Workplace Strategies Watercooler 2025: The Latest Tips and Trends for Multistate Handbooks [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, Dee Anna Hays (shareholder, Tampa) and Lucas Asper (shareholder, Greenville), who are co-chairs of the firm’s Multistate Advice and Counseling Practice Group, join Todd Duffield (shareholder, Atlanta) to discuss the latest tips and trends for multistate handbooks. Dee Anna, Lucas, and Todd touch on various state and local law-specific issues and key topics for employers’ consideration, including revisiting diversity, equity, and inclusion (DEI), leaves of absence, and reasonable accommodation policies. They also stress the importance of understanding employee monitoring and privacy limitations and employee rights to engage in protected activity under the National Labor Relations Act, a protection that extends to all employees, including those not represented by a union.
New York City Employers: It’s Time to Post Your Lactation Policy
Effective May 8, 2025, New York City employers with four or more employees must physically post a copy of their written lactation policy in an area accessible to employees as well as on its intranet if one exists.
This new posting obligation is an addition to the City’s requirement that covered employers maintain a written lactation room accommodation policy that must be provided to new employees upon hire and New York State’s requirement to provide the policy annually. The City enacted legislation on November 9, 2024, effective 180 days later, amending existing provisions to require covered employers to make their written policies readily available to employees.
In addition, the legislation amended the ordinance to reflect 2024 changes in New York State law (explained in detail here) requiring employers to provide at least 30 minutes of paid break time for breast milk expression. While the New York City ordinance covers only New York City employers with four or more employees, be aware that obligations for paid lactation breaks under New York State Labor Law § 206-c apply to all employers in New York State.
To be compliant, the lactation policy must clearly state that employees have the right to request a private space to express breast milk and outline the steps for making such a request. The policy should also inform employees that the employer will provide 30 minutes of paid break time for employees to express breast milk and shall further permit an employee to use existing paid breaks or mealtime if additional time is needed, as required under state law.
The mandatory 30-minute paid break is additional to any regular paid break time. Moreover, the law requires employers to allow employees to take further breaks (paid or unpaid) sufficient for their needs, unless doing so poses an undue hardship. These issues are addressed in updated FAQs released by the New York City Commission on Human Rights (NYCCHR) (see especially Qs 7-10). As a reminder, if providing a lactation room would pose an undue hardship, employers must inform employees of their obligation to engage in a cooperative dialogue with the employee to find a suitable solution.
Notably, as of this posting, the NYCCHR guidance page regarding lactation accommodations still links old versions of the downloadable model policies that do not reflect the law’s requirement for paid breaks. As such, employers may wish, at least at this time, not to rely on the City’s model policies in order to effectuate this requirement.
We are ready to help you develop a compliant lactation policy tailored to your needs and guide you through the new posting requirement. The following chart summarizes the State and City requirements regarding posting and distributing the policy:
Posting/Distribution
NYS
NYC
Distributing upon hire
X*
X*
Distributing annually
X
Distributing upon return from parental leave
X
Physical posting of policy at workplace
X
Electronic posting of policy
X
* New York City-based employers must also distribute a Notice of Pregnancy Accommodations at Work poster to new hires. If available, this poster must be provided in the employee’s native language.
Elizabeth A. Ledkovsky contributed to this article
Workplace Strategies Watercooler 2025: Top Complex ADA Issues [Podcast]
In this installment of our Workplace Strategies Watercooler 2025 podcast series, the speakers from our interactive Accommodations Workshop offer an information-packed look at complex issues under the Americans with Disabilities Act (ADA). Jamie Brod Ashton (shareholder, Dallas) kicks things off by highlighting common mistakes employers often make during the interactive process, including failing to recognize requests for an accommodation, neglecting to conduct individualized assessments, and providing accommodations that remove essential job functions. Charles Thompson (shareholder, San Francisco) and Sheri Giger (shareholder, Pittsburgh) clarify the factors that may justify a failure to accommodate. Charles, who co-chairs the firm’s Leaves of Absence/Reasonable Accommodation Practice Group, and Sheri share examples of operational costs and discuss the nuances of indefinite leave. Michael Riccobono (shareholder, Morristown) wraps up the conversation with insights on “hidden” disabilities, the individualized assessments required to determine whether an employee poses a direct threat to themselves or others, and the right to bring service animals into the workplace.
Indiana Enacts Earned Wage Access Law
On May 6, Indiana Governor Mike Braun signed House Enrolled Act No. 1125 into law, making Indiana the latest state to enact a statutory framework for regulating earned wage access (EWA) products. The Indiana Earned Wage Access Act, which takes effect January 1, 2026, requires most EWA providers to obtain a license from the Indiana Department of Financial Institutions and comply with operational, disclosure, and consumer protection requirements.
The Act distinguishes between “employer-integrated” and “consumer-directed” EWA models. Employer-integrated models rely on income, attendance, or other employment data supplied directly by the employer. Consumer-directed models, by contrast, are based on a provider’s reasonable determination of a consumer’s earnings using information reported by the consumer.
The Act also clarifies that services offered in accordance with the new framework are not considered loans or credit under Indiana law. Other key provisions include:
Mandatory licensing and reporting requirements. EWA providers must obtain a license, submit quarterly reports, and retain records for at least two years.
Fee restrictions and tip transparency. Providers must offer a no-cost option, and any tips must be clearly disclosed as voluntary and may not be shared with employers. Providers may not default users into fee-based or tip-based services.
Prohibited debt collection practices. Providers are barred from using outbound collection calls, lawsuits, or third-party collections to recover unpaid proceeds unless fraud is involved.
Data use and advertising limits. The statute restricts software from accessing a user’s location (except to verify Indiana residency) and bans unsolicited advertisements without opt-in consent.
Exemptions. Employers offering EWA directly to their workers and federally insured depository institutions are not subject to the licensing requirement.
Putting It Into Practice: With Indiana’s enactment of HEA 1125, eight states have now adopted EWA-specific laws (previously discussed here, here, and here). Indiana’s framework reflects a growing recognition that EWA products are not loans. As more states enact laws governing EWA products, providers should remain attentive to new legislative and regulatory developments that may impact their compliance obligations.
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The CHOICE Act: An Unprecedented Shift in the Future of Noncompete Agreements in Florida
On April 24, House Bill 1219 was passed by the Florida Legislature, marking a new, even more employer-centric era for noncompete agreements and other restrictive covenants in the Sunshine State. The bill, titled “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act,” (the Act) expands and builds on Florida’s current noncompete statute, Fla. Stat. 542.335, adding two new provisions that broaden employers’ abilities to enforce noncompete agreements in employment contracts: covered garden leave agreements and covered noncompete agreements.
Covered Garden Leave Agreements
The Act’s covered garden leave provision allows an employer to keep an employee on the payroll during the “notice period,” i.e., the period after the employee has given notice that they intend to end the employment relationship, but before the set date of termination. Although an employer has an obligation to continue to pay employees during the “garden period,” it is not required that employees on garden leave receive any discretionary incentive compensation. In addition, employers can restrict employees on garden leave from performing any work for both the employer enforcing the agreement and additional employers, regardless of the nature of the work.
In short, the CHOICE Act sets forth that employees must provide their employers with a predetermined amount of notice before terminating their employment. Notably, under the Act, employers can set an employee’s notice period to begin up to four years before termination, although employers can reduce or extinguish it with 30-day written notice to the employee. Finally, the employee must (1) be given at least seven days to consider this agreement and the right to have a lawyer review it; and (2) acknowledge the receipt of confidential information or customer relationships.
Covered Noncompete Agreements
Under the covered noncompete provision of the CHOICE Act, employers can restrict employees who meet certain financial and compensation thresholds from engaging in competition in a specified geographic area for up to four years after the termination of the employment. However, this “specified” geographic area is defined at the discretion of the employer; there is no requirement that the restrictions be narrowly tailored, or even reasonable. In theory, this allows a worldwide geographic scope.
As with a garden leave agreement, in order for a covered noncompete to be enforceable, employees must be given at least seven days to review the agreement and must be told of their right to obtain legal counsel. In addition, employees must be informed and acknowledge that as part of their role, they will be privy to confidential information or trade secrets.
If employees breach their employment agreement, under the Act, an employer is entitled to immediate injunctive relief as well as monetary damages. It is then the employee’s burden to establish, by clear and convincing evidence, that (1) the employer failed to perform a duty under the agreement; (2) the employee will not engage in similar work or use any previously obtained confidential information or customer relationships obtained during their previous employment; or (3) the new or prospective employer is not involved in or preparing to enter a business similar to the employer enforcing the restriction.
Covered Employees
Notably, the CHOICE Act does not impact all employees. In order to be subject to the Act, employees, which includes independent contractors, must be classified as “covered employees,” defined as individuals who either earn or are expected to earn over twice the annual mean wage of the county in which the employer has its principal place of business. In the event that the employee works for a foreign corporation or an out-of-state employer but resides in Florida, the wage threshold is determined using the mean wage in the county of the employee’s residence. The CHOICE Act also creates a blanket exemption for defined healthcare practitioners.
What’s Next for Employers?
The CHOICE Act, which is expected to be signed by Gov. Ron DeSantis in the coming days, will take effect on July 1. In the meantime, it is critical that employers assess and revise their employment agreements to ensure they are in compliance with the procedures laid out by the Act. Although the CHOICE Act broadens the scope of permissible noncompete agreements, it also lays out specific technical requirements that employers must follow in order to ultimately enforce these agreements. Additionally, before attempting to get an independent contractor to enter into a CHOICE Act agreement, employers should consult with their lawyers to assess whether this would impact the classification of someone as an “independent contractor” as opposed to an “employee.” Finally, employers in multistate businesses should be aware that it is likely that litigation will be brought by employees located in other states if those states have laws that conflict with Florida’s approach to noncompete agreements.
Achieving DEI Compliance…On Your Website
Diversity, Equity & Inclusion (DEI) efforts, and the term itself, have become increasingly scrutinized and subjected to legal challenges by both government and private actors, making an understanding of the current DEI climate and applicable law critical to organizations advancing efforts to support DEI initiatives. DEI focuses on the elimination of barriers to opportunities for all to achieve goals of fair treatment, which should have the effect of expanding the demographics of an organization. The current White House administration, with the stated purpose of providing for fair treatment and equal protection of all people, has rescinded or limited certain previous executive orders and promulgated policies against “illegal” DEI but has not defined what “illegal DEI” includes. As a result, many universities and businesses that rely on federal funding have curtailed their efforts out of fear that the administration may consider their organization’s initiatives “illegal.” However, you can have compliant DEI initiatives referenced on your website that do not violate the law and are not contrary to the current administration’s objective to provide fair treatment and equal protection for all.
It is not illegal for universities and businesses to prioritize increasing diversity. However, “diversity” should be construed to be inclusive of, and offer opportunities to, all races, genders, and backgrounds rather than interpreted myopically. Neither the rescission of executive orders from previous administrations nor the issuance of new executive orders by the current administration gives employers and businesses the right to discriminate. Discrimination against anyone based on an immutable characteristic (such as race) is illegal. Only Congress can repeal current federal law. None of the current civil rights laws have been touched, including, without limitation, those passed following the Civil War and during the Civil Rights Movement of the 1960’s (e.g., Section 1981 of the Civil Rights Act of 1866 and Title VII of the Civil Rights Act of 1964, both of which remain the applicable law today). So, consult your attorney and continue to abide by the law.
Key Considerations for Current State of the Law
Executive Order 14151 (Ending Radical and Wasteful Government DEI Programs and Preferencing) (“EO 14151”). On January 20, 2025, the current administration published EO 14151, which rescinded EO 13985, a Biden-era executive order titled “Advancing Racial Equity and Support for Underserved Communities Through the Federal Government.” EO 13985 required federal agencies and departments to implement “Equity Action Plans” to identify and remove barriers to equal participation in and access to federal benefits and services, barriers to benefiting from federal agency procurement and contracting programs, and other government programs. EO 14151 terminates the requirement for federal agencies to prepare and submit these plans. EO 14151 also requires federal agencies to terminate all “equity-related” grants or contracts that were intended to assist the agencies in meeting their DEI objectives and all DEI or DEIA performance requirements for employees, contractors, or grantees. Certain aspects of EO 14151 are subject to current litigation, which should be monitored closely. You can read here to review highlights of some of the ongoing litigation.
Executive Order 14173 (Ending Illegal Discrimination and Restoring Merit-Based Opportunity) (“EO 14173”). On January 21, 2025, the current administration published EO 14173, which rescinds EO 11246 (a 60-year-old civil rights era directive signed by President Lyndon B. Johnson). EO 11246 (and its subsequent amendments through additional executive orders) required federal contractors and subcontractors to refrain from discrimination in hiring, promotion, compensation, and employment practices based on race, color, religion, sex, sexual orientation, gender identity, and national origin. EO 11246 also required those contractors to engage in affirmative action practices for women and minorities. EO 14173 eliminates all affirmative action obligations with respect to women and minorities, and it requires federal contractors and subcontractors “to certify” that they do “not operate any programs promoting DEI that violate any applicable Federal anti-discrimination laws.” EO 14173 currently is in ongoing litigation, which should be followed closely. Employers should note that Title VII of the Civil Rights Act of 1964 is still the law and should ensure that they are complying with the equal employment opportunity requirements therein. You can read here for a more detailed breakdown of EO 14173.
The current administration has stated that it will continue to follow the law. Federal law, such as Title VII, prohibits (unless a clear illustration of historic disparate treatment can be shown) “affirmative action” and, by extension, DEI programs that provide any advantage to any person based on race, gender, or other immutable characteristic. The guidelines published by the Equal Employment Opportunity Commission state that discrimination based on race, color, religion, sex, or national origin violates Title VII (as stated in the Supreme Court case McDonald v. Santa Fe Trail Transportation Co., 427 U.S. 273, 12 EPD (1976)). For more information on how your company can lawfully promote equal opportunity considerations on your website, always consult with a labor & employment attorney.
Key Considerations: Applicable/Current Law
Section 1981 of the Civil Rights Act of 1866. All persons within the jurisdiction of the United States shall have the same right in every state and territory to make and enforce contracts, to sue, to be parties, to give evidence, and to receive the same full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens, and shall be subject to like punishment, pains, penalties, taxes, licenses, and exactions of every kind, and to no other. The application of the law protects all persons from discrimination in contracting based on race.
Title VII of the Civil Rights Act of 1964 prohibits discrimination based on race, color, religion, sex (including pregnancy), and national origin. It gives a private right of action to employees to sue their employers for violating the law. Title VII is broader than Section 1981 (referenced above) and remains the principal employment anti-discrimination law in the United States.
The concept of quotas (i.e., identifying a number of persons of a specific race for employment or enrollment) has been explicitly forbidden under federal law for some time. The concept associating quotas with illegal conduct was further reemphasized within EO 14173. Therefore, no DEI initiative should encourage or be premised upon quotas.
The following recommendations are worthy of consideration:
Mission Objectives
Focus on the elimination of barriers and creating opportunities for all. “Inclusion” is a keystone of DEI, and when you eliminate barriers, you are far more likely to include everyone — whether in a decision-making role or when taking steps to advance organizational priorities.
When focusing on diversity, emphasize seeking diversity of viewpoints on your website, concerning the primary subject area. The point of DEI is not simply to have a broad sector of races and ethnicities but to have different views and perspectives, which often emanate from differences between individuals (whether that be due to environment or otherwise — e.g., urban versus rural, first-generation college student, or economically disadvantaged). You also should express how your DEI efforts remove barriers to entry and barriers to success for your target audience.
DEI efforts and initiatives should be focused on ensuring the organization’s systems, policies, and processes are intentional, equitable, fair, and structured in a manner to minimize bias. A systems-focused approach is one that helps everyone but also goes a long way to close gaps and remove barriers for the most marginalized. In this manner, the focus is on the macro and not on specific programs, which, if not made accessible to all, can run afoul of non-discrimination law.
Application Process
If you have an application for admissions, grants, or scholarships on your website, create a prompt that asks the applicant to explain how they plan to effect [insert your diversity criteria] change in the U.S. and/or how they may have felt subjected to discriminatory practices in relation to the purpose of the application. Do not seek information on a particular applicant’s immutable characteristics or premise a selection or award on this information.
Require application candidates to discuss their individual, historical circumstances and how they have affected their current situation rather than have your company, university, or organization make assumptions associated with historical circumstances based on immutable characteristics. This step works to your organization’s advantage because it provides a deeper look into an applicant’s individual circumstance and makes no assumption based on immutable characteristics, which is the cornerstone of illegal discrimination.
Use of Language
Consider how the name of your organization can help or hinder your outreach. For example, affinity groups should always be open to all. However, many affinity groups utilize an immutable characteristic in their name (e.g., Black Law Students Affinity Group). Adding a reminder on multiple pages of your website and application materials that the affinity group is open to all could be helpful in reducing legal risk. Stating that a program is being presented by “[Diversity X Organization]” is legal, whereas stating that a program is “only” for Black or White people is not. When naming a new organization, consider the intended demographic that you are trying to reach when selecting the name of the organization and how that may impact your legal risks.
Remember, diversity of ideas and approaches is more fulsome where anyone can be a member of an organization, without regard to an immutable characteristic (e.g., race or ethnicity).
Note on your website that the application process is “open to all,” including by emphasizing this fact and by noting the process is an equal opportunity for all persons irrespective of race, religion, gender, etc.
For some compliance initiatives, DEI has been used as an umbrella term to capture compliance obligations monitored by human resources departments. For example, under the Americans with Disabilities Act, employers and places of public accommodation are obligated to ensure persons with disabilities can access buildings and resources, and barriers and impairments to successfully working or accessing public locations are eliminated. Some businesses began to group these actions together and label them holistically as DEI. If you feel that the term “DEI” has become too incendiary, then consider language for the policy that is more descriptive, such as “improving success” or “removing barriers” and the like.
Finally, it goes without saying: Follow the law. If you have questions on what is legal or problematic, consult a lawyer, and remember that the laws in your jurisdiction and new executive orders are constantly changing.
EEOC EEO-1 Reporting for 2024: Coming Soon
Key Takeaways
The 2024 EEO-1 Report is expected to open May 20 pending approval of the instruction book and justification.
The EEO-1 is expected to eliminate the option to report non-binary employees.
Employers should confirm how their system collects data on the sex of employees to comply with binary-only gender reporting.
On April 15, 2025, the Equal Employment Opportunity Commission (EEOC) submitted its 2024 EEO-1 Component 1 Instruction Booklet and justification to the Office of Information and Regulatory Affairs (OIRA), containing potential changes that may impact employers.
This booklet indicates that 2024 EEO-1 Component 1 reporting will begin on Tuesday, May 20, 2025, with the deadline to file on Tuesday, June 24, 2025. The 2024 report will cover employee data from the payroll period between October 1, 2024, through December 31, 2024. These reporting dates remain tentative as OIRA must approve the booklet, which can take 30-60 days from the date of submission. Final dates will be posted on the EEO-1 reporting page.
Understanding the EEO-1 Reporting Requirements
The EEO-1 is an annual requirement that certain employers submit demographic workforce data, including information on race, ethnicity and sex by job group. The EEO-1 report is required for employers with 100 or more employees and employers with less than 100 employees who are related to other entities, such that combined, there are over 100 employees.
Changes are Expected to the 2024 EEO-1
Executive Order 14168: Defending Women From Gender Ideology Extremism And Restoring Biological Truth To The Federal Government could have an impact on EEO-1 reporting, particularly concerning the recognition of sex. Executive Order 14168 reinforced the federal government’s stance on recognizing only two sexes—male and female.
In recent reporting periods, employers were instructed to report non-binary employees by footnote. EEOC is seeking approval to remove the option for employers to voluntarily report on employees who have self-identified as “non-binary” in order to comply with Executive Order 14168. This change would mean that the booklet’s instructions on “Reporting by Sex” would be restated to: “The EEO-1 Component 1 data collection provides only binary options (i.e., male or female) for reporting employee counts by sex, job category, and race or ethnicity.”
What Employers Should Do Now?
To ensure compliance with the new EEO-1 reporting requirements, employers should review and update their data collection processes. This includes auditing current systems to ensure they can accommodate the reporting of sex as needed. Employers should also stay informed about any updates or clarifications issued by the EEOC regarding the implementation of these changes.
Top Five Labor Law Developments for April 2025
U.S. Supreme Court Chief Justice John Roberts temporarily halted a U.S. Court of Appeals for the D.C. Circuit Court order reinstating National Labor Relations Board Member Gwynne Wilcox. Trump, et al. v. Wilcox, et al., No. 24A966 (Apr. 9, 2025). Following President Donald Trump’s unprecedented termination of Board Member Wilcox, the D.C. Circuit issued an en banc order reinstating her to the Board, citing the Court’s 1935 decision in Humphrey’s Executor that upheld the constitutionality of for-cause removal protections for federal agency leaders. The Trump Administration filed an emergency application to the Court for a stay of the D.C. Circuit’s order, arguing subsequent case law narrowed Humphrey’s Executor to apply only to multi-member agencies that do not wield substantial executive power, making the case inapplicable to the Board. Although Chief Justice Roberts’ order temporarily pauses Wilcox’s reinstatement, Wilcox has filed a response to the stay application urging the Court to deny the stay until the D.C. Circuit can issue a decision on the merits of the case. Wilcox also requested that the Court deny the Trump Administration’s petition for certiorari before the D.C. Circuit’s decision, arguing the request to rush the Court’s normal appeal procedures is unwarranted.
A Washington, D.C. federal judge blocked President Trump’s executive order (EO) aiming to exclude certain federal agencies and their subdivisions involved in national security from collective bargaining. National Treasury Employees Union v. Donald J. Trump, et al., No. 1:25-cv-00935 (D.D.C. Apr. 25, 2025). Pursuant to the EO, covered agencies (including the Departments of Defense, Justice, and State) were no longer required to engage in collective bargaining with unions. The National Treasury Employees Union (NTEU), which represents federal workers in 37 departments and agencies, requested a preliminary injunction arguing the order was retaliatory against the unions. The injunction applies to all employees that NTEU represents. Because NTEU was the filing party, employees represented by other unions are not included in the order.
A coalition of unions, nonprofit groups, and local governments filed a complaint in a California federal court arguing President Trump lacks the constitutional authority to downsize or reorganize federal agencies without congressional approval. The lawsuit stems from an EO aiming to reduce the size of the federal government’s workforce and directing each agency head to work with the Department of Government Efficiency on hiring plans. The coalition, which includes national unions such as the Service Employees International Union and the American Federation of State, County and Municipal Employees, as well as the City of Chicago and City of San Francisco, claims the EO violates the U.S. Constitution’s separation of powers and the Administrative Procedure Act. The coalition requests the court to vacate the executive order and the related reorganization plans.
William Emanuel, former Board member and management-side labor attorney, has passed away. Emanuel was appointed to the Board by President Trump in 2017 and served until 2021. Emanuel’s confirmation to the Board gave the Board its first Republican majority in more than a decade. During his time on the Board, Emanuel was involved in reversing a wide range of union-friendly rulings and decisions issued under the Obama Administration, bringing significant changes to Board law.
Former Board General Counsel Jennifer Abruzzo has joined a union-side law firm as an attorney and rejoined the Communications Workers of America (CWA) as a senior advisor. President Trump terminated Abruzzo shortly after Inauguration Day in an expected move. She previously held various roles at the Board and formerly served as special counsel at the CWA. Abruzzo’s time at the Board was marked by aggressive initiatives resulting in overturning precedent on many issues, including expansion of protected concerted activity, increased use of enhanced remedies for unfair labor practice charges, and making it easier for employees to unionize without an election, among others. President Trump recently nominated management-side labor attorney Crystal Carey as the new general counsel. She is awaiting U.S. Senate approval.
Time Is Money: A Quick Wage and Hour Tip . . . Contractual Indemnification May Not Guard Against FLSA Claims
The complex web of federal and state wage and hour laws create potentially devastating risk of exposure for employers.
Years of possible liability for yet unknown claims, liquidated damages, shifting attorneys’ fees, not to mention the risk of class or collective suit, can quickly transform seemingly minor and technical irregularities into expensive complications. And for companies that partner with other entities to meet their staffing needs, resolving this risk of liability is a critical piece of their business operations.
Quite often, the quick solution for this concern is through a traditional business arrangement: contractual indemnification. Shifting risk of loss via contract is fairly standard, especially as courts generally enforce the unambiguous terms of the parties’ agreement. Yet employers should take note of a concerning trend among courts across the country, which have in some cases refused to enforce indemnification agreements in Fair Labor Standards Act (“FLSA”) matters on public policy grounds.
How Did We Get Here?
Courts ordinarily steer clear of interrupting the unambiguous contractual agreements of sophisticated business entities, so what is motivating this judicial scrutiny of indemnification clauses in FLSA matters? Much can be traced back to the Second Circuit’s decision in Herman v. RSR Sec. Servs. Ltd., which rejected an interpretation of the FLSA that would have provided a statutory right to indemnification or contribution among co-employers.[1]
In Herman, a putative co-employer who had been found liable for back wages following a bench trial sought to shift those losses to his co-defendants, whom he claimed were the plaintiff’s actual employer. In reviewing this claim, the Second Circuit looked to the text of the FLSA, its overarching intent, its remedial mechanisms, and the law’s statutory history. None counseled in favor of creating a new statutory obligation among co-employers. The law was silent as to any right to contribution or indemnification, employers were clearly not the class for whose benefit the FLSA was enacted, and no evidence in the legislative history of the statute favored the judicial creation of this new statutory right. Accordingly, the Second Circuit unequivocally held that “there is no right to contribution or indemnification for employers held liable under the FLSA.” Id. at 144.
More than 20-years after Herman, the Ninth Circuit reached the same conclusion.[2] In rejecting yet another attempt to develop a statutory reading of the FLSA that would have permitted a claim for contribution or indemnification, the Ninth Circuit highlighted how “Congress, not the courts” held responsibility for developing this type of remedy. Following this “cautious” approach toward statutory interpretation, the Ninth Circuit similarly “decline[d] to find an implied cause of action for contribution or indemnification under the FLSA.” Id. at 1105.
How Does this Impact Contractual Obligations?
Although the Second and Ninth Circuit limited their holdings to statutory claims to indemnification under the FLSA—and notwithstanding the judicial “cautio[n]” recognized in their analysis—district courts across the country have not been so restrained. Only two years after Herman, district courts in New York began expanding the rejection of a statutory right to contribution under the FLSA to also negate contractual indemnification agreements. In Gustafson v. Bell Atl. Corp., the defendants sought to enforce an indemnification clause that would have required a putative co-employer to pay for any losses incurred as a result of their violations of the FLSA.[3] The defendants in this matter emphasized that their claim was “purely one for damages for breach of contract by a third party,” and thereby did not fall within the gambit of Herman. The Court disagreed.
Irrespective of the contractual basis for indemnification, the Court held that “defendants’ attempt to recover damages from [the co-employer] for overtime violations is an attempt to receive indemnification for FLSA liability.” Id. (emphasis added). Whether the putative co-employer was responsible for the alleged overtime violation was of no consequence. In the Court’s view: “[a]llowing indemnification in cases such as this would permit employers to contract away their obligations under the FLSA, a result that flouts the purpose of the statute.” Id. Accordingly, the indemnification clause was held unenforceable for purposes of any FLSA-related damages.
Are Courts Uniform In this Approach?
Unsurprisingly, courts across the country are divided on this issue. Some have adopted the public policy arguments noted above, holding that contractual indemnification of FLSA damages would give employers little reason to comply with the statute and run contrary to the FLSA’s statutory purpose.[4] Others have rejected this premise, and distinguished indemnification claims taken against employees (which are prohibited on public policy grounds) from contractual agreements involving sophisticated business entities that should be enforced.[5] Still others have permitted contractual indemnification claims without even opining on this brewing public policy dispute; in these cases, the parties’ unambiguous contractual intent is sufficient to enforce their agreement.[6]
As one court succinctly stated: “[f]or each FLSA case that permits contractual indemnity claims, however, there is a case that prohibits the same.”[7]
How Should Employers Address This Uncertainty?
The lack of any uniformity in this regard, and the policy-based rationale for negating these provisions, presents a difficult problem for employers: an inability to easily allocate risk and develop protection from exposure.
But companies can still take affirmative steps to address this concern. First and foremost, companies must identify potential sources of liability, both internally and through their arrangements with business partners. Indemnification agreements may not provide sufficient protection against FLSA claims, and identification of any vulnerabilities can help dictate how best to allocate appropriate business costs. Next, a comprehensive wage and hour audit of these internal and external pay practices can help quantify risk and potential loss. This will help business leaders maintain compliance with federal and state wage and hour laws, explore remediation opportunities to resolve problems prospectively, and dictate how to structure relationships with business partners in order to reduce the risk of joint liability. Finally, companies and their counsel should carefully consider the forum of any brewing FLSA dispute, in order to gauge the likelihood of success on any indemnification claim.
Judicial uncertainty notwithstanding, these steps can help business leaders identify and quantify risk while also achieving the primary goal of any indemnification clause: safeguarding the company against potential loss.
ENDNOTES
[1] 172 F.3d 132 (2d Cir. 1999).
[2] Scalia v. Employer Solutions Staffing Grp, LLC, 951 F.3d 1097 (9th Cir. 2020).
[3] Gustafson v. Bell Atl. Corp., 171 F. Supp. 2d 311 (S.D.N.Y. 2001).
[4] Goodman v. Port Auth. of N.Y. & N.J., 850 F. Supp. 2d 363 (S.D.N.Y. 2012); Scalia v. MICA Contracting, LLC, 2019 WL 6711616, at *4 (S.D. Ohio Dec. 10, 2019), report and recommendation adopted, 2020 WL 635908 (S.D. Ohio Feb. 11, 2020).
[5] Varnell, Struck & Assocs., Inc. v. Lowe’s Cos., 2008 WL 1820830, at *10-11 (W.D.N.C. Apr. 21, 2008); Plummer v. Rockwater Energy Sols. Inc., 2019 WL 13063612, at *4 (S.D. Tex. July 2, 2019) (“The court finds that no controlling authority bars Rockwater’s claims for contractual indemnity and contribution under the FLSA.”).
[6] Bogosian v. All Am. Concessions, 2011 WL 4460362, at *4 (E.D.N.Y. Sept. 26, 2011).
[7] Robertson v. REP Processing, LLC, 2020 WL 5735081, at *5 (D. Colo. Sept. 24, 2020).
Ready for the Recent Arrival? Pregnant Workers Fairness Act is Here and Kicking
As everyone in Human Resources knows by now, the Pregnant Workers Fairness Act (PWFA) requires employers to reasonably accommodate employees because of pregnancy and conditions related to pregnancy. In case you missed it, we blogged about this here. The EEOC has filed lawsuits to enforce employee rights under the PWFA and has settled cases for pregnant workers. While these were all filed under the prior administration, the PWFA is the > law of the land and employers need to be ready.
Make Sure Your Leadership Knows Pregnant Workers Have a Legal Right to Accommodations
The standard for a reasonable accommodation under the PWFA is different than the standard under the ADA. Make sure your front-line supervisors and managers know that you have a heightened responsibility to pregnant workers who need accommodations. While your supervisors do not need to be PWFA experts, they do need to understand that if a pregnant worker is having trouble fulfilling her job duties, they should call Human Resources.
Human Resources professionals need to be ready as well. Unlike the ADA, reasonable accommodations under the PWFA:
Could require that you remove an essential function of a job temporarily. If you have light-duty positions, you many need to make those available to your pregnant employees.
Are temporary, which would be up to the 40 weeks of the pregnancy.
Like the ADA, if an employee is not eligible for FMLA leave (or any other leave under company policy or state law), you likely have an obligation to provide unpaid leave under the PWFA. However, leave to accommodate pregnancy is a last resort.
Check Your Policies and Procedures
In defending an EEOC charge of discrimination, you will want to tell the EEOC that you have a policy that shows your good faith. With that in mind:
Be sure your EEOC policy mentions that you prohibit discrimination based on pregnancy. Saying that you prohibit discrimination based on sex probably covers it, but it may be helpful to add pregnancy to your policy.
Consider having a separate policy addressing the PWFA. A policy that clearly outlines how an employee can request a PWFA accommodation can be great evidence if an employee claims she did not know she could request one.
Given the differences between the PWFA and the ADA, you may want to consider having separate forms to document the PWFA process.
Takeaways
This is a new law and it is complicated. Make sure your front-line supervisors are staying in touch with Human Resources. There is no one size fits all approach, so Human Resources should seek legal advice when necessary.
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Employers Beware: Blanket Policies Prohibiting Workplace Recordings May Violate the NLRA
In the past, employees recording audio or images in the workplace might resort to use of a bulky tape recorder or a hidden “wire” or camera. Now that smart phones with professional-grade audio and video capabilities are an integral part of our society, clandestine (or blatant) workplace recordings are much more easily accomplished.
With this increased ease of access to reliable and compact recording equipment has come a heightened employer sensitivity to workplace recordings. As a result, many employers are tempted to implement blanket policies prohibiting workplace recordings, or otherwise require management consent to make any workplace recordings.
While some limited prohibitions on workplace recordings are permissible—for instance, to protect confidential business information or private health information—in recent years, the National Labor Relations Board (“NLRB” or the “Board”) has criticized blanket policies prohibiting such activities. The NLRB reasons that policies against workplace recordings may discourage employees from participating in concerted activity with other employees that safeguard their labor rights. In other words, such policies may “chill” employees’ ability to act in concert, and some courts have agreed.
Section 7 of the National Labor Relations Act (“NLRA” or the “Act”) ensures employees’ “right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection,” and the right “to refrain from any or all such activities.” Section 8(a)(1) of the Act makes it an unfair labor practice for an employer “to interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in Section 7” of the Act.
The Board has noted that workplace video and audio recording is protected if employees are “acting in concert for their mutual aid and protection” and the employer does not have an “overriding interest” in restricting the recording. As noted above, protection of confidential company information or personal health information can help an employer to demonstrate an overriding interest in restricting recordings. As noted by the Board, a few examples of recordings made in concert for mutual protection that may outweigh an employer’s interest in any restrictions are recordings made to capture:
unsafe working conditions;
evidence of discrimination;
“townhall” meetings with anti-union sentiment; and
conversations about terms and conditions of employment.
Regardless of any state laws that may require two-party consent for recording conversations, the NLRB has held that the NLRA preempts state law, and that protection of employees’ rights under the NLRA overrides concerns about state law recording consent violations.
Thus, at a time when recording capabilities are packed into an ordinary, everyday device carried by nearly every employee in every workplace, employers who still wish to have a policy limiting workplace recordings should ensure that the policy lists valid reasons for implementing the policy, include a carve-out in the policy for protected concerted activities under the NLRA, and not require management approval for recordings that constitute protected concerted activities. Taking such measures can help to ensure the Board will not find an employer’s no-recording policy in violation of the NLRA.
Connelly v. U.S.: A Reminder About Corporate Owned Life Insurance
Many businesses have used corporate owned life insurance (COLI) and buy-sell agreements as key elements of their succession planning. However, it may be time to consider whether these programs are creating unnecessary risk. Although these programs generally have not been problematic in the past, a recent Supreme Court case has potentially changed the analysis.
COLI is a life insurance policy owned by the company on the life of an employee, with some or all the benefits payable to the company. This life insurance can provide a significant cash benefit at a time when the company may be looking to fund the repurchase of shares from a deceased owner. Historically, practitioners have excluded insurance proceeds from a business’s valuation when those proceeds are contractually designated for repurchasing shares under a buy-sell agreement. This exclusion arises because the buy-sell agreement creates a liability that offsets some or all of the proceeds. Although excluding the value of the insurance proceeds from the value of the business was relatively common, the IRS had sometimes argued that the value of the insurance should be included in the value of the company.
In Connelly v. U.S., the Supreme Court unanimously held that the proceeds from COLI need to be included in some valuations of the company that received the proceeds. When the value of the COLI is added for tax and valuation purposes, there are several possible implications. First, the increased value from including the COLI may have to be reflected in a higher purchase obligation under the buy/sell obligation associated with the COLI than would otherwise be necessary. Second, the value of the COLI may need to be included in company valuations related to deferred and executive compensation payments. Third, the inclusion of COLI proceeds as an asset on the company’s balance sheet may impact the company’s investment or lending agreements. And fourth, the increased value of the company needs to be reflected when valuing the decedent’s company equity for estate tax purposes and in any tax planning for surviving owners.
After Connelly v. U.S., companies and business owners should reassess how COLI and buy-sell agreements interact. If a COLI and a buy-sell agreement are already in place, now is a good time to review them to determine if changes need to be made. If so, make those changes before it’s too late. For companies that do not have COLI and a buy-sell agreement in place, it is a good time to determine if your business should have these arrangements in place now that the Supreme Court has settled the question.