Newsletter
Jun 9, 2011
Five Key Labor And Employment Issues Hospitality Employers Need To Be Aware Of This Quarter
1. The EEOC Issues Regulations Based on the ADAAA
4. New FLSA Regulations Impact Tipped
5. DOL Proposal Would Make Drastic Changes to the H-2B Temporary Worker Program
1. The EEOC Issues Regulations Based on the ADAAA
By: Lynn Kappelman | Erin Dougherty Foley
You will recall that Congress enacted the Americans with Disabilities Act Amendments Act (“ADAAA”) on September 25, 2008, effective January 1, 2009. In so doing, Congress expressly rejected several Supreme Court decisions that had narrowly construed the term “disability” by, among other ways, holding that mitigating measures were to be considered in assessing whether an impairment was “substantially limiting.” Armed with statistics about employer successes, and after heavy lobbying by disability rights advocates, Congress responded with the new law, which substantially broadened the scope of the ADA.
On March 24, 2011, the Equal Employment Opportunity Commission’s long-awaited regulations under the ADAAA were issued in final form. The regulations became effective on May 24, 2011. Much of the new regulations and accompanying guidance is unsurprising and comports with the language of the ADAAA. For example:
- the statute is to be construed broadly;
- employers should focus on accommodations, as opposed to questioning whether someone is disabled; and
- mitigating measures including medicine, other treatments, and prosthetic devices must be set aside in analyzing whether an individual is “disabled.”
Further consistent with ADAAA, the new regulations add several new activities to the list of major life activities covered by the ADA, including “sleeping, ... concentrating, thinking, [and] communicating.”
The regulations likewise expand the concept of “major life activities” to include “the operation of major bodily functions” such as the “immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive functions.” The new regulations go further, however, in adding three more major life activities – sitting, reaching and interacting with others – plus the “major bodily functions” of the special sense organs, skin, genitourinary, cardiovascular, hemic, lymphatic and musculoskeletal systems.
In these regulations, the EEOC also listed conditions that, according to the EEOC, will “virtually always” be covered impairments including autism, cancer, cerebral palsy, diabetes, epilepsy, HIV infection, multiple sclerosis, muscular dystrophy, major depressive disorder, bipolar disorder, post-traumatic stress disorder, obsessive compulsive disorder, and schizophrenia.
It is also clear now that any impairment – no matter how brief in duration – can be a covered disability. In other words, ADAAA can be thought of as: “Assume Disability; Always Attempt Accommodation.”
A New and Expansive Approach to “Substantially Limits”
The ADAAA and the EEOC’s regulations also extended coverage to individuals with episodic impairments or conditions in remission, and provided a non-exhaustive list of examples, including epilepsy, multiple sclerosis, cancer, and psychiatric disabilities such as major depressive disorder, bipolar disorder, and post-traumatic stress disorder.
Impact Of New Regulations On Hospitality Employers
- Hospitality employers are far less likely to prevail in court by arguing that an employee is not disabled and therefore is not covered under the ADA and/or does not require accommodation.
- Now more than ever, hospitality employers must focus on reasonable accommodation, and on whether an individual with a physical or mental condition is otherwise qualified to perform essential job functions, with or without reasonable accommodation. This means employers must reassess their job descriptions, job qualification standards, and reasonable accommodation process (including leave of absence procedures) to ensure that they are current and defensible.
- Train supervisors and managers will be greater attuned to employee communication about what they can and cannot do as a result of any claimed disability. The emphasis under the new regulations will shift toward whether the employee’s request can be reasonably accommodated. Denying some form of accommodation will be harder, particularly for the larger hospitality employers. Partnering with Human Resources throughout the accommodation request process will be even more important.
- Hospitality employers must focus on testing procedures. That includes physical ability tests, which may adversely impact persons with disabilities, or at the very least require accommodation upon request. Likewise, pencil and paper tests should be reevaluated in light of ADAAA, no matter what skills they purport to measure. Some such tests are rooted in personality tests, even the most sophisticated of which may run afoul of ADA’s medical inquiry and examination proscriptions.
- Lawyers defending ADA cases in court must, in most cases, shift the focus away from whether or not the plaintiff is disabled. Making that argument will remain a powerful urge, particularly (although not exclusively) when the employer believes the individual is exaggerating the effects of his or her impairment. Now, however, to prevail in court on summary judgment or at trial, the employer must typically focus its arguments on accommodation – i.e. the fact that the employer made accommodation, the plaintiff failed to request accommodation, the plaintiff declined accommodation, or the plaintiff failed to participate meaningfully in the accommodation process, etc.
- Documentation has become even more important, along with training. If a supervisor fails to recognize an employee’s request for accommodation, the employer may well be liable – even absent evidence of intentional discrimination.
- Lastly, the class action epidemic that continues in most parts of the country will now likely expand further to encompass mass actions under ADAAA. We can also expect the EEOC to bring additional disability discrimination and accommodation actions against hospitality employers pursuant to a pattern and practice theory.
NOTE: Seyfarth Shaw presented a webinar on the ADAA regulations on Tuesday, March 29. Hospitality employers wishing to view that webinar may click here.
2. Pending Supreme Court Ruling in Dukes Expected to Clarify Issues Facing the Hospitality Industry in the Litigation and Defense of Class Actions
By: Laura Maechtlen
On March 23, 2011, the U.S. Supreme Court heard oral argument in Wal-Mart Stores, Inc. v. Dukes, a case that could redefine how workplace class actions are structured, defended, and litigated.
The U.S. Supreme Court’s review follows a 6 to 5 en banc decision of the U.S. Court of Appeals for the Ninth Circuit in San Francisco – reported at 603 F.3d 571 (9th Cir. 2010) – which affirmed an earlier class-certification order that certified the largest class action in history. The Ninth Circuit upheld an earlier panel decision certifying a class-action gender discrimination lawsuit challenging Wal-Mart’s pay and promotions practices under Title VII. The full Ninth Circuit ruled that the U.S. District Court for the Northern District of California did not abuse its discretion in finding that the large and diverse class – encompassing approximately 1.5 million female employees, both salaried and hourly with a range of positions, who are or were employed at one or more of the company’s 3,400 stores across the country – was united by a system of company-wide discriminatory practices against women where plaintiffs presented expert opinions, factual evidence, statistical evidence, and anecdotal evidence showing a corporate policy and common pattern of discrimination imposed on female employees nationwide.
The U.S. Supreme Court’s forthcoming opinion will address the following questions: (1) whether claims for monetary relief can be certified under Federal Rule of Civil Procedure 23(b)(2) and, if so, under what circumstances; and (2) whether the order certifying a class conforms to the requirements of Federal Rule of Civil Procedure 23(a).
Whether the Supreme Court Finds Commonality Under Rule 23(a) Will Affect the Litigation of Class Action Disputes in ihe Hospitality Industry
The arguments related to Rule 23(a) are particularly interesting for the hospitality industry. Under Rule 23(a), Plaintiffs are required to demonstrate a common policy of discrimination on the part of Wal-Mart. Plaintiffs’ theory, which had been endorsed by the District Court and the slim majority of the Ninth Circuit, was that the common policy consisted of two elements: Wal-Mart’s common corporate culture that allegedly embodies sexual stereotypes, coupled with granting in-store managers unfettered discretion in making personnel decisions. Without any other tangible proof of class-wide discrimination, Plaintiffs argued, based on expert opinions, that the subjective decision making in pay and promotional decisions is the common thread among females to pursue class action - a “subjectivity leads to bias theory.” This “subjective decision making” theory raises several practical concerns for hospitality employers.
First, if the plaintiffs’ theory is adopted by the Supreme Court, Dukes opens the door to Title VII class actions challenging the promotion and pay practices of virtually all large decentralized employers, including hotels, restaurants, hotel management companies, gaming and racing establishments, clubs and golf courses, who necessarily rely on individual judgments by local decision-makers to determine which candidates to promote or provide increased compensation. This is the result because, under Dukes, plaintiffs need only offer generalized expert opinions to establish the requisite “commonality” under Rule 23(a), without needing to link those opinions to workplace realities. However, workplace realities dictate that individualized decision making is necessary - and a best practice - because single employers in the hospitality industry often employ people with a wide range of skills (e.g., an employer within our industry might employ chefs, housekeepers, maintenance staff, accountants, executives, professional coaches or sports talent, all at a single property), and individual judgments by supervisors often play an essential role in employment decisions. Indeed, plaintiffs’ theory does not make practical sense because subjective decision making in certain employment decisions is a method endorsed by other Supreme Court guidance, the EEOC’s best practices and human resource literature.
Second, as evidence of a “strong corporate culture” to support a finding of commonality, the Ninth Circuit in Dukes identified that Wal-Mart had certain national programs or policies, including: a common orientation session for new employees; a policy of “promoting from within,” which maintains the effectiveness of prior culture lessons; use of a “Wal-Mart cheer” at meetings; regular meetings about company culture; testimony about a corporate philosophy called the “Wal-Mart Way”; company-wide communications through computers and “Wal-Mart TV”; and frequent transfers between stores, which the court believed demonstrates a high degree of store-to-store uniformity. The court’s reliance on this evidence does not suggest that employers must dilute their company culture to avoid a successful class action, however, employers should be aware that plaintiffs in class-action litigation will look for any evidence that company culture aids discrimination. This issue can pose unique difficulties in the hospitality industry, which often values strong corporate culture and consumer and employee-based brand equity including special focus on brand awareness, brand loyalty, perceived quality and brand image, internally and externally.
Whether Claims for Monetary Relief Can Be Certified Under Rule 23(b)(2) Will Impact All Employers
One of the more controversial aspects in Dukes is plaintiffs’ request to certify a class under Rule 23(b)(2). Rule 23(b)(2) requires that a defendant’s conduct “apply generally to the class, so that final injunctive relief … is appropriate respecting the class as a whole.” FED. R. CIV. P. 23(b)(2). Plaintiffs argued that their claims for injunctive relief predominated over claims for monetary relief, and therefore certification under Rule 23(b)(2) was proper. Wal-Mart argued to the contrary, given the million putative class members at issue and the plaintiffs’ likely request for billions of dollars in damages. The Supreme Court’s analysis of this issue will impact how all employers defend class action lawsuits.
Guidance Expected from the Supreme Court
It is very difficult, if not impossible, to predict what the Supreme Court will decide. The ruling, expected by late June, could change the legal landscape for workplace class-action lawsuits, including those in the hospitality industry. Employers should expect guidance from the Supreme Court about whether and how employers should formulate and implement processes to address decisions that most often rely on subjective decision-making, including performance review processes, hiring, promotion and pay decisions. The decision may also offer guidance to aid in the successful development and implementation of corporate diversity and inclusion programs, whether and how employers can lawfully impose policies and/or practices that require decentralized control of certain employer decisions, and when employers should require centralized or strictly objective decision-making.
Seyfarth will issue a management alert when Dukes is decided. Pending further developments, however, employers should stay aware of the issues raised by Dukes. Employers should review HR practices related to pay and promotion decisions - subjective or not - to determine whether they are adversely impacting any classification of employee. Employers should design any subjective decision-making process and procedure carefully, by linking the process and procedure directly to each position and criteria for performance, ensuring that managers closest to performance are trained to make effective decisions, and consider an appeal process for employees considered but not selected for promotion or training opportunities. Employers should review their programs aimed at increasing diversity and preventing discrimination to ensure that they are being implemented effectively, and should not avoid implementing these programs. Further, employers should continue providing training and communications regarding company policies, including those relating to equal employment opportunities, non-discrimination, open door and the company complaint process.
3. Recent NLRB Hotel Decisions Continue To Provide Labor More Rights At The Expense Of Hospitality Employers
By: Kerry Mohan
The National Labor Relations Board ("Board") continues to make life much more inhospitable for the hospitality industry. Recently, the Board issued a decision that significantly affects hospitality employers regarding the property access rights of a contractor’s off-duty employees.
In New York New York, 356 NLRB No. 119 (2011), the Las Vegas hotel and casino (NYNY) had contracted with a company to operate its restaurants and food court. On three separate occasions, the contractor’s off-duty employees distributed handbills to NYNY’s casino, hotel, and restaurant customers as a part of the contract employees’ organizing campaign. The handbilling occurred once on the covered sidewalk and driveway outside NYNY’s main entrance, and twice inside the hotel itself in front of the two contractor-operated restaurants. Each time the contractor’s employees were issued police citations and escorted off NYNY’s premises. The employees brought unfair labor practice charges against NYNY for allegedly interfering with their right to engage in protected and concerted activity.
Historically, the Board has long recognized that employees have certain access rights to an employer’s premises to engage in protected concerted activity. For non-employee union organizers, the Board similarly has recognized that, absent a showing that the non-employee union organizers lacked reasonable alternative means of communicating with their intended audience, an employer who acted in a non-discriminatory manner generally could deny them access to its premises. In this situation, however, the Board recognized that, while the contractor’s employees were not NYNY’s own employees, these employees of a contractor were entitled to more access than traditional non-employees.. The Board thus adopted a new “access standard,” designed to balance the contractor employees’ rights under federal labor law and the property owner’s property rights and legitimate managerial interests.
Under the new standard, a property owner may lawfully exclude handbilling by a contractor’s off-duty employees in public, non-work areas “only where the owner is able to demonstrate that [the] activity significantly interferes with [the owner’s] use of the property or where the exclusion is justified by another legitimate business reason, including, but not limited to, the need to maintain production and discipline.” The Board left open the possibility that in some instances property owners will be able to “demonstrate that they have a legitimate interest in imposing reasonable, nondiscriminatory, narrowly-tailored restrictions on the access of contractors’ off-duty employees, greater than those lawfully imposed on its own employees.”
Applying this new standard, the Board found that NYNY failed to demonstrate that the handbilling significantly interfered with NYNY’s use of the property, and failed to justify the exclusion on the basis of another legitimate business reason. The Board reasoned that the contractor’s employees did not interfere with the operations or discipline at NYNY’s property, did not adversely affect the ability of customers to enter, leave, or use the facility, nor adversely affect the ability of employees to perform their work. Accordingly, the Board found that NYNY violated Section 8(a)(1) by prohibiting the contract employees from handbilling in front of the two restaurants located within the hotel and on the covered sidewalk and driveway outside of NYNY’s main entrance.
What This Decision Means For Employers
In New York New York, the Board changed the landscape regarding what access employers and/or property owners must provide a contractor’s off-duty employees to public, non-work areas. Accordingly, employers and hotel property owners need to re-address their access rules, and train management and security on the new precedent. Failure to do so could result in unfair labor practice charges.
This case, as well as other recent Board decisions, further demonstrate that the current Board is a pro-Labor Board. Employers wishing to avoid unfair labor practice charges, especially allegations that could result in the overturning of representation and decertification elections, should take the time now to carefully review all of their employment and access policies to verify that they, at a minimum, fully comply with the current Board precedent. Those that may want to be more proactive may further narrow otherwise lawful rules and policies that in their existing form, be subject to review and reversal by this Board.
4. New Fair Labor Standards Act Regulations Impact Tipped Employees
By: Alex Passantino
Hospitality employers should be aware that the U.S. Department of Labor’s Wage & Hour Division recently issued a final regulation addressing a number of issues under the Fair Labor Standards Act (FLSA). The new rules became effective on May 5, 2011.
Of particular interest to the hospitality industry are three new provisions related to employees who receive tips as part of their wages. First, the Department specified what an employer must tell employees who receive the tip credit wage. Second, the Department eliminated the 15% cap on employee contributions to a mandatory tip pool. Finally, the Department stated that tips are the property of the employee who earns them.
The final regulation requires an employer to inform its employees that it intends to avail itself of the tip wage credit.
Specifically, an employer seeking to use the tip credit must inform a tipped employee (before it utilizes the tip credit wage) of the following:
- the direct cash wage the employer is paying the tipped employee;
- the additional amount the employer is using as a credit against tips received, which cannot exceed
- the difference between the minimum wage and the actual cash wage paid by the employer to the employee;
- that the additional amount claimed by the employer on account of tips as the tip credit may not exceed the value of the tips actually received by the employee;
- that the tip credit shall not apply with respect to any tipped employee unless the employee has been informed of the tip credit provisions; and
- that all tips received by the tipped employee must be retained by the employee except for the pooling of tips among employees who customarily and regularly receive tips.
Furthermore, although the Department is not requiring written notification of these terms to the employees, it notes that “employers may wish to do so, since a physical document would, if the notice is adequate, permit employers to document that they have met” these requirements.
The final regulation also addresses the issue of the maximum amount an employer may require an employee to contribute to a tip pool. It eliminates the existing cap on the maximum permissible contribution percentage (15%). Going forward, employers must notify employees of tip pool contribution requirements. Additionally, employers may not use a tip credit in an amount greater than the amount of tips ultimately received. Furthermore, employers “may not retain any of the employees’ tips for any other purpose.” It is not clear whether the Department will continue to require that the tip pool contributions be “customary and reasonable.”
Finally, the Department states that tips are the property of the employee – with the exception of contributions to a valid tip pool – even when the employer does not take a tip credit.
As a result of the final rule, hospitality employers should ensure that they are providing the required notice to tipped employees. In certain circumstances (e.g., multi-state operations, multiple pay rates within the same position), this may require a notice that has been specifically tailored to an individual facility or employee. Hospitality employers should also take this opportunity to review their tip pooling arrangements to confirm that only those employees who may participate in a tip pool are doing so.
Remember, of course, that the FLSA does not pre-empt state wage and hour laws. Thus, employers should take care to review applicable state laws that may place different requirements on an employer’s use of tips.
| NOTE: The final rule contains numerous technical amendments, most of which will have little to no impact on the majority of hospitality employers. In addition to the tipped employee provisions, however, hospitality employers should know that DOL has provided an explanation of the fluctuating workweek method of payment that may make it invalid for employees who receive bonuses and other non-overtime premium payments. If you use this pay method, click here for more about this change. |
5. DOL Proposal Would Make Drastic Changes to the H-2B Temporary Worker Program
By: Leon Sequeira
In March of this year, the Department of Labor issued a regulatory proposal that would fundamentally redesign the H-2B Temporary Worker Program. The H-2B program enables employers to hire foreign workers on a temporary or seasonal basis, generally up to 10 months, if sufficient numbers of U.S. workers are unavailable. Employers in the program are subjected to a host of requirements, including paying workers a government-imposed hourly wage that varies by occupation and location.
Hospitality employers located in resort and vacation areas and those with a significant seasonal aspect to their business frequently utilize H-2B workers to supplement their domestic workforce. The program is capped at 66,000 visas a year and hospitality is one of the largest industries utilizing the program, along with landscaping, forestry and construction. Traditionally, there has been intense competition for the limited number of visas, although during the recession of the past couple of years, not all of the 66,000 annual visas have been claimed.
The Department’s proposal would impose numerous burdensome and costly new requirements on employers. Among the proposed changes is a requirement that every domestic worker that performs a task that is also performed by an H-2B worker has to be paid the same wage as the H-2B worker. This one change alone will likely render the program too expensive for most employers given that the Department has already issued a Final Rule increasing the wages of H-2B workers by about 50 percent for many positions. That so-called “wage rule” is scheduled to take effect in January 2012.
In addition, the proposal requires that an employer guarantee the H-2B worker that they will be paid for at least 3/4 of the hours described on the application in each 4-week period. Thus, if the worker was hired with the expectation of working 40 hours a week, then the employer would have to pay the worker for at least 120 hours of work in each 4-week period. This requirement applies even if there is a temporary downturn in business and there is not enough work for the H-2B employee to perform. The regulatory changes also include an additional required step to the application process, which now would have to begin as much as 7 months before the workers are even needed. This will be a difficult requirement to meet for most employers who cannot forecast their labor needs that far in advance.
The Department claims that its proposed changes are intended to improve access to jobs for U.S. workers. But the H-2B program already requires employers to complete a lengthy application process that includes advertising and recruiting U.S. workers for the positions. Only after the Department of Labor “certifies” that there are insufficient U.S. workers available for the job is the employer permitted to hire from abroad.
Notably, these proposed changes would reverse many of the important reforms to the H-2B program that were put in place by the Department in 2008 and which reduced duplicative bureaucracy and improved processing times and predictability for employers. The Department’s latest proposal to redesign the H-2B program follows a similar effort last year in the H-2A Temporary Agriculture Worker Program. Those H-2A program changes, which added layers of bureaucracy and delays, have caused endless headaches for employers and have reportedly resulted in scores of employers abandoning the program.
It appears that H-2B employers may soon be faced with a similar fate. At the same time, however, increased government I-9 audits and state-based mandatory E-Verify means many employers will increasingly need to rely on temporary worker programs like H-2B. Unfortunately, rather than improving the operation of the program, the Department’s proposal would make it much more complex, burdensome and expensive.
The period to comment on the Department’s proposed regulatory changes ended on May 17. A number of individual hospitality employers, as well as trade associations, filed comments with the Department. Seyfarth Shaw assisted in the preparation of comments for the National Restaurant Association, click here to read. The Department is expected to issue a Final Rule later this year.
6. Hospitality Team Updates
Michael Viccora, of the Washington, D.C. office, provided a Mid-Atlantic & National Hotel Labor Relations Update at the Hotel Association of Washington, DC HHRA meeting on February 18, 2011.
Ray Baldwin, of the Washington, D.C. office, and Marc Jacobs, of the Chicago office, hosted an audio conference entitled “Third-Party Retaliation Claims: What Employers Must Know about Rising Claims and the EEOC” on March 8, 2011.
Chuck Walters, of the Washington, D.C. office, was published in the April 2011 edition of Hospitality Law. The article, “Be Aware if OSHA Plans to ‘Shame’ Your Company into Compliance,” noted that OSHA plans to continue its aggressive enforcement of health, safety standards.
Jim King and Nicole Kersey, of the Atlanta office, Angelo Paparelli, of the Los Angeles office, and Jason Burritt, of the New York office, presented a webinar entitled “Limiting Immigration Exposure in a Climate of Aggressive I-9 Enforcement: Weathering the Storm in the Hospitality Industry” on April 19, 2011 for Seyfarth’s hospitality clients.
Chuck Walters, of the Washington, D.C. office, wrote a case comment for the May 2011 edition of Hospitality Law.
Ellen McLaughlin and William Schurgin, of the Chicago office, spoke at The American Hotel & Lodging Association’s “New ADA Regulations: What They Mean for the Hospitality Industry” webinar on May 17, 2011.
For upcoming labor and employment events generally, click here for our website.
To check out our labor and employment hospitality team web page, click here.
We want to hear from you! Do you want to know more about these or any other topics? Want to see something reported on? Have an idea for an article or webinar? Looking for a speaker for your group? Please feel free to contact your Seyfarth attorney.
