May 7, 2014

1. EMPLOYMENT LAW UPDATE May 7, 2014 Keith Weddington PARKER POE ADAMS & BERNSTEIN LLP

2. AGENDA I.Judicial Decisions • U.S. Supreme Court • 4th Circuit • N.C. Appellate Courts II. Legislative and Regulatory Update

3. Supreme Court Decisions

4. WHO IS A “SUPERVISOR”?Vance v. Ball State University(Decided June 24, 2013) • Definition of “supervisor” determines those individuals for whom employers may be held strictly and vicariously liable. • Supervisors = management level employees who are empowered to take tangible employment actions – not those who merely oversee or direct employees’ daily activities.

5. WHO IS A “SUPERVISOR”? Vance v. Ball State University(Decided June 24, 2013) • Tangible employment action: “A significant change in employment status, such as hiring, firing, failing to promote, reassignment with significantly different responsibilities, or a decision causing a significant change of benefits.” • Supervisory status can “usually be readily determined, generally by written documentation.”

6. WHO IS A “SUPERVISOR”? Vance v. Ball State University(Decided June 24, 2013) Significance: • Bright line test/definition • Rejected EEOC’s definition • Status can be determined at SJ stage – or earlier • Review job descriptions and clearly specify whether employee is empowered to take tangible employment actions.

7. ARBITRATION AGREEMENTS – CLASS ACTION WAIVERSAmerican Express v. Italian Water Colors(Decided June 20, 2013) • Class action waivers in arbitration agreements are enforceable under the FAA. • Even if the cost of arbitrating a federal statutory claim individually exceeds the potential recovery.

8. AUTHORITY OF ARBITRATOR TO ORDER CLASS ARBITRATIONOxford Health Plans v. Sutter(Decided June 10, 2013) • Arbitrator did not exceed his powers under FAA by determining arbitration agreement permitted class arbitration. • Agreement silent as to class actions • Parties stipulated that arbitrator should decide if agreement authorized arbitration on a class-wide basis. • Narrow decision • Key: Arbitration agreements should include express class waivers

9. STANDARD OF PROOF FOR TITLE VII RETALIATION Univ. of Texas SW Med. Ctr. v. Nassar(Decided June 24, 2013) • Plaintiffs must prove protected activity was “but for” cause • Rejected lower standard of “substantial motivating factor” • “But for” standard will help courts dismiss “dubious claims at the summary judgment stage”

10. DEFENSE OF MARRIAGE ACT (“DOMA”)U.S. v. Windsor(Decided June 26, 2013) • § 3 of DOMA required that in determining the meaning any federal statute, regulation or ruling of federal agencies,  “marriage” means only a legal union between one man and one woman • Held unconstitutional – violated equal protection component of the Fifth Amendment’s Due Process Clause

11. DEFENSE OF MARRIAGE ACT (“DOMA”)U.S. v. Windsor(Decided June 26, 2013) • FMLA leave to care for a legally married same sex spouse with a serious health condition or for qualifying military leave • Tax treatment of employer provided insurance coverage to same sex spouse • Multi-state employers face varying state law definitions of “spouse” • Spousal privilege in federal proceedings • Examine benefit plan definitions of “spouse”

12. LIMITATIONS PERIODS FOR ERISA BENEFIT CLAIMSHeimeshaff v. Hartford Accident Ins. Co. et al.(Decided December 16, 2013) • Here, limitations period began when “proof of loss” was due under the plan, even though lawsuit could not be filed until plan’s internal claims review process had been exhausted. • Held: OK to start “shot clock” on limitations period in ERISA benefit plan before participant’s cause of action even accrues, if period is reasonable.

13. LIMITATIONS PERIODS FOR ERISA BENEFIT CLAIMSHeimeshaff v. Hartford Accident Ins. Co. et al.(Decided December 16, 2013) • Court again emphasized importance of enforcing plan terms. • Review plan documents, including SPD’s, to insure that plan limitations periods are reasonable under Heimeshaff. • Consider amending plan documents to add reasonable limitations period if current plan has no limitation period.

14. “CHANGING CLOTHES” AND THE FLSASandiffer v. U.S. Steel Corp.(Decided January 27, 2014) • Limited ruling affecting unionized employers. • Issue: Definition of “Changing Clothes” under FLSA provision allowing employers and unions to agree to exclude from compensable time the time employees spend changing clothes. • Time spent donning and doffing protective clothing – as opposed to equipment – may be excluded by CBA.

15. SOX WHISTLEBLOWERSLawson v. FMR LLC(Decided March 4, 2014) • SOX whistleblower provisions apply to private companies providing products or services to publicly traded companies. • Open question: Do SOX whistleblower protections apply to contractor’s employees only if the whistleblowing relates to the contractor’s work as a contractor for the public company?

16. SOX WHISTLEBLOWERSLawson v. FMR LLC(Decided March 4, 2014) • Private employers should: • Determine what products or services are provided to publicly traded companies – and which employees serve those customers. • Be sure anti-retaliation policy covers whistleblowing activity. • Train supervisors regarding SOX whistleblower provisions and the impact on your company.

17. SOX WHISTLEBLOWERSLawson v. FMR LLC (Cont’d.)(Decided March 4, 2014) • Encourage employees to raise concerns of suspected fraud, especially at public companies they serve. • Remember that employers face a higher standard of proof in defending SOX whistleblower claims— “clear and convincing” evidence that employee would have faced same action regardless of protected activity

18. FICA TAX ON SEVERANCE PAYU.S. Quality Stores, Inc. (Decided March 25, 2014) • Severance pay = wages and is subject to FICA withholding tax. • Employers that have not withheld FICA on severance payments may need to file amended returns. • Open question: Whether supplemental unemployment benefits (paid via SUB plans) linked to receipt of state unemployment benefits are subject to FICA.

19. STILL PENDINGNLRB v. Noel Canning • Issue: validity of recess appointments of NLRB commissioners • Impacts lots of NLRB actions, which may have been taken without a quorum if the recess appointments are held to be invalid

20. FOURTH CIRCUIT DECISIONS

21. AFFIRMATIVE DEFENSE FOR EMPLOYERCrockett v. Mission Hosp., Inc.(Decided May 30, 2013) • Upheld SJ for employer on sexual harassment claim • Keys: • Sound anti-harassment policy and complaint procedures • Prompt investigation • Plaintiff’s refusal to cooperate in investigation established her unreasonable failure to avoid harm

22. NLRB NOTICE POSTING RULEChamber of Commerce of U.S. v. NLRB(Decided June 14, 2013) • NLRB exceeded its authority by issuing rule requiring employers to post notice of employee’s NLRA rights • NLRB serves statutorily defined reactive roles—conducting representation elections and resolving ULP charges • NLRA does not grant NLRB authority to issue notice posting rule sua sponte

23. SPINNING WAL-MART v. DUKES?Scott et al. v. Family Dollar Stores, Inc.(Decided October 16, 2013) • Wal-Mart v. Dukes: allegations regarding manager discretion over employee pay were insufficient to satisfy commonality requirement for class actions. • Allegations distinguishable from Dukes: • specific company-wide practices re: employee pay • discretionary authority exercised by high-level managers

24. SPINNING WAL-MART V. DUKES?Scott et al. v. Family Dollar Stores, Inc.(Decided October 16, 2013) • Amendment was not futile--reversed district court’s denial of motion to amend • Vigorous dissent challenging majority’s interpretation of Dukes • Stay tuned--we haven’t seen the last of this case

25. TEMPORARY IMPAIRMENTS UNDER ADASummers v. Altarum Inst., Corp.(Decided January 23, 2014) • Temporary impairment may be a covered disability under ADA Amendments Act. • Must be sufficiently severe to limit a major life activity • Makes no difference if impairment is due to temporary injury vs. permanent condition • Mitigating measures are irrelevant to determination of disability

26. TEMPORARY IMPAIRMENTS UNDER ADASummers v. Altarum Inst., Corp.(Decided January 23, 2014) Employers should: • Make sure HR and supervisors understand that temporary impairments can trigger protection. • If in doubt, err on side of assuming condition is a disability • Engage in interactive process to determine if reasonable accommodation is available without undue hardship

27. LIABILITY FOR 3RD PARTY HARASSMENTFreeman v. Dal-Tile Corp., et al.(Decided April 29, 2014) • Claims for Title VII harassment by third parties are subject to same standard for employer liability as claims for coworker harassment. • Employer is liable if: • Knew or should have known of harassment, and • Failed to take prompt remedial action reasonably calculated to end the harassment

28. LIABILITY FOR 3RD PARTY HARASSMENTFreeman v. Dal-Tile Corp., et al.(Decided April 29, 2014) • Supervisor failed to act, despite having witnessed 3rd party’s offending behavior and receiving complaints from plaintiff • After 3 years, plaintiff complained directly to HR, which investigated and barred communication with plaintiff by 3rd party harasser • Held: employer knew or should have known and failed to act promptly.

29. LIABILITY FOR 3RD PARTY HARASSMENTFreeman v. Dal-Tile Corp., et al.(Decided April 29, 2014) • Per Vance v. Ball St. Univ., make clear who is a supervisor—may impact whether knowledge is imputed to employer • Train supervisors re: 3rd party liability and importance of promptly escalating complaints and observations • Employer’s response must be prompt and reasonably calculated to end the harassment

30. North Carolina State Court Decisions

31. BONUSES—NC WAGE & HOUR ACTMorris v. Scenera Research, LLC(Decided August 20, 2013) • Jury’s award of bonus compensation turned on questions of when bonus was “earned” and whether bonuses were “calculable” at time of separation • No written agreement or bonus plan specifying: • When bonus was earned • Whether payment conditioned on continued employment

32. BONUSES—NC WAGE & HOUR ACTMorris v. Scenera Research, LLC(Decided August 20, 2013) • Use written bonus and commission plans to clearly define terms and conditions • Give timely written notice of changes • Employer will bear the risk of ambiguities or lack or clearly written plans or agreements

33. CONTINUED ASSAULT ON NONCOMPETES • Two N.C. Ct. of Appeals cases deny enforcement of noncompetes due to scope of activity exceeding what was necessary to protect employer’s legitimate business interests. • CopyPro, Inc. v. Musgrove (Feb. 4, 2014) • Horner Intl. Co. v. McKoy (March 4, 2014)

34. CONTINUED ASSAULT ON NONCOMPETES • Court could have easily denied enforcement due to other factors—3 year term, no geographic limitation—yet chose to focus on scope of activity • Caution for employers!! • Revisit your existing noncompetes to reexamine them through the lens of these cases and amend as needed • Amendment may require new consideration

35. Legislative and RegulatoryActivity

36. NLRB THE CONTINUED QUEST FOR RELEVANCE • Section 7 of the NLRA: • “other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

37. NLRB • Social Media Policies • Confidential and Proprietary Information • “At will” statements in handbooks • Challenges to termination of employment

38. EMPLOYER POLICIES HELD UNLAWFUL BY NLRB • Policy prohibiting gossip about company, employees and customers • Dress code prohibiting insignias or message clothing • Confidential information, defined to include “personal or financial” info or “any non-public” info

39. EMPLOYER POLICIES HELD UNLAWFUL BY NLRB • Policy prohibiting use of company logo on social media sites • “At will” clause in handbook that says at will relationship cannot be amended or modified

40. EMPLOYER POLICIES/ACTIONS UPHELD BY NLRB • Prohibition on recording conversations during working time • Prohibition of display of negative attitude toward customers and coworkers • Termination of employees for Facebook chatter suggesting they would ignore management’s directions and run teen center’s operations as they saw fit.

41. EMPLOYER POLICIES/ACTIONS UPHELD BY NLRB • Termination for Facebook comments of personal contempt for supervisor—not comments re: shared concerns re: terms and conditions • Statements limiting to certain officers the authority to modify “at will” relationship • Statements requiring modification of “at will” relationship to be in writing

42. NLRB • Fact specific/case-by-case • Policy in question often not used as basis for adverse action • Use disclaimers emphasizing policy is not intended to interfere with rights to engage in concerted activity • But—NLRB now says disclaimer in acknowledgment may not suffice. Instead, disclaimer may need to be proximate to the policy in question.

43. EEOC GUIDANCE ON ACCOMMODATION OF RELIGIOUS DRESS AND GROOMING • EEOC’s default position: absent other compelling circumstances, employers are expected to modify usual dress and grooming policies to accommodate religious beliefs. • Limited circumstances rise to undue hardship: main exception is workplace safety • Customer preference ≠ undue hardship • Image or brand ≠ undue hardship

44. EEOC and FTC—BACKGROUND CHECKS • Joint guidance re: background checks • Two publications: one for employers, one for applicants and employees • Both agencies consider background checks affecting employment to be a priority • EEOC and FTC may share information

45. FAIR LABOR STANDARDS ACTHome Care Services • DOL has finalized regs to apply FLSA to workers employed by businesses providing home care services • Exemption for certain companionship services is limited to family members and similar caregivers • Due to take effect January 1, 2015.

46. FAIR LABOR STANDARDS ACTPotential Changes Re: OT Exemptions • DOL to consider changing FLSA regs re: executive, administrative and professional overtime exemptions • Potential increase of current minimum salary level of $455/week • Potential changes to the duties test • Changes would have to be made via formal rulemaking process

47. Office Locations • Charleston, SC • Charlotte, NC • Columbia, SC • Raleigh, NC • Spartanburg, SC Keith Weddington Direct Dial 704-335-9035 keithweddington@parkerpoe.com