So far, 2018 has brought an increasing number of labor and employment rules and regulations. To help you stay up to date, we are pleased to introduce the Employment, Labor & Workforce Management Webinar Series.

Epstein Becker Green’s Hospitality service team took a deeper dive into our recently released Take 5 during the first webinar. Topics discussed include:

  • Additional measures to protect lesbian, gay, bisexual, and transgender employees in the hospitality workplace
  • Compliance training in the hospitality workplace
  • Transactional due diligence, including labor relations issues
  • The risk of self-reporting overtime and minimum wage violations under the Payroll Audit Independent Determination (PAID) program

Watch a recording of the webinar video here and download the webinar presentation slides.

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.

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 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.

On April 18, 2017, the Equal Employment Opportunity Commission (“EEOC”) filed a putative class action against the SLS Hotel South Beach in Miami, Florida (“Hotel”), alleging that the Hotel violated Title VII by firing black Haitian dishwashers who worked in the kitchen and serviced several restaurants in the Hotel – including the Bazaar by Jose Andres, Katsuya and Hyde Beach – and replacing them with white and Hispanic workers, who were supplied by a staffing agency, National Service Group (“NSG”).

This case highlights one of the EEOC’s asserted priorities in its strategic plan for the next six years, to address discrimination in “complex employment relationships” focusing on “temporary workers, staffing agencies, independent contractor relationships, and the on-demand economy.” Here, although a staffing agency made the decision regarding who to hire to replace the terminated employees, the EEOC has stated that an employer may not shield itself from liability for discrimination simply by authorizing an agent to make its hiring or firing decisions, if those decisions are discriminatory.

The Complaint against the Hotel was filed by the EEOC after fifteen former employees lodged charges of discrimination with the EEOC based on their race, color and national origin, and the EEOC issued Letters of Determination after finding reasonable cause to believe that discrimination occurred. The Complaint asserts that black Haitian employees were treated worse than their Hispanic counterparts at the Hotel.  Among the allegations in the Complaint are that black Haitian employees were reprimanded for speaking Creole while Hispanic employees were not reprimanded for speaking Spanish; that black Haitian employees were referred to as “slaves” by other employees, including managers; and Haitian employees were forced to carry heavy items up the stairs, while Hispanic employees were not asked to perform those same tasks.  Further, the Complaint alleges that the Hotel decided to outsource staffing to NSG, but it did not encourage or notify its black Haitian employees to apply for positions with the agency.  Rather, according to the Complaint, black Haitian employees were provided a settlement agreement in English, though many cannot read the language, and were told they would only receive their final paycheck upon signing the agreement.  A press release from the EEOC further contends that the black Haitian workers were replaced “with light-skinned Hispanics.” For its part, the Hotel has spoken out against the allegations, contending that it conducted an investigation as soon as it received notice of the charges and found no evidence of wrongdoing.  Chief Legal Officer for the Hotel, James L. Greeley, stated that the Hotel has been cooperating with the EEOC, engaging in good faith attempts to resolve this matter, and will continue to fully defend the Hotel against false claims.

Our colleagues Patrick G. Brady and Julie Saker Schlegel, at Epstein Becker Green, have a post on the Retail Labor and Employment Law blog that will be of interest to many of our readers in the hospitality industry: “Beyond Joint Employment: Do Companies Aid and Abet Discrimination by Conducting Background Checks on Independent Contractors?

Following is an excerpt:

Ever since the National Labor Relations Board (“NLRB”) issued its August 2015 decision in Browning-Ferris Industries of California, Inc., holding two entities may be joint employers if one exercises either direct or indirect control over the terms and conditions of the other’s employees or reserves the right to do so, the concept of joint employment has generated increased interest from plaintiffs’ attorneys, and increased concern from employers. Questions raised by the New York Court of Appeals in a recent oral argument, however, indicate that employers who engage another company’s workers on an independent contractor basis would be wise to guard against another potential form of liability, for aiding and abetting acts that violate various anti-discrimination statutes, including both the New York State (“NYSHRL”) and New York City Human Rights Laws (“NYCHRL”) and the New Jersey Law Against Discrimination (“NJLAD”).

Read the full post here.

Fifth Circuit Pays Special Deference to NLRB’s Determination that Hotel Management Company Acted With Anti-Union Animus In Outsourcing Housekeeping DepartmentA recent decision of the U.S. Court of Appeals for the Fifth Circuit illustrates the potential pitfalls of outsourcing in the face of a union campaign, as well as the steep hurdle employers face in overturning a decision of the National Labor Relations Board (“NLRB”). In Remington Lodging & Hospitality, LLC v. NLRB, the Fifth Circuit enforced an NLRB order holding that a hotel management company’s decision to outsource the hotel’s housekeeping department was motivated at least in part by anti-union animus and therefore violated Section 8(a)(3) of the National Labor Relations Act (“the Act”).

In late 2011, Remington Lodging & Hospitality, LLC (“the Management Company”) was hired to manage the Hyatt Regency Long Island hotel (“the Hotel”). At the time the Management Company took over management, the Hotel’s housekeeping functions had been outsourced to a staffing company. Consistent with its general preference to directly employ its workers, the Management Company brought the housekeeping function back in-house, and terminated the Hotel’s contract with the staffing company.

Unfortunately, the Hotel’s guest-room component score – its primary indicator of housekeeping effectiveness – continued to decline, and by June of 2012 had hit its lowest level. That month, the Management Company contacted the staffing company about re-outsourcing the Hotel’s housekeeping department, and in August entered into a new agreement with the staffing company to do so.

The NLRB held that this second outsourcing was at least partially motivated by a desire to discourage membership in a union that had begun making efforts to unionize the housekeepers around the time the Management Company elected to re-outsource the department.

On appeal, the Fifth Circuit rejected the Management Company’s argument that to prove a violation of Section 8(a)(3) of the Act, the NLRB must produce evidence that the discrimination “in fact caused or resulted in a discouragement of union membership.” As the NLRB had failed to introduce such evidence, the Management Company argued the NLRB’s order was not supported by substantial evidence.

In rejecting this argument, the Fifth Circuit noted that requiring actual evidence of discouragement was “completely inconsistent” with Fifth Circuit precedent. The court stated flatly the NLRB “need not prove discouragement as a matter of fact.”

While the Management Company asserted that the decline in guest-room component scores explained its decision, the court upheld the NLRB’s resolution of this contested issue of fact. The court noted that the NLRB had relied on evidence of two union-related conversations between housekeepers and Hotel supervisors prior to the outsourcing decision, as well as the statement of another supervisor that the outsourcing decision was “because of the union.” Together these constituted substantial evidence of an unlawful motive. Stating that it must pay “special deference” to the NLRB’s resolution of conflicting evidence, the court upheld the NLRB’s order.

The lesson for employers is a familiar one – be mindful of the potential repercussions of outsourcing decisions, and careful when considering and articulating the underlying motivation. Conflicting evidence is enough to find illegal motivation.

Our colleagues Brian W. Steinbach and Judah L. Rosenblatt, at Epstein Becker Green, have a post on the Heath Employment and Labor blog that will be of interest to many of our readers in the hospitality industry: “Mayor Signs District of Columbia Ban on Most Employment Credit Inquiries.”

Following is an excerpt:

On February 15, 2017, Mayor Muriel Bowser signed the “Fair Credit in Employment Amendment Act of 2016” (“Act”) (D.C. Act A21-0673) previously passed by the D.C. Council. The Act amends the Human Rights Act of 1977 to add “credit information” as a trait protected from discrimination and makes it a discriminatory practice for most employers to directly or indirectly require, request, suggest, or cause an employee (prospective or current) to submit credit information, or use, accept, refer to, or inquire into an employee’s credit information. …

Read the full post here.

A New Year and a New Administration: Five Employment, Labor & Workforce Management Issues That Employers Should MonitorIn the new issue of Take 5, our colleagues examine five employment, labor, and workforce management issues that will continue to be reviewed and remain top of mind for employers under the Trump administration:

Read the full Take 5 online or download the PDF. Also, keep track of developments with Epstein Becker Green’s new microsite, The New Administration: Insights and Strategies.