Think Twice Before Firing an Injured Employee

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If your employee has been going to the doctor, think twice before you decide to fire them.

Most businesses are well-oiled-machines that rely upon their employees to keep the machine running.  And, managers can get frustrated when employees aren’t available to work.  But, businesses need to be very cautious when dealing with employees who miss work because of injury or illness.  Employees with physical impairments can have rights under federal laws like the Americans with Disabilities Act and the Family and Medical Leave.  Additionally, Alabama law prohibits employers from firing employees because they have filed a worker’s compensation claim.

In a recent case, a manager’s impatience with the workers’ compensation process was a key factor in the Alabama Supreme Court’s decision to send a retaliation case to trial.  See Register v. Outdoor Aluminum, Inc., No. 1200181, 2021 WL 1826991 (Ala. May  7, 2021).  Laura Register was injured on-the-job working for Outdoor Aluminum, Inc. on October 20, 2016.  Register immediately began treatment with the company’s worker’s compensation physician and she was assigned a nurse case manager to facilitate her treatment.  She was initially cleared to return to work light duty in March 2017, but was soon placed off-work after complaining about continuing symptoms.  The workers’ compensation physician referred her to an orthopedic surgeon for neck pain and headaches.

This is where managerial frustration comes into play.  On June 6, 2017, the nurse case manager told Register’s supervisor that she had been referred by the orthopedic for a Functional Capacities Evaluation, and she would need a follow-up appointment to review the results of that FCE.  The supervisor responded with e-mails expressing a “negative attitude” toward the workers’ compensation treatment:

“Just when will this happen?  This is dragging out way past its time.”

“We seem to be just going from one place to another TRYING to find a place that will say she’s disabled.  She has no trouble going to yard sales and such. It seems light duty is easier than that.”

Register underwent the FCE on June 20, 2017.  On July 18, 2017, she visited the regular workers’ compensation doctor, who referred her to a pain management doctor and placed her off-work until July 27, 2017.

But, on July 20, 2017, the supervisor:  (1) e-mailed the case nurse; (2) learned that the FCE was complete; and, (3) was told that the orthopedic released Register to return to full duty with zero impairment.  On July 21, 2017, the supervisor terminated Register’s employment, saying that she should have “reported back to work on 6/29/17” and concluding “it is obvious to me that you no longer wish to be employed here ….”  The supervisor failed to recognize that the regular workers’ compensation physician had placed Register off work, and that Register still had not met with the orthopedic to review the FCE results.  To make matters worse, Outdoor Aluminum had a three-step progressive discipline policy that it did not follow.

Outdoor Aluminum was able to convince a trial court judge that it did not violate Alabama’s retaliatory discharge statute.  See Ala. Code § 25-5-11.1.  But, the Alabama Supreme Court found  the evidence was sufficient to warrant a jury trial.  In particular the Court noted:

  1.  Outdoor Aluminum was aware of Register’s injury and the fact that its regular workers’ compensation physician was treating Register.  And, that regular physician placed Register off-work through July 27, 20217.  The inference seems to be that Outdoor Aluminum should have checked on Register’s status with the regular physician before firing her.
  2. The supervisor’s emails before the FCE “indicate either that he did not believe that Register’s injuries were serious or that he believed that she was exaggerating her injuries to stay out of work.”
  3. Outdoor Aluminum did not comply with its own disciplinary policy.  While Outdoor Aluminum argued that it had discretion to deviate from its policy, there was nothing in writing establishing that discretion.
  4. The supervisor was aware that Register was supposed to follow-up with the orthopedic to discuss the results of the FCE.  But, Register did not receive a copy of the FCE or meet with the orthopedic before she was fired.

The Register case provides a simple lesson for employers:  Go slow before firing an employee who is suffering from an injury, illness or impairment.  Yes, employee absences are frustrating.  But, state and federal laws are designed to protect employees who miss time for health-related reasons.  If you act too quickly, and without all of the relevant information, you could be setting yourself up for a legal claim.

 

Does Insurance Cover Your COVID-Related Business Losses?

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Most federal judges find that insurance does not cover claims for business losses related to COVID-19.

COVID-19 has wreaked havoc on the lives of almost every American.  It has also devastated many businesses which were forced to shut down by government order or simple lack of customers.  Faced with devastating losses, many businesses have attempted to get insurance coverage to reimburse them.  The general idea is:  My business closure for COVID-19 reasons is no different from closure because of a fire.  So, my insurance should pay for my COVID-19 losses in the same manner as a closure for a fire.

Insurance companies disagree with that basic analysis.  In most cases, insurance companies are denying coverage for COVID-19 businesses losses.  As a result, businesses around the country are suing trying to get courts to award them coverage.  Usually, these claims are litigated in federal court.  And, the vast majority of federal courts are holding that COVID-19 business claims are not covered by insurance.

An insurance policy is a contract.  So, courts deciding these coverage issues have to interpret the contract.  The language of almost every policy only provides coverage for: “direct physical loss or damage.”  As a result, most insurance companies differentiate between a “physical loss” to fire and a non-physical loss caused by COVID-19.  After all, the brick-and-mortar business is still standing.  Additionally, some policies have exclusions — provisions that deny coverage for specific reasons.  Many policies specifically exclude any loss or damage caused by a virus.  Because of those provisions, most federal judges in Alabama have found that COVID-19 business losses are not covered by insurance.

  1.   Hillcrest Optical, Inc. v. Continental Cas. Co., No. 1:20-CV-275-JB-B, 2020 WL 6163142 (S.D. Ala. Oct. 21, 2020).  Judge Beaverstock focused on the word “physical”  and found that there must be some “tangible” alteration to the property.  Because COVID-19 does not tangibly alter property, business losses are not covered.
  2. Part Two, LLC v. Owners Ins. Co., No. 7:20-cv-01047-LSC, 2021 WL 135319 (N.D. Ala. Jan. 14, 2021).  Judge Proctor found that coverage was precluded by a virus exclusion.
  3. Pure Fitness, LLC v. Twin City Fire Ins. Co., No. 2:20-CV-775-RDP, 2021 WL 512242 (N.D. Ala. Feb. 11, 2021).  Judge Proctor again found coverage barred by a virus exclusion.
  4. The Woolworth, LLC v. Cincinnati Ins. Co., No. 2:20-CV-01084-CLM, 2021 WL 1424356 (N.D. Ala. Apr. 15, 2021).  Judge Maze found that there was no physical damage or loss.  “A virus does not physically alter the property it rests on.  A virus does not require property to be repaired, rebuilt or replaced.  A virus can simply be wiped off the surface with disinfectant, so there is no ‘physical damage,’ no ‘physical loss,’ and no ‘period of restoration’ of property.”  Notably, Judge Maze also relied upon a 2020 decision from the Eleventh Circuit Court of Appeals, applying Florida law to hold that “dust and debris” in a restaurant cannot be a “direct physical loss” because it “merely needs to be cleaned.”  See Mama Jo’s, Inc. v. Sparta Ins. Co., 823 Fed. Appx. 868 (11th Cir. 2020).
  5. Ascent Hosp. Mgmt. Co, LLC v. Employers Ins. Co. of Wausau, No. 2:20-cv-770-GMB, 2021 WL 1791490 (N.D. Ala. May 5, 2021).  Magistrate Judge Borden found that “direct physical loss must be a loss requiring repair or replacement.”  He also applied a contamination exclusion to deny coverage.
  6. Dukes Clothing, LLC v. The Cincinnati Ins. Co., No. 7:20-cv-860-GMB, 2021 WL 1791488 (N.D. Ala. May 5, 2021).  Judge Borden again denied coverage, finding that “direct physical loss or damage required an actual physical change to property that COVID-19 particles cannot cause.”

Against this tide of decisions stands one federal judge in Alabama:  Judge Haikala.  Each of the foregoing six cases was dismissed immediately after filing.  In a recent opinion, however, Judge Haikala refused to follow that trend.  See Serendipitous, LLC v. The Cincinnati Ins. Co., No. 2:20-cv-00873-MHH, 2021 WL 1816960 (N.D. Ala. May 6, 2021).  Notably, the insurance policy in Judge Haikala’s case did not have a virus exclusion.  Thus, she was only confronted with the issue of whether COVID-19 business closure was the result of “accidental physical loss or accidental physical damage.”  Judge Haikala focused on “physical loss,” noting that “loss” can be defined as “the act of losing possession.”  And, the restaurants in Judge Haikala’s case alleged that they were forced to “close completely” either as a result of government orders or the need to clean when an employee tested positive.  Consequently, she refused to dismiss the restaurants’ complaint.

Almost certainly, Judge Haikala’s case will continue and the parties will conduct discovery on the exact nature of damages suffered by the restaurants.  And, after discovery the insurance company will again move to dismiss the claim at the summary judgment stage.  There is some possibility that Judge Haikala could change her analysis in the interim.  Also, the Eleventh Circuit might issue a decision directly addressing the “physical loss or damage” issue.  But, for now, Judge Haikala has provided a path that businesses might try to follow to obtain coverage for their COVID-19 losses.

 

Your Non-Compete May Be Binding – Even After Death

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Non-competition agreements that are part of the sale of a business can be binding even after the death of the person is who is supposed to refrain from competition.

The old saying goes:  Nothing in life is certain but death and taxes.  Well, the Alabama Supreme Court just made sure that your non-competition agreement is certain — even after you die.  See Boyd v. Mills, No. 1190615, 2021 WL 1589331 (Ala. Apr. 23, 2021). At first blush, this seems like a ridiculous premise:  How can I compete with anybody after I’m dead????

On closer examination, it looks like the Supreme Court was just trying to reach a fair result.  In 2006, Thomas Batey sold his company, Batey & Sanders, to John Boyd for $2,136,631.62.  Boyd was supposed to pay that amount in 120 equal monthly payments starting on December 1, 2006.  Unfortunately, Batey died in April 2013 before the purchase price was paid-off.  Boyd continued to make payments to Batey’s estate until December 2013.  When he stopped, he still owed three years’ of payments totaling $640,989.36.  Boyd claimed that he didn’t have to pay the remainder because the non-competition agreement was a personal services agreement by Batey (the service being a lack of competition).  Since Batey’s death meant he could no long provide that service, Boyd thought he shouldn’t have to pay.

The Supreme Court addressed one issue:  “whether the buyers’ obligation under the noncompete survived Batey’s death.”  Thus, the real issue was not whether Batey was competing, but whether the buyer (Boyd) was still required pay.  And, under the particular facts of this case, the Court found that Boyd should continue payments even after Batey’s death.  In particular, the Court relied upon a decision from Georgia which held:  “when a noncompetition agreement ancillary to the sale of a business does not also require the seller to affirmatively provide services to the buyer, the essential benefit to the buyer is purchasing the business’s goodwill (as opposed to the seller’s expertise) … [s0] the seller’s death does not deprive the buyer of his benefit.”

So, upon closer examination, the Batey case is not focused on competition as much as doing-the-right-thing.  The main thing that Boyd bought in the transaction was the goodwill of Batey’s business.  He shouldn’t get that goodwill at a steep discount simply because of Batey’s death.

The Court left-open the possibility that it could reach a different result in a case where a non-competition agreement was connected to employment or specific skills of the seller.  So, there might be a more-important lesson to learn from the Batey case:  Parties negotiating a non-competition agreement with installment payments should include a provision that clearly states the obligations of the parties if either dies.

 

 

Employees on Workers’ Compensation Must Be Notified of FMLA Rights

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Employers should give notice of FMLA rights to employees who are injured on the job.

Most employers purchase workers’ compensation insurance to provide payment and benefits for employees who are injured on-the-job.  Usually, the workers’ compensation insurance carrier handles all aspects of the claim and employers are happy to let them do so.  But, employers need to know that workers’ compensation frequently overlaps with the Family and Medical Leave Act.  And, workers’ compensation insurance companies have little motivation (and no obligation) to notify injured employees of their FMLA rights.  A recent case from the Eleventh Circuit Court of Appeals shows the danger to employers if they fail to notify injured employees of their FMLA rights.  See Ramji v. Hospital Housekeeping Sys., LLC, No. 19-13461, 2021 WL 1257247 (11th Cir. Apr. 6, 2021).

Noorjhan Ramji suffered a trip-and-fall while working on September 15, 2016.  She took eleven days off work during which her workers’ compensation physician found that she could perform light-duty work. After that finding, Ramji’s employer offered her a light-duty position, which she accepted.  Ramji continued to receive treatment and physical therapy.  On October 21, 2016, the workers’ compensation physician found that she could return to full-duty.  But, Ramji’s employer also required that she successfully pass an “essential functions” test, which appears to have been administered by her supervisors.  That test required Ramji to complete twenty tasks assessing her ability to grip, bend, lift, twist, climb and push.  When she failed five of those tasks, Ramji was fired.

A trial court entered summary judgment dismissing Ramji’s FMLA claims.  The court reasoned that the employer could not have been expected to offer FMLA rights to Ramji, because she was released to full-duty.  The Eleventh Circuit Court of Appeals disagreed and vacated the dismissal.  There are several important aspects of that decision.

  1. Ramji’s formal workers’ compensation claim  was sufficient to notify the employer that she might be protected by the FMLA.  “That claim included information about the nature of Ramji’s knee injury, the need for emergency medical and follow-up treatment, and a release excusing Ramji from three days of work.”
  2. The information in the workers’ compensation claim “activated [the employer’s] duty to provide Ramji with FMLA notice within five business day ….”  And, the Court found a failure to provide notice could be an interference with Ramji’s FMLA rights.
  3. The employer argued that Ramji’s acceptance of a light-duty position relieved it of the duty to notify her of FMLA rights.  Yet, the Eleventh Circuit found that Ramji was entitled to choose between a paid light-duty job and an unpaid period of FMLA leave.  “But Ramji never had the opportunity to decide between taking a light-duty position or taking unpaid FMLA leave.  [The employer] made that choice for her by offering only a light-duty assignment.”  The failure to provide the choice was also a potential interference with FMLA rights.
  4. The Court seemed to accept Ramji’s argument “that the FMLA notice provisions exist to ensure that employees ‘make informed decisions about leave.'”

Ultimately, the Eleventh Circuit decided that a jury should decide whether Ramji’s employer violated the FMLA.  Few employers want to place their fates in the hands of jury.  That fate, however, might have been avoided if the employer simply gave Ramji notice of her right to take twelve weeks of unpaid FMLA leave.

The lesson of the Ramji case is simple:  In most cases, employers should give notice of FMLA rights to employees who are injured on-the-job.  If an employer fails to provide notice, the consequences can be significant.

Does Your Website Violate the Americans with Disabilities Act?

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In the Eleventh Circuit, a website is not a place of public accommodation for purposes of Title III of the ADA.

The Americans with Disabilities Act generally requires that a “place of public accommodation” must be accessible to individual with disabilities.  In recent years, numerous lawsuits have been filed claiming that websites are inaccessible in violation of the ADA.  For example, a blind person will sue because a website cannot be read by specialized screen reader software.  A recent decision from the Eleventh Circuit Court of Appeals may limit future lawsuits of that kind.  See Gil v. Winn-Dixie Stores, Inc., No. 17-13467, 2021 WL 1289906 (11th Cir. Apr. 7, 2021).

Juan Carlos Gil is legally blind and a frequent visitor of Winn-Dixie’s physical grocery stores to shop and occasionally fill prescriptions.  When Gil visited Winn-Dixie’s web site, he found that it was incompatible with screen reader software he used to access websites and vocalize sites’ content.  He sued Winn-Dixie and claiming that its website was not accessible in violation of Title III of the ADA.  A trial judge agreed and found a violation of the ADA, but the Eleventh Circuit reversed.

The primary issue was whether Winn-Dixie’s website was a “place of public accommodation.” Under Title III of the ADA, “[n]o individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation ….”  42 U.S.C. § 12182(a).  Thus, Gil claimed that the website was a “place of public accommodation” and he was being denied full enjoyment of it.

The Eleventh Circuit disagreed and relied primarily on the language of the ADA itself.  That statute provides twelve examples of places of public accommodations.  See 42 U.S.C. § 12181(7).  “The list covers most physical locations in which individual will find themselves in their daily lives.  Notably, however, the list does not include websites.”  Gil, 2021 WL 1289906 at *6.  The Court also noted that the Department of Justice’s ADA regulation provides a similar list:  “The regulation echoes the language of the statute, listing a plethora of physical spaces, including ‘[a] baker, grocery store, clothing store, hardware store, shopping center, or other sales or rental establishment,’ not including websites.”  Id.  As a result, the court concluded that “public accommodations  are limited to actual, physical places.  Necessarily then, we hold that websites are not a place of public accommodation under Title III of the ADA.”  Id. at *7.

But, that conclusion didn’t end the opinion.  Prior decisions in the Eleventh Circuit held that Title III of “the ADA prohibits not just physical barriers, but also ‘intangible barriers,’ that prevent an individual from fully and equally enjoying the goods, services, privileges or advantages of a place of public accommodation.”  Gil, 2021 WL 1289906  at *8.  So, Gil cleverly argued that the inaccessible website prevented him from fully enjoying a place that is clearly a place of public accommodation — Winn Dixie’s physical store.  The Eleventh Circuit relied upon three facts to reject that argument.

First, and most importantly, with website has only limited functionality.  The court stressed that “it is not a point of sale; all purchases must occur at the store.”  Gil, 2021 WL 1289906 at *9.  Second, the limited functions permitted by the website (requesting prescription refills and redeeming coupons) had to be completed in-store.  Finally, nothing prevented Gil from shopping at the physical store.  Based upon those facts, the court found that the inaccessible website was not an intangible barrier.

The Gil decision leaves open the possibility that a future disabled person might be able to prevail under the ADA if an inaccessible website prevents them from making purchases that are available on the site.  But, the vast majority of websites are informative, rather than sales-oriented.  As a result, the Gil decision provides protection to many businesses whose websites might not be accessible to the disabled.

You May Be Required to Pay Employees for Voluntary Training

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If training is directly related to an employee’s job, the employer probably has to pay for the time spent in training.

Often, questions from clients provide the opportunity for a new blog post.  Recently, I was asked whether a client was required to pay employees who attended voluntary, after-hours training.  Most people would think that voluntary training is just that:  voluntary.  Surely, you don’t have to pay for something that is voluntary, right?  Unfortunately, the answer is not so simple.  In fact, the general rule for most employers is:  If the training directly relates to the employee’s job, the employer must pay for the time spent in training — even if attendance is voluntary.

The Fair Labor Standards Act requires that employees receive compensation for their work time.  And, in many circumstances, training time is work time.  The FLSA’s implementing regulations provide that time spent at lectures, meetings, training programs and similar activities is not work time if four criteria are met:

(a)  Attendance is outside of the employee’s regular working hours;

(b)  Attendance is in fact voluntary;

(c)  The course, lecture or meeting is not directly related to the employee’s job; and,

(d) The employee does not perform any productive work during such attendance.

29 C.F.R. § 785.27.  In most circumstances, an employer wants an employee to attend training to benefit the job.  As  result, most employee training must be compensated (even if “voluntary”) because it will be “directly related to the employee’s job.”

But, there are always exceptions.  And, in this case, the regulations recognize “special situations” where voluntary training is not compensable even if it directly relates to the employee’s job:

There are some special situations where the time spent in attending lectures, training sessions and courses of instruction is not regarded as hours worked. For example, an employer may establish for the benefit of his employees a program of instruction which corresponds to courses offered by independent bona fide institutions of learning. Voluntary attendance by an employee at such courses outside of working hours would not be hours worked even if they are directly related to his job, or paid for by the employer.

29 C.F.R. § 785.31.

That regulation is clear as mud.  Fortunately, the Wage and Hour Division of the United States Department of Labor provided some clarification last year.  In Opinion Letter FLSA2020-15, WHD addressed six hypothetical scenarios focused on voluntary training and “special situations.”  Here is a link to the letter:  FLSA2020-15.  Most significantly, WHD found that a nurse who enrolled in a webinar directly related to her job, but who viewed the webinar in her off-work time, would not be entitled to compensation under the FLSA.

In summary, employers generally must pay for time spent in training that is directly related to an employee’s job.  But, employers may be excused from payment if “special situations” occur.

Most Employers Are Subject To The FLSA’s Overtime Rules

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The Fair Labor Standards Act applies to most employers and requires payment of overtime to hourly employees.

Sometimes, my clients ask if they are required to pay overtime to their hourly employees.  Some of the more-savvy clients know that most federal employment laws only apply to businesses of a certain size.  For example, Title VII of the Civil Rights Act of 1964 only applies to employers with fifteen or more employees.  So, these legal-oriented clients will ask about the size-requirement for the Fair Labor Standards Act, which requires overtime.

The answer:  there is no size requirement.  Instead, the FLSA looks at the business of the employer and the employee.  Employers must provide overtime for any employee “who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce ….”  29 U.S.C. §207(a)(1).  That language provides “individual coverage” for employees who work in commerce and also “enterprise coverage” for employers whose business  is engaged in commerce.

Last week, the Eleventh Circuit Court of Appeals made clear that it doesn’t take much for an employee to get “individual coverage.”  See Elien v. All County Enviro. Svcs., Inc., No. 2021 WL 1034800 (11th Cir. Mar. 18, 2021).  The Court concluded that an employee who “makes three to five phone calls per week to out-of-state customers and vendors” can receive “individual coverage” under the FLSA.

Wendy St. Elien was an administrative assistant for a pest control company in Florida.  She called out-of-state customers and vendors on the phone between three and five times a week.  She called “snowbird” property owners to ask for permission to charge their credit cards for services rendered at their Florida properties or to get permission to enter their premises.  She also called the out-of-state corporate headquarters of vendors to discuss billings and payments.  St. Elien sued her employer under the FLSA claiming that she was not paid overtime.  Her employer claimed that she was not covered by the FLSA.

The Eleventh Circuit’s opinion boiled-down to whether St. Elien was “engaged in commerce.”  The FLSA defines “[c]ommerce” to mean “trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof.” 29 U.S.C. § 203(b) (emphasis added).  Because St. Elien was engaged in “communication” between States, the Court found that she was entitled to individual coverage under the FLSA. Despite that clear language, the trial court in St. Elien’s case relied upon an earlier Eleventh Circuit decision to require that an employee seeking individual coverage must be “directly participating in the actual movement of persons or things in interstate commerce ….”  But, the St. Elien court reversed the trial court because its reliance upon the earlier decision was overbroad.

St. Elien is a reminder to employers that they have broad obligations to pay overtime to their employees.  There are a few, rare employers who are truly intra-state — with no business conducted with other states.  But, in most cases, employers are required to pay overtime to their hourly employees.

Government Contractors: President Bans Certain Diversity Training

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President Trump’s new Executive Order prohibits government contractors from training employees on certain “divisive concepts.”

On September 22, 2020, President Trump issued an Executive Order which prohibits government contractors from conducting training which it calls “race and sex stereotyping and scapegoating.”  Here is a link to the Executive Order: Order on Race and Sex Stereotyping

What Training is Prohibited?

Every new federal contract must include a clause that prohibits training by government contractors for employees on the following “divisive concepts”:

  1.  One race or sex is inherently superior to another race or sex;
  2.  The United States is fundamentally racist or sexist;
  3.  An individual, by virtue of his or her race or sex, is inherently racist, sexist, or oppressive, whether consciously or unconsciously;
  4. An individual should be discriminated against or receive adverse treatment solely or partly because of his or her race or sex;
  5. Members of one race or sex cannot and should not attempt to treat others without respect to race or sex;
  6. An individual’s moral character is necessarily determined by his or her race or sex;
  7. An individual, by virtue of his or her race or sex, bears responsibility for actions committed in the past by other members of the same race or sex;
  8.  Any individual should feel discomfort, guilt, anguish, or any other form of psychological distress on account of his or her race or sex; or,
  9. Meritocracy or traits such as a hard work ethic are racist or sexist, or were created by a particular race to oppress another race.

The order also prohibits training that includes “race or sex stereotyping,” which means “ascribing character traits, values, moral and ethical codes, privileges, status, or beliefs to a race or sex, or to an individual because of his or her race or sex.”  Additionally, training cannot include “race or sex scapegoating,” which means “assigning fault, blame, or bias to a race or sex, or to members of a race or sex because of their race or sex.”

While not explicitly called-out, the Order appears to take square aim at stopping diversity training programs teaching about “white privilege” and/or critical race theory.

What Other Obligations Are Imposed On Contractors?

Federal contractors must flow-down the requirements of this Executive Order to their subcontractors and vendors.  It is not clear whether subcontractors must further flow-down these requirements to their subcontractors.

Contractors must post a notice about these training obligations in “conspicuous places” available to employees and job applicants.  Each contracting officer is supposed to give that notice to the contractors.  Contractors must also provide the notice to any applicable labor union.

When Does the Order Become Effective?

The Order’s training prohibitions are supposed to be placed into ever new contract issued on or after November 21, 2020.  It is not clear whether the requirements will be placed into contract renewals.

What Are the Consequences of Violating the Order?

The Order does not mandate any specific penalty if a contractor conducts prohibited training.  Nevertheless, the contractual language notes the possibility of punitive measures such as terminating, suspending, or canceling contracts, and potentially debarring contractors.

What’s Next?

Almost certainly, this order is going to be challenged in court.  In the interim, government contractors should pay close attention to new contracts (and even contract renewals) to determine if the training provisions have been included.  If so, then contractors should carefully review any diversity training to ensure that they do not run afoul of this new order.

Should You Defer Your Employees’ Payroll Taxes?

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Employers can defer payroll taxes. But, is deferral a smart choice?

On August 8, 2020, President Trump issued a Presidential Memorandum authorizing employers to defer withholding, deposit and payment of payroll tax obligations.  The idea behind that memorandum was to “put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most.”  Here is a link to the memorandum: Payroll Tax Memorandum

The Internal Revenue Service is responsible for implementing the details of the memorandum.  On August 28, 2020, the IRS issued Notice 2020-65 to provide some additional guidance.  Here is a link to that notice: Notice 2020-65. Full disclosure:  I am not a tax attorney.  Nevertheless, the Presidential Memorandum is important to employers.  My accountant-friends at Anglin, Reichmann & Armstrong have published a client bulletin discussing Notice 2020-65 and it can be found here: Anglin Reichmann Update.

In summary, the memorandum allows employers to defer withholding payroll taxes from employee paychecks from September 1, 2020 to December 31, 2020.  In concept, this would result in more money in each employee’s pocket.  Other important aspects of the guidance include:

  1. Employees are entitled to defer on the 6.2% employee portion of payroll tax (i.e., Social Security tax).
  2. Only employees with pre-tax wages less than $4,000 per bi-weekly pay period are eligible for deferral.
  3. THIS IS ONLY A DEFERRAL. Employees must re-pay the deferred tax through payroll tax deductions between January 1, 2020 and April 30, 2021.

At this point, there are more questions than answers.

  1. The White House is hoping that the deferred payroll taxes will ultimately be forgiven.  But, only Congress has the power to authorize forgiveness. Nobody knows if that legislation will actually be passed.  If not, employees will face a double-tax at the start of 2021.
  2. What happens if an employer defers the payroll tax and then the employee leaves/quits/is terminated by the employer?  Potentially, the employer will be left holding the bag.
  3. If an employer adopts payroll tax deferral, will individual employees be able to opt out?

In my opinion, the current risks associated with payroll tax deferral outweigh the benefits.  Without a guarantee of forgiveness legislation from Congress, employees will receive no real benefit and face substantial monetary difficulties next year.  Employers get no real benefit and run the risk of paying deferred taxes for people who are no longer employees.

Like all COVID-related issues, payroll tax deferral is an evolving process.  Please follow this blog and my friends at Anglin, Reichmann for future updates.

 

DOL: Employers Should Use Reasonable Diligence & Document Telework

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Employers should use reasonable diligence to determine the amount of work performed by employees who telework.

In the age of COVID-19, many employers are allowing employees to work-from-home — also known as telework.  And, employers are required to pay hourly workers for all work they perform — whether at home or a specific job site.  Moreover, employers also have to pay for work they didn’t request  — unscheduled work.  But, how is an employer supposed to know exactly how much unscheduled work was performed from home?  On August 24, 2020, the United States Department of Labor’s Wage & Hour Division (“WHD”) issued guidance on that issue.  The guidance (known as Field Assistance Bulletin 2020-5) can be found at this link: FAB 2020-5.

Bulletin 2020-5 focuses on the concept of “reasonable diligence.”  Essentially, the bulletin says that employers should establish a system and use “reasonable diligence” to determine the amount of unscheduled work performed. But, the “reasonable diligence” standard also puts obligations on employees.   Employees who fail to follow reasonable time reporting procedures may not be entitled to be paid under the terms of the Fair Labor Standards Act.

As with almost all legal issues, the devil is in the details of each situation.  Employer’s can’t “bury their head in the sand” and ignore unscheduled work.  They also can’t implicitly or overtly discourage or impede accurate time reporting.  For example, employers shouldn’t tell employees:  “Don’t write down any work that you performed after 5:00.”  At the same time, employees can’t ignore well-published time keeping requirements and then complain about not being paid for unscheduled, unreported work.

So, how can employers engage in “reasonable diligence”?  Here are some basic steps:

  1. Employers should create a simple time-keeping policy that requires all hourly employees to document all scheduled or unscheduled work.
  2. Any time keeping policy should have a disciplinary component. Employers have to pay for unscheduled, and even unauthorized work.  But, in most circumstances, an employer can impose discipline if the time keeping policy is violated. IMPORTANTLY: NEVER WITHHOLD PAY WITHOUT CONSULTING A LAWYER.
  3. Employers should do more than just adopt a policy.  They should educate hourly employers and their supervisors on the requirements of the policy.  This can be done with e-mails, memoranda and/or employee meetings. Employers should keep any available documentation to prove that the time keeping policy was effectively disseminated.

Obviously, WHD’s guidance is aimed at ensuring that hourly employees are properly paid when they work from home.  Yet, the WHD guidance also dovetails nicely with the IRS’s guidance requiring employers to keep adequate documentation to support any award of paid leave under the Families First Coronavirus Response Act.  Here’s a link to a blog post that I wrote discussing the IRS’s requirements for documentation of telework: IRS Documentation Requirements.