, Tatiana Kozlova and Ramil Shafigulin)
The RF Labor Code was amended in late December 2013 to include provisions that directly prohibit employers from concluding civil law contracts (e.g. services contracts, work contracts, etc.) – as opposed to employment contracts – for the purpose of establishing employment relations with their employees. Furthermore, employers engaging in this practice are now subject to administrative liability.
These provisions were introduced as part of an effort to curb the practice in which employers conclude civil law contracts with their employees in order to avoid the responsibility of providing them with federally-mandated employment requirements such as paid sick leave, paid vacations, redundancy payments, work safety rules, etc. In cases where this practice may occur, an employee is now entitled to demand that his employer recognize the employee’s rightful legal status in the company through means of an employment contract. Moreover, recognition of employment status may also be obtained by an authorized state employment body and/or through the court. Although the courts have been active in recognizing employment status in relations established under civil law contracts, these provisions mark the first time in which an actual prohibition of the practice is established by law.
The Federal Law that introduced these provisions entered into force on January 1, 2014, save for the provisions on administrative liability, which will enter into force on January 1, 2015.
Special Assessment of Labor Conditions
In an effort to improve worksite safety conditions, a new procedure for assessing labor conditions has been established by law. The aim of this new procedure is to identify hazardous and dangerous elements in the working environment, and the risks that they pose to the employees. Employees working from remote locations are not subject to workplace safety assessments.
Furthermore, the RF Administrative Code and the RF Criminal Code have been amended to include increased liability for non-compliance with Russian labor law. In particular, provisions for a fine of up to RUB 70,000 (approximately US$2,000) with respect to repeated administrative offenses in the area of employment have been established, as well as entirely new provisions on administrative liability for non-compliance with work safety requirements and/or the procedure for assessing labor conditions have been introduced. Moreover, company officers held criminally liable for non-compliance with work safety requirements are subject to an increased (double of what it used to be in the past) fine of up to RUB 400,000 (approximately US$12,000) or imprisonment of up to 5 years (up from 4 years previously).
The Federal Laws that introduced these provisions came into force on January 1, 2014, with the provisions on administrative liabilities to enter into force on January 1, 2015.
Employment of Foreign Citizens
Provisions introducing new, stricter rules on entry of foreign citizens into Russia for the purposes of mitigating illegal immigration came into force during summer 2013. Among the new rules include those providing for peremptory denial of entry to foreign citizens who have been repeatedly held liable for administrative offences and who have a record of public order offenses or of violating residency and employment requirements for foreign citizens in Russia. In addition, the time period for which entry may be denied has been increased. Foreign citizens who are evicted, deported or readmitted to their original country from Russia will be denied new entry for a period of 5 years. Denial of entry for 10 years will be applied to foreign citizens who are repeatedly evicted, deported, or readmitted (up from the previous 5 years).
In addition, other related provisions established that foreign citizens are only eligible for engaging in labor activity in Russia after their 18th birthday. While this rule was previously upheld by the regulations and procedures of the state authorities that grant work permits to foreign citizens, it is now formally cemented in Russian law.
Liability for Discriminatory Job Advertisements
In an effort to curb the widespread practice of placing discriminatory job advertisements, new provisions were implemented in summer 2013 establishing liability for employers who place job advertisements containing discriminatory conditions, e.g. indicating preferences of gender, race, nationality, age, etc. Employers placing such job advertisements are subject to administrative liability and may be fined an amount of up to RUB 5,000 (approximately US$150) for company officials and up to RUB 15,000 (approximately US$450) for companies themselves.
Although the provisions are currently in force, the courts are still interpreting the extent of the rules and their application. On September 4, 2013, for example, the Moscow City Court ruled in a case that it did not consider indicating a preferred gender in a job advertisement as a form of discrimination.
Draft Law – Rules for Agency Work (Secondment/Outstaffing)
A law regulating the agency work (secondment/outstaffing) in Russia is still in draft status and has yet to be passed, despite the fact that the Russian State Duma has been considering it for a long period of time. Although not addressed by Russian law, agency work – such as secondment/outstaffing arrangements – is widely used by employers and recognized by the courts. For example, in considering a case with respect to outstaffing arrangements for a foreign citizen, the Russian Supreme Arbitrazh Court ruled that the company that receives the outstaffed employee is obliged to notify the appropriate Russian migration authorities when engaging an employee by means of an outstaffing agreement, rather than the company with which the employee has an employment agreement.
Notifications Regarding Foreigners – Highly Qualified Specialists
Beginning on January 1, 2014, an employer is now required to notify the migration authorities within three business days after dismissing a foreign citizen who occupies position of a highly qualified specialist (HQS) or providing him/her with unpaid vacation for more than one month in a year. Although such obligation of notifying migration authorities existed prior to January 1, 2014, the term in which the employer must notify the migration authority had never been envisaged until now.
Furthermore, it has now been established that the notification may be submitted to the migration authority in person, by post or via the internet. Failure to submit the notification within the 3-day window may result in the employer of the HQS incurring a fine of up to RUB 1 million (approximately US$30,000) and/or its manager in the amount of up to RUB 70,000 (approximately US$2,000).
Other Draft Laws – Current Status
Draft Law No. 265590-6, which provides for an increase of the statute of limitations for employment disputes (from one to three months for disputes related to employee’s dismissal, from three to six months for other disputes), is still at the initial stage in the Russian State Duma committee.
Draft Law No. 284365-6, which is supposed to oblige all employers to index the salaries of their employees, was returned to its authors at the end of June 2013. There are still no further developments on this draft.
Supreme Court Strikes Down Federal Law Defining Marriage (by Thomas Johnson, II and J. Ian Downes)
Section 3 of the Defense of Marriage Act (DOMA), a federal law passed in 1996, states that “[i]n determining the meaning of any Act of Congress, or of any ruling, regulation, or interpretation of the various administrative bureaus and agencies of the United States, the word ‘marriage’ means only a legal union between one man and one woman as husband and wife, and the word ‘spouse’ refers only to a person of the opposite sex who is a husband or a wife.” In a 5-4 decision in United States v. Windsor, the U.S. Supreme Court held that Section 3 of DOMA was unconstitutional as applied to same-sex couples lawfully married under state law. According to the Court, “no legitimate purpose overcomes the purpose and effect to disparage and to injure those whom the State, by its marriage laws, sought to protect in personhood and dignity.” As a result of the decision, same-sex couples who are validly married under state law are entitled to recognition under all federal laws, including tax and employee benefit laws. A major open question with respect to many federal laws is whether a marriage needs to be lawful in the state where the couple resides, or only in the state where the marriage was performed. Significantly, the Internal Revenue Service announced that for purposes of federal tax laws, a marriage is valid if it was lawful in the state where the marriage was “celebrated.” Although the Supreme Court attempted to disclaim that its decision required states to recognize same-sex marriages under state law, a number of courts have recently concluded that the rationale of Windsor requires that state laws banning same-sex marriage be struck down. Employers should monitor these decisions carefully and review their benefit, leave and other policies in light of this quickly changing area.
Supreme Court Continues Trend Supporting Employer Arbitration Programs
In American Express Co. v. Italian Colors Restaurant, the Supreme Court rejected an antitrust challenge by small business owners to the enforcement of a class action waiver contained in an arbitration clause in a credit card use agreement. Although it is not an employment case, the American Express decision represents one of the Supreme Court’s strongest decisions supporting the right of employers to establish mandatory employee arbitration programs that require employees to waive their rights to file class actions. According to the business owners suing American Express, the class waiver was unenforceable because the value of each business’s claim was small and preventing the businesses from proceeding on a class basis imposed “prohibitive costs” that frustrated enforcement of antitrust laws. In a 5-4 decision, the Court sided with American Express, holding that because “the antitrust laws do not guarantee an affordable procedural path to vindication of every claim,” there was no basis for refusing to honor the Federal Arbitration Act’s directive that arbitration agreements be enforced on the same basis as other contracts. Enforcement of the class waiver did not preclude the business owners from “effectively vindicating” their statutory rights because the waiver did not eliminate the businesses’ “right to pursue” their claims under the antitrust laws. The Court’s decision is significant for employers because it clarifies that employees cannot use the relatively small value of individual claims—such as claims for overtime under the Fair Labor Standards Act—as a basis for arguing that they must be permitted to proceed on a class-wide basis. Employers who do not already have an arbitration program in place may want to consider whether such a program may make sense now given the proliferation of class action labor and employment and other suits and the Supreme Court’s growing support for arbitration programs.
Supreme Court Defines Who Is a Supervisor
In Vance v. Ball State, the Supreme Court in a 5-4 decision held that an employee is a supervisor only if the employee is able to take tangible employment actions against other employees. Tangible employment actions include hiring, firing, promoting and disciplining employees. The Court refused to adopt a more expansive definition of “supervisor” that the EEOC supported. Under U.S. law, employers can be held strictly liable for the tangible employment actions of a supervisor, but may be able to mount an affirmative defense in cases where the action was not tangible such as a hostile work environment. By contrast, an employer is liable for a non-supervisor only if it knew or should have known about the offensive conduct and failed to take appropriate action. The practical effect of the Court’s decision is to narrow the group of employees for whom an employer will be held strictly liable. Employers should review job descriptions and actual day-to-day functions carefully to ensure that it understands who its supervisors actually are.
EEOC Issues Guidance for Employers About How to Handle Common Disabilities
Employers in the United States have faced a deluge of claims related to the Americans with Disabilities Act (ADA). The number of such claims and, in particular, whether employers have provided reasonable accommodations is expected to increase over the coming years. In 2013 the EEOC issued guidance to employers about the four most common disabilities in the workplace: cancer, diabetes, epilepsy and intellectual disabilities. The guidance1 provides hypothetical answers and addresses issues related to employers' inquiry about and use of medical information as well as reasonable accommodations. The EEOC guidance also emphasized maintaining the confidentiality of any employee medical or health information as well as whether the employee is receiving a reasonable accommodation. Employers should familiarize themselves with the EEOC guidance on this important issue to minimize the chance of liability by ensuring that the treatment of applicants and employees is consistent with the EEOC’s position.
United States Enacts Two New Laws Protecting Trade Secrets and Increasing Penalties for Those Who Steal Secrets to Benefit a Non-U.S. Business
The United States passed two new laws addressing the protection of trade secrets in the United States. Employers both in the United States and abroad should pay particular note to this significant development. First, Trade Secret Clarification Act of 2012, signed into law in late December 2012, effectively amended the Economic Espionage Act and made the definition of “trade secret” broader to include services and products that are only used internally by the employer. In particular, the Trade Secret Clarification Act was designed to expand protection of computer source code. In addition, in early 2013, the Foreign and Economic Espionage Penalty Enhancement Act became law. This statute has particular significance for foreign and domestic employers because it increases the maximum fines for organizations and individuals who misappropriate trade secrets of domestic companies in order to benefit a non-U.S. entity. The maximum fines are now in the millions of dollars for both individuals and companies.2