2017 Fall Employment Update
The Employment Law landscape has shown no signs of slowing down anytime soon. For employers, it has been a challenge keeping current on new and proposed laws and trends in Employment Law. From the Family Leave Law to a proposal to “tax the rich,” to trends in overtime and severance, now more than ever one must be informed of so many Employment Law developments.
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With the rise of new employment laws and the increase in employment-related litigation, it is no surprise that employers are looking for ways to provide business certainty. One way employers are doing this is through the use of severance agreements. A severance agreement is a contract between an employer and a soon-to-be departing employee in which the employer agrees to compensate the employee (with money, benefits, or a combination of the two) in exchange for the employee’s release of claims against the employer. Such an agreement allows the employer to know that it will not be sued by the former employee for an employment-related claim after the employment terminates. The severance agreement can also include other employer-friendly terms like future cooperation, restriction from soliciting employees or customers, confidentiality, and non-disparagement.
However, every employee is different and the employer should carefully tailor the severance agreement so it both fits the employer and addresses any issues related to that specific employee. Below are three examples of common mistakes that employers make when drafting or presenting severance agreements.
It must be a two-way exchange. Some employers offer their employees a severance payment to lessen the financial burden while the employee finds a new job. While there may be business reasons for such an arrangement (i.e., goodwill, company culture), severance payments without a release signed by the employee should be seen as nothing more than a gift to the employee. If the employer wants to prevent the employee from filing a claim, the employer should require the employee to sign an agreement. Other employers present their employees with a release of claims as part of the exit interview but do not accompany the release with a severance payment. This, too, can be problematic because the release is not enforceable if the employee does not receive something (money, benefits, or both) in return.
The release must be clear and consistent with applicable laws. It is important that the release clearly states what rights the employee is waiving, otherwise, the employer may later be met with the argument that the employee did not know what he was waiving. Employers should also take into account what laws actually apply – the answer to which depends, in part, on the total number of employees that work for the employer. We see employers trying to skirt around these issues by making the release as broad as possible, covering each and every potential claim. However, while it is generally desirable and appropriate to have a broad scope of released claims, there are some claims that cannot be released in a severance agreement (for example, a release of future claims is not enforceable). There are also some claims that require specific language in order to be enforceable (for example, the Older Workers Benefits Protection Act (OWBPA) – releases signed by employees who are forty years or older).
Don’t coerce your employee into signing the agreement. An employer can remember to do all of the above and ultimately still have an unenforceable agreement if a court later finds that the employee was coerced into signing it. To avoid a finding of coercion, it is important to properly train your management teams so they know to give the agreement to the employee without threats and with enough time to actually consider it before signing. It is also a good idea to include language in the agreement advising the employee to consult with an attorney before signing.
Family Leave Law
Beginning in 2020, workers in Washington State will be eligible to receive paid time off for the birth or adoption of a child or for serious medical conditions. This new measure is not to be confused with the State paid sick leave which was approved by initiative last year (we know these rapid-fire changes can be confusing and difficult to track; don’t hesitate to reach out to us with questions – we can clarify and explain).
The new paid leave benefits will be administered by the State but funded through employer and employee contributions. The state will begin collecting premiums on January 1, 2019.
Under the paid family leave program, eligible employees will receive 12 weeks of paid leave for either:
- The birth or adoption of a child (an additional two weeks may be used if there is a serious health condition with a pregnancy); or
- The employee’s or employee’s family member’s serious medical condition.
Alternatively, employees may receive up to 16 weeks for a combination of both types of leave.
The premium paid by employers and employees will amount to 0.4 percent of wages: employees will pay 63 percent of the premium through a paycheck deduction and employers will pay the remaining 37 percent. For example, according to a Senate calculator, an employee who makes $50,000/year will pay $2.42/week in premiums and his employer will pay $1.42/week.
If your business already offers equivalent benefits, it may be eligible to opt out of the State-run program. We are available to help you review your current policies (or draft new ones) to ensure that you are in compliance when the new rules go into effect.
As we previously discussed, on November 22, 2016, U.S. District Court Judge Amos Mazzant issued a nationwide injunction against new overtime rules by the U.S. Department of Labor (DOL) that would have more than doubled the minimum salary requirement for the major white-collar exemptions under the Fair Labor Standards Act (FLSA) from $455/week or $23,660/year to $913/week or $47,476/year.
On December 1, 2016, the DOL filed a notice to appeal the preliminary injunction to the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit).
On August 31, 2017, Judge Mazzant granted summary judgment against the DOL holding that the proposed overtime rules salary level exceeded the DOL’s authority. The overtime rules were held to be invalid as they were inconsistent with congressional intent. According to the Fifth Circuit, the new overtime rules “makes overtime status depend predominately on a minimum salary level, thereby supplanting an analysis of an employee’s job duties.”
On September 5, 2017, the DOL filed an unopposed motion to dismiss the appeal of the preliminary injunction ruling issued by Judge Mazzant earlier in November 2016. The DOL asked the Fifth Circuit to have the appeal voluntarily dismissed as moot because the August 31st summary judgment decision was a final decision on the merits. The Fifth Circuit granted that motion on September 6, 2017.
Even though the appeal has been dismissed, the DOL continues its efforts to focus on overtime. For instance, on July 26, 2017, the DOL published a Request for Information (RFI) seeking comments from the public regarding potential changes to the salary and duties tests for white-collar regulations under the FLSA. When the comment period ended on September 25, 2017, almost 140,000 comments were submitted with the large majority encouraging the DOL to implement the $47,476 annualized salary level as proposed by the invalidated overtime rules.
Seattle: Income Tax on the Rich
Approximately two months ago, the Seattle City Council unanimously passed a local income tax. Under the Seattle income tax, any income over $250,000 annually (or $500,000 for joint-filing households) would be taxed at a rate of 2.25 percent. The tax is already facing several legal challenges including lawsuits from the libertarian Pacific Legal Foundation; the conservative Freedom Foundation; and Washington State Attorney General Rob McKenna. As opponents of the income tax have pointed out, state law prohibits cities from taxing net income (see RCW 36.65.030). In addition, the state constitution requires all taxes to be uniform, so if income is taxed, it must be levied on all taxpayers rather than only on taxpayers over a certain threshold (see Article VII of the Washington State Constitution).
The tax is set to go into effect January 1, 2018 but a court may strike it down before then; a hearing on the tax is scheduled in November 2017 and a ruling may be rendered soon after.
The horrific events in Las Vegas serves as another reminder of the risks associated with random gun violence. While we grieve this tragedy, we would like to assist our clients in understanding the risk of violent acts in the workplace their companies face; whether their company should adopt a workplace violence prevention policy and how to tailor such a policy to the specific needs of the company.
The definition of workplace violence is evolving and is contextually specific but generally is any act that negatively affects an employee physically or psychologically (i.e., a physical or verbal assault, threats, coercion, intimidation or harassment). At one extreme workplace, violence ends in homicide and extraordinary exposure for employers. Understanding your exposure as an employer is key to limiting your liability. Factors that increase the risk of violence in workplaces include:
- exchanging money with the public
- working with volatile or unstable people
- serving alcohol
- providing services and care
- working late at night
- working in a high crime area
- working as a: delivery driver; healthcare professional; public service workers; customer service agents; or law enforcement personnel
- workers who are isolated
It is important to understand too that the extraordinary risk of death typically occurs in an environment that is prone to robberies. About 70% of workplace homicides are committed by robbers or other assailants where as 21% are committed by work associates. The armed disgruntled employee is the exceptional circumstance by far, not the norm.
Employers should protect themselves from liability associated with workplace violence by adopting a policy of zero tolerance policy for workplace violence that is applied broadly, includes employees at every level and those with whom they regularly interact. Tailored workplace violence prevention policies that advise workers how workplace violence will be promptly investigated and remedied are optimal. Additional guidance may be required for high risk industries.
More information on risk factors to consider, prevention policies, training and other resources, and enforcement is available on the OSHA website at: https://www.osha.gov/SLTC/workplaceviolence/ . Our upcoming breakfast will feature Kera O’Reilly, a Special Agent for the Seattle FBI, skilled in advising and investigating these threats. Contact us with tailored needs and specific concerns.