The federal Equal Pay Act (“EPA”) mandates equal pay for equal work regardless of sex.  Employers that pay men and women different wages for the same work are strictly liable for violations of the EPA unless they can show that one or more of four exceptions apply to explain the wage disparity. The four statutory exceptions are seniority, merit, the quantity or quality of the employee’s work, or “any other factor other than sex.”  The Ninth Circuit recently took up the question of the meaning of the fourth, catchall exception – “any factor other than sex” – in order to consider whether an employer may rely, in whole or in part, on an employee’s prior salary as a basis for explaining a pay differential in Aileen Rizo v. Jim Yovino.

Rizo was a math consultant who worked for the Fresno County Office of Education (“County”). After learning that comparable male employees were earning more for the same work, Rizo filed suit against her employer, alleging that its practice of calculating the salaries for newly hired employees based on their salary history violated the EPA. The County did not dispute that Rizo was paid less than her male counterparts, but it argued that basing her salary on past earnings was a lawful reason for the pay differential as it constituted a “factor other than sex” under the EPA.

On April 9, 2018, the Ninth Circuit sitting en banc rejected the County’s argument. The Court held that “prior salary alone or in combination with other factors cannot justify a wage differential.” Writing for the majority, Judge Reinhart stated that justification of a pay disparity based on “‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” The Court explained that the terms “job-related” and “business-related” are not synonymous and that an employer cannot explain a pay differential based on the benefit to the business as opposed to a legitimate work-motivated consideration.  Some examples of job-related factors identified by the Court included shift differentials, job hazards, physical job requirements, and training.  Unlike each of these things, past salary was not a “job-related” factor but rather, potentially, a business-related factor.

The Court further opined that permitting an employer to rely on historical pay information was inconsistent with the purpose of the EPA, which was to correct past pay discrepancies caused by sex discrimination.  “It is inconceivable,” wrote Reinhart, “that Congress, in an Act the primary purpose of which was to eliminate long-existing ‘endemic’ sex-based wage disparities, would create an exception for basing new hires’ salaries on those very disparities….”  Thus, the majority concluded that relying on past salary in order to explain a wage differential was improper, even if it was only one of the factors ultimately considered.  Confusingly, the Court also noted that there could be instances in which past salary might play a role in individualized negotiations and declined to resolve whether past salary could be taken into account in such circumstances.  However, given the broad pronouncement against factoring past compensation into current salary considerations, it would seem unlikely that the current court would countenance such an exception.

In finding that past salary may never be considered, the Rizo decision overrules the Ninth Circuit’s prior ruling in Kouba v. Allstate Insurance Co. 691 F.2d 873 (9th Cir. 1982).  Kouba held that past salary could be one of the factors considered by employers in evaluating pay, as it was a “factor other than sex” permissible to justify pay gaps between men and women under the EPA.  Notably, four of the eleven judges on the panel concurred with the decision in Rizo, because salary history was the sole reason for the pay disparity, but separated from the majority on the issue of excluding salary history from consideration under any circumstance.  The Rizo decision has also exacerbated a circuit split on whether salary history may be considered, and to what extent.  While certain circuits have taken an approach similar to the concurring judges in Rizo, permitting it as long as it is not the sole basis for a pay disparity, the Seventh Circuit has held that salary history is always a legitimate factor other than sex.

While California employers are no longer entitled to inquire about past salary as part of the job application process as of January 1, 2018, in light of the Rizo decision, employers with operations in California, Oregon, Washington, Idaho, Montana, Nevada, Arizona, Alaska, and Hawaii may wish to take actions to ensure that any pay disparities are not based on salary history, such as not asking about salary history during the hiring process (even in states where this practice is not prohibited by law) and conducting pay equity audits.

Our colleague  at Epstein Becker Green has a post on the Wage and Hour Defense blog that will be of interest to our readers in the hospitality industry: “Federal Court Concludes That 7-Eleven Franchisees Are Not Employees of 7-Eleven.

Following is an excerpt:

In November 2017, four convenience store franchisees brought suit in federal court against 7-Eleven, Inc., alleging that they and all other franchisees were employees of 7-Eleven. The case was filed in the United States District Court for the Central District of California, entitled Haitayan, et al. v. 7-Eleven, Inc., case no. CV 17-7454-JFW (JPRx).

In alleging that they were 7-Eleven’s employees, the franchisees brought claims for violation of the federal Fair Labor Standards Act (“FLSA”) and the California Labor Code, alleging overtime and expense reimbursement violations. The trial court granted judgment in 7-Eleven’s favor, concluding that 7-Eleven was not the four franchisees’ employer under California law or federal law. …

Read the full post here. 

Featured on Employment Law This Week: Under the recently signed Consolidated Appropriations Act, Congress has amended the FLSA to address tip pools. The amendment prohibits employers from keeping employees’ tips or distributing any portion of the tips to managers or supervisors. Non-tipped, back-of-the-house employees, like cooks and dishwashers, may participate in tip pools when the employer pays at least the minimum wage and does not take a tip credit. The amendment also provides for enhanced damages and penalties when employees are deprived of tips.

Watch the segment below:

The first quarter of 2018 has already stirred up an array of legal matters that employers in the hospitality industry should be conscious of, both in their day-to-day operations and long-term planning. In February alone, the U.S. House of Representatives passed legislation to curb lawsuits focused on the inaccessibility of brick-and-mortar business establishments and a federal appeals court ruled that discrimination based on sexual orientation violates Title VII of the Civil Rights Act of 1964 (“Title VII”). Earlier this month, the U.S. Department of Labor announced a pilot program that will allow employers to avoid potential penalties for overtime and minimum wage violations. In addition, the #MeToo movement continues to be top of mind across all industries, and hospitality employers should be vigilant in their training and employee awareness efforts. Due diligence in change-of-ownership transactions should include labor relations issues, especially with unionized employees.

This edition of Epstein Becker Green’s Take 5 addresses important and evolving issues confronting employers in the hospitality industry:

  1. Will Congress Slam the Breaks on ADA “Drive By” Lawsuits?
  2. Expanding Sex Discrimination Protection to LGBT Employees in the Hospitality Industry
  3. Effective Compliance Training in the Hospitality Industry in the Wake of #MeToo
  4. Transactional Due Diligence Should Include Labor Relations Issues
  5. Voluntary PAID Program Permits Employers to Escape Potential High Penalties for Self-Reported FLSA Violations—but at What Risk?

Read the full Take 5 online or download the PDF.

Our colleagues , at Epstein Becker Green, have a post on the Wage and Hour Defense Blog that will be of interest to many of our readers in the hospitality industry: “Initial Discovery Guidelines May Fast-Track Early Disclosure Requirements in Individual FLSA Cases.”

Following is an excerpt:

Depending on the jurisdictions within which they operate, certain employers and their counsel will soon see a significant change in early mandatory discovery requirements in individual wage-hour cases brought under the Fair Labor Standards Act (“FLSA”).

A new set of initial discovery protocols recently published by the Federal Judicial Center (“FJC”), entitled Initial Discovery Protocols For Fair Labor Standards Act Cases Not Pleaded As Collective Actions (“FLSA Protocols”), available here, expands a party’s initial disclosure requirements to include additional documents and information relevant to FLSA cases. These Protocols apply, however, only to FLSA lawsuits that have been filed in participating courts that have implemented the Protocols by local rule or by standing, general, or individual case order. …

Read the full post here.

New Jersey Unemployment Compensation Law (N.J.S.A. 43:21-4) provides that an unemployed individual who meets an earnings and employment duration threshold is eligible to receive unemployment benefits if he or she “is able to work, and is available for work, and . . . actively seeking work.”  An individual’s eligibility for benefits is subject to disqualification conditions outlined in N.J.S.A. 43:21-5.  One such condition (N.J.S.A. 43:21-5(a)) states that an individual is ineligible for benefits if he or she leaves work “voluntarily without good cause attributable to such work and for each week thereafter until [he or she] becomes reemployed and works eight weeks in employment.”  Accordingly, an individual may voluntarily leave work and remain eligible for benefits so long as the individual can show that he or she left work with “good cause attributable to such work.”  The inquiry does not end there.

What constitutes “good cause attributable to such work” is a fact-specific inquiry.  The New Jersey Department of Labor and Workforce Development has promulgated regulations that seemingly address particular circumstances under which an individual will be found to have left work with “good cause attributable to such work.”  Pursuant to N.J.A.C. 12:17-9.3(b), for example, “[a] n individual who leaves a job due to a physical and/or mental condition or state of health which does not have a work-connected origin but is aggravated by working conditions will not be disqualified for benefits for voluntarily leaving work without good cause ‘attributable to such work,’ provided there was no other suitable work available which the individual could have performed within the limits of the disability.”  Notably, the regulation does not include a requirement that the individual notify his or her employer of the health condition and inquire as to the availability of “other suitable work.”

Another exception to the disqualification rule was added in 2015, when the Legislature amended N.J.S.A. 43:21-5(a) to allow an individual who voluntarily leaves employment to be eligible for unemployment benefits if he or she does so to accept employment elsewhere, begins the other employment within seven days, and his or her “weekly hours or pay [is] not less than the hours or pay of the employment of the first employer.”  The amendment essentially protects an employee who voluntarily leaves employment for another job with at least the same hours or pay, but is terminated prior to working the requisite eight weeks to become eligible for unemployment benefits.

With the backdrop of this legislative and regulatory history, in Margo S. Ardan v. Board of Review, the New Jersey Supreme Court, in a 4-3 majority opinion, recently clarified two issues surrounding the application of the above two exceptions to the disqualification rule for voluntarily leaving employment.  First, the Court explained what a claimant must prove to demonstrate the unavailability of “other suitable work” under N.J.A.C. 12:17-9.3(b).  Second, the Court concluded that the 2015 amendment to N.J.S.A. 43:21-5(a) was not retroactive.  While the Court’s latter holding concerning the retroactivity of the 2015 amendment will likely have little impact on employers, the Court’s decision with regard to a claimant’s required evidentiary showing under N.J.A.C. 12:17-9.3(b) may increase the number of employees who seek accommodations for health problems aggravated by working conditions.  These requests may give rise to an employer’s obligation to engage in the interactive process under the Americans with Disabilities Act (ADA) and the New Jersey Law Against Discrimination (LAD) to determine whether the employee can be accommodated.

Plaintiff Ardan, who suffered “chronic neck, lower-back, and left-knee pain,” began working at a medical center as a registered nurse in September 2010.  Her job duties required her to “walk substantial distances,” and to bend and lift, which aggravated her ailments.  Ardan neither requested less arduous work nor informed her employer of her condition while employed.  In 2012, she resigned from her position at the medical center and accepted a desk job as a healthcare communicator to ease the strain on her body without significantly reducing her wages.  After seven weeks at her new job, Ardan was terminated.

Ardan applied for unemployment benefits.  The Deputy Director of the Division of Unemployment and Disability Insurance denied her application, and the Appeal Tribunal, the Board of Review, and the Appellate Division all subsequently upheld the denial.  The appellate panel, in particular, concluded that Ardan did not offer sufficient proof regarding the unavailability of “other suitable work” under N.J.A.C. 12:17-9.3(b), which it interpreted to require notice to the employer and employee inquiry regarding an alternative position to accommodate the condition.  The panel also found that the 2015 amendment to N.J.S.A. 43:21-5(a) was not retroactive.  The Court granted Ardan’s petition for certification.

On appeal, the Court addressed whether Ardan had shown that her situation fell within the scope of N.J.A.C. 12:17-9.3(b).  This required the Court to determine whether she had presented sufficient evidence that there was “no other suitable work available which [she] could perform within the limits of her disability.”  Rejecting an interpretation of the regulation that would always require a claimant to notify her employer and request an accommodation to prove the absence of “other suitable work,” the Court interpreted the regulation as calling for “an individualized determination” – meaning that in some cases, sufficient proof of the unavailability of “other suitable work” would only need to consist of evidence of the claimant’s medical condition, combined with proof of a job’s physical demands, the “small size of the workplace,” or any other “relevant factors,” whereas other circumstances would require a claimant to prove the absence of “other suitable work” by presenting evidence that she both notified her employer and inquired about an accommodation before leaving the job voluntarily.  The Court did not explain when such notice and inquiry would be required.

Applying the above standard, the Court concluded that Ardan failed to proffer sufficient evidence to prove the unavailability of “other suitable work.”  She had not submitted objective evidence that her former employer had no position available to accommodate her to which she could have been assigned.  Nor had she investigated or sought her employer’s assistance in pursuing a less arduous position.  Consequently, the Court characterized Ardan’s belief that there were no suitable positions at the hospital to accommodate her condition as “premised on nothing but speculation.”

Next, the Court addressed whether the 2015 amendment to N.J.S.A. 43:21-5(a) applied retroactively to Ardan’s claim.  An amendment is retroactive if the Legislature expresses its intent that the law apply retroactively; the amendment is curative; or the parties’ expectations warrant it.  After reviewing the amendment’s legislative history, the Court found no evidence that the Legislature intended retroactive application.  The amendment was also not curative because the Legislature did not amend the statute to correct an error or ambiguity.  Retroactive application was similarly not warranted by the parties’ expectations because, when the matter was being decided on appeal, the parties’ expected that the outcome would be determined by the statutory and regulatory scheme then in existence, under which Ardan was disqualified.

The Court’s opinion in Ardan incentivizes an employee to seek an accommodation from his or her employer prior to leaving a job for health reasons.  Because the Court did not adopt a bright-line rule requiring an employee to always request an accommodation from his or her employer to make the evidentiary showing required by N.J.A.C. 12:17-9.3(b), it remains unclear when an employee must apprise her employer of the need for an accommodation to prove the unavailability of “other suitable work.”  Cautious employees who are seeking to preserve their eligibility for unemployment benefits will notify employers of their condition and seek an accommodation.  When these discussions occur, employers should be aware of their obligations under the ADA and LAD to engage in the interactive process to determine whether the employee can be accommodated.  Failure to do so may result in a disability discrimination claim.  Employers are further advised to consult with counsel when faced with these accommodation requests.

Our colleagues , at Epstein Becker Green, have a post on the Health Employment and Labor blog that will be of interest to many of our readers in the hospitality industry: “Sixth Circuit Finds Title VII Covers Discrimination Based on Transgender Status.”

Following is an excerpt:

In a significant decision on Wednesday, March 6, 2018, the U.S. Court of Appeals for the Sixth Circuit held in EEOC v. R.G. &. G.R. Harris Funeral Homes that discrimination against a worker on the basis of gender identity or transitioning status constitutes sex discrimination that violates Title VII.

In R.G. & G.R., the funeral home’s owner fired funeral director Aime Stephens after she informed him she intended to begin a gender transition and present herself as a woman at work. In finding gender identity to be covered by Title VII, the Sixth Circuit also upheld the EEOC’s claim that the funeral home’s dress code, which has different dress and grooming instructions for men and women, discriminates on the basis of sex. …

Read the full post here.

Featured on Employment Law This Week: Second Circuit: Title VII Covers Sexual Orientation Discrimination.

“Legal doctrine evolves.” Those words from the Second Circuit spoke volumes as the court ruled that Title VII of the Civil Rights Act prohibits sexual orientation discrimination, overturning their own long-standing precedent. The court ruled in favor of a skydiving instructor who claimed he was fired for telling a client he was gay.

The majority opinion began by looking at whether sex is a motivating factor in the alleged unlawful practice. And, in this case, looking at sexual orientation discrimination, the court concluded that sex is a factor and inextricably linked to sexual orientation, and therefore sexual orientation acts as a proxy for sex. The Second Circuit now joins the Seventh Circuit in finding that Title VII does protect against sexual orientation discrimination, and deepens a circuit split with the Eleventh Circuit, which went the other way last year.

Watch the segment below and read our recent post.

Our colleague  at Epstein Becker Green has a post on the Technology Employment Law blog that will be of interest to our readers in the hospitality industry: “The GDPR Soon Will Go Into Effect, and U.S. Companies Have to Prepare.”

Following is an excerpt:

The European Union’s (“EU’s”) General Data Protection Regulations (“GDPR”) go into effect on May 25, 2018, and they clearly apply to U.S. companies doing business in Europe or offering goods and services online that EU residents can purchase. Given that many U.S. companies increasingly are establishing operations and commercial relationships outside the United States generally, and in Europe particularly, many may be asking questions akin to the following recent inquiries that I have fielded concerning the reach of the GDPR:

What does the GDPR do? The GDPR unifies European data and privacy protection laws as to companies that collect or process the personally identifiable information (“PII” or, as the GDPR calls it, “personal data”) of European residents (not just citizens). …

Read the full post here.

Featured as our top story on Employment Law This Week: Me too At Work – Sexual misconduct in the C-Suite leads to shareholder lawsuits.

Last month on Employment Law This Week, you heard that sexual misconduct allegations would start impacting shareholder value and reputation. Well, now we’ve got a case study in Wynn Resorts. After the Wall Street Journal uncovered multiple sexual misconduct allegations against Casino mogul Steve Wynn, the company’s stock fell nearly 20%. Wynn resigned a week later, but the company’s troubles were far from over. The company’s  stock has lost $3 billion in value. The first shareholder lawsuit was filed the day Wynn resigned, and to date three suits by shareholders claim that Wynn and the Board breached their fiduciary duties to the company and its shareholders. Bill Milani, from Epstein Becker Green, has more.

Watch the segment below and read our recent post.