Misinformation regarding the OFCCP’s revised regulations on protected veterans and workers with disabilities is abundant on OFCCP compliance vendor and law firm blogs, according to attorney John C. Fox, a former OFCCP official and current president of Fox, Wang & Morgan P.C. in Los Gatos, California. Candee Chambers, SPHR, Sr. CAAP, and Vice President of Compliance & Partnerships at DirectEmployers Association, joined Fox at the National Employment Law Institute’s (NELI) Thirty-Third Annual Affirmative Action Briefing in Chicago, Illinois in a presentation discussing aspects of the new requirements that many contractors still do not understand.
Differences in regulatory architecture. The regulatory requirements for the OFCCP’s three program authorities—enforcement of Executive Order (EO) 11246, Section 503 of the Rehabilitation Act of 1973 (Section 503) and the Vietnam Era Veterans’ Readjustment Assistance Act (VEVRAA) — are not homogenous, the speakers pointed out. The data collection and recordkeeping/retention requirements vary for each set of regulations, and the required assessments vary as well.
Major revisions to the OFCCP’s regulations implementing VEVRAA (78 FR 58614–58679) and Section 503 of the Rehabilitation Act of 1973 (Section 503) (78 FR 58682-58752) took effect on March 24, 2014. The revised regulations require covered federal contractors to establish a 7 percent utilization goal for workers with disabilities (per job group) and a variable hiring benchmark for protected veterans (per establishment) and also impose new data collection and recordkeeping requirements.
Veterans hiring benchmark. The revised VEVRAA regulations (41 CFR §60-300) provide that covered contractors must set, for each of their establishments, annual hiring benchmarks for protected veterans, either based on the national percentage of veterans in the workforce (currently 7 percent – see, http://www.dol-esa.gov/errd/VEVRAA.jsp), or based on the five factors described in 41 CFR §60-300.45(b)(2). The benchmark applies only to hiring data and does not need to be applied to each AAP job group. The agency has repeatedly made clear that failing to meet the benchmark is not a violation of the regulations and will not carry any penalties. However, failure to set the benchmark and meet the data collection, analysis, and recordkeeping requirements related to this benchmark does violate the regulations.
Utilization analysis regarding workers with disabilities. The revised Section 503 regulations (41 CFR §60-741) require covered federal contractors to establish a 7 percent utilization goal for the employment of workers with disabilities (IWDs). Contractors must apply the utilization goal to each of their Affirmative Action Plan (AAP) job groups, with the exception of contractors with 100 or fewer employees, who may apply the goal to their entire workforce.
Comparisons. The 7 percent utilization goal for IWDs required by the Section 503 regulations means that contractors must compare 7 percent versus their on-roll employment percentage of IWDs for each AAP job group. This utilization goal is similar to the EO 11246 placement goal for minorities and women which requires measuring a calculated (as prescribed in the regulations) availability percentage against the contractor’s incumbent on-roll percentages of employment, explained Fox.
In contrast, the VEVRAA hiring benchmark is NOT a goal, he emphasized. Moreover, it is a hiring benchmark, not an on-roll employment benchmark. Thus, contractors merely have to set the benchmark (for each establishment) and stop; they do not have to compare the benchmark to their on-roll percentage of protected veterans or to anything else.
Measuring goal attainment. The OFCCP thinks of the goals required under Section 503 and EO 11246 as “destinations,” Fox said, but measuring whether the contractor has attained these goals (i.e. arrived at the destination) differs under each program authority.
Under the EO 11246 regulations (at 41 CFR §60-2.15), contractors do not have to set a placement goal unless the percentage of minorities or women employed in a particular job group is “less than would reasonably be expected” given their availability percentage in that particular job group. This “reasonably expected” language gives contractors the flexibility to use many different tools to measure whether they have to set a placement goal, including:
- The “Any Difference Rule” — which means if there is any difference between the percentage available and the percentage employed, the contractor must set a placement goal.
- The “80 Percent Rule” — which means that the contractor can be as much as 20 percent below the percentage available before having to set a placement goal. “It’s like horseshoes, where close still counts,” Fox said.
- The Statistical Tests: Two Standard Deviations Test and Fischer’s Exact Test—under these tests, the contractor can miss the destination by a lot, but still be “there,” he stated.
The Section 503 regulations, however, do not allow for this type of flexibility in measuring the attainment of the 7 percent utilization goal for employment of IWDs. Rather, the regulations (at 41 CFR §60-741.45(e)) provide that when the percentage of IWDs is less than the utilization goal, the contractor must take certain steps (specified in the regulations) to determine “whether and where impediments to equal employment opportunity exist.” Thus, the Any Difference Rule applies under Section 503, Fox explained. Accordingly, if a contractor has less than 7 percent of IWDs employed in any given job group, the contractor must set a utilization goal to meet the 7 percent mark.
As noted above, the VEVRAA regulations do not have a goal requirement. Therefore, even if a contractor has zero percent protected veterans hired/employed, that contractor is not required to meet any percentage goal. Given that there is no percentage goal required under the VEVRAA regulations, what is the purpose of the benchmark? As Fox subsequently explained, the purpose is to inform another requirement of the regulations—the “effectiveness review” (detailed below).
In light of these differences, Fox “strongly recommends” that contractors have separate AAPs for each of the three programs, rather than combined AAPs.
“Good faith efforts” no longer sufficient. Some blogs have “missed the boat entirely” by stating that the revised VEVRAA and Section 503 regulations call for “good faith efforts,” Fox warned. While the OFCCP’s EO 11246 regulations (at 41 CFR §60-2.16(a) and §60-2.17(c)) maintain that contractors must apply/demonstrate “good faith efforts” designed to reach any placement goals set, “good faith efforts” are no longer sufficient under the revised VEVRAA and Section 503 regulations.
“They don’t ask for your good faith efforts anymore” Chambers said. Instead, the OFCCP wants engaged “outreach and positive recruitment” (as specified in §60-300.44(f)(2)(i) and §60-741.44(f)(2)(i)) of protected veterans and IWDs. Chambers noted OFCCP Director Patricia Shiu’s keynote address at the 2011 Industry Liaison Group National Conference in New Orleans in which Shiu stated that “affirmative action can no longer be defined by ‘good faith efforts’” (a statement that Shiu reiterated at the NELI Affirmative Action Briefing in Chicago later that year).
So, if a contractor has less than 7 percent of IWDs employed in one or more job groups, what actions must the contractor undertake as a means to reach the 7 percent utilization goal? The regulations (at 41 CFR §60-741.45(f)) state that the contractor must develop “action-oriented programs” which may include modification of personnel processes and/or outreach and recruitment, Fox said.
What is an “Effectiveness Review”? Under both the revised VEVRAA and Section 503 regulations (at 41 CFR §60-300.44(f)(3) and 41 CFR §60-741.44(f)(3)), contractors must undertake an annual, written self-evaluation of their effectiveness at outreach and recruiting. The “effectiveness review” requirement is different and apart from the employment utilization goal for IWDs and the hiring benchmark for protected veterans, Fox pointed out.
When a contractor reaches its placement goals under the EO 11246 regulations, the contractor has no other related obligations, but under the VEVRAA and Section 503 regulations, once a contractor sets the benchmark/reaches the utilization goal, it is still required to do an effectiveness review, he said.
For the effectiveness review, the contractor must evaluate each outreach and recruitment effort it has undertaken in the previous twelve months. Among the criteria used for review, contractors must include the data collected pursuant to part 44(k) of the regulations for the current year and the two most recent previous years. Specifically, part 44 (k) requires contractors to collect data on the:
- number of IWD and protected veteran applicants;
- total number of applicants for all jobs;
- total number of job openings and jobs filled;
- number of IWDs and protected veterans hired; and
- total number of applicants hired.
If the contractor concludes that the totality of its efforts was not effective, it must implement the alternative actions listed at part 44 (f)(1) or (f)(2) of the regulations. [Note that (f)(1) incorporates all the efforts listed in (f)(2)].
Contractors should not wait to do an annual review, Chambers advised, but rather, should do quarterly reviews in order to track progress and show the OFCCP that the contractor is making an effort to meet its obligations. In audits, the OFCCP will be looking to see if the contractor is trying, she noted.
Separate transactions. While the 7 percent utilization goal under Section 503 helps inform whether a contractor’s outreach is effective, the utilization goal is a separate transaction from the effectiveness review, Fox emphasized. He also pointed out that, while the part 44(k) data metrics are a required tool for the effectiveness review, these data metrics are not part of the Section 503 utilization analysis.
If a contractor’s employment of IWDs is 7 percent or greater in each job group, the contractor must still engage in outreach and recruitment efforts, but is not required to engage in the specific types of outreach and recruitment actions set forth in 41 CFR §60-741.44(f)(1) or (f)(2). In other words, the OFCCP won’t tell a contractor how to get to the 7 percent utilization goal, unless the contractor fails to meet the goal; in that event, the contractor has to pick among the actions listed in part 44(f)(2), Fox said. If the contractor still doesn’t meet the goal, it must simply continue more outreach and recruitment as specified in part 44(f)(2). Therefore, the regulations require contractors to engage in outreach and recruitment regardless of whether they have reached the utilization goal.
In a similar vein, the hiring benchmark for protected veterans helps inform whether a contractor’s outreach is effective. The effectiveness review is where the benchmark is relevant, Fox explained, because contractors can use it to assess their outreach and recruitment efforts. The required use of the part 44(k) data metrics tool means that a contractor must compare its protected veteran applicant percentage to the hiring benchmark to assess whether its outreach is sufficient. If a contractor’s hiring rate for protected veterans meets the benchmark set for each establishment, the contractor must still engage in outreach and recruitment efforts, but is not required to engage in the specific types of outreach and recruitment actions set forth in 41 CFR §60-300.44(f)(1) or (f)(2).
The regulatory requirement that contractors must continue to engage in outreach and recruitment regardless of whether they reach the utilization goal under Section 503 or met the hiring benchmark under VEVRAA is “absolutely the purest form of affirmative action,” Fox remarked.
VEVRAA requires job “listing” not “posting”. The job listing obligation of the revised VEVRAA regulations (at 41 CFR §60-300.5(a)) is not included the Section 503 regulations. The VEVRAA statute, as amended by the Jobs for Veterans Act of 2002, requires covered contractors to list all employment openings—for jobs lasting longer than three days and not involving an executive or senior management position—with “the appropriate” employment service delivery system (ESDS) as specified in the regulations.
It is important to note that regulations require contractors to “list” the jobs, rather than “post” the jobs, both Fox and Chambers stated, adding that this was another area where some blogs have been inaccurate. A “posting” requirement does not exist in the VEVRAA regulation, Chambers observed. In order to meet the requirements of the revised VEVRAA regulations, contractors must prove the jobs were listed with the state workforce agency or delivery system so that protected veterans get priority referrals, Fox added.
The presenters. Fox is the President and a founder of Fox, Wang & Morgan P.C. in Los Gatos, California. He leads large and complex litigation matters in state and federal courts, in cases involving wage-hour and discrimination class actions, trade secret claims, employment contract disputes, wrongful termination, corporate investigations, and the use of statistics in employment matters. Fox previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.
Chambers is the Vice President of Compliance & Partnerships at DirectEmployers Association in Indianapolis, Indiana. She leads the Association’s compliance initiatives, oversees the creation of strategic partnerships with a multitude of organizations that allow DirectEmployers membership to share their job opportunities with job seekers, and manages the relationship with the National Association of State Workforce Agencies (NASWA) which includes the joint-initiative, National Labor Exchange (NLx). In addition, she is the Vice Chair of the Indiana Industry Liaison Group, and serves as Co-Chair of the DirectEmployers Association Compliance Advisory Council and the National Labor Exchange (NLx) Operations Steering Committees.
NELI’s Thirty-Third Annual Affirmative Action Briefing was held in Chicago on October 29-30, 2015. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: www.neli.org.
New York Governor Andrew M. Cuomo is being lauded for introducing regulations through the state’s Human Rights Law that unequivocally ban harassment and discrimination against transgender people. The regulations affirm that all transgender individuals are protected under the New York State Human Rights Law, and all public and private employers, housing providers, businesses, creditors and others should know that discrimination against transgender persons is unlawful and will not be tolerated anywhere in the state.
Governor Cuomo announced the regulations during a speech at the Empire State Pride Agenda’s fall dinner, where he was also honored with the group’s Silver Torch award. This is the first time any governor has issued statewide regulations to prohibit harassment and discrimination on the basis of gender identity, transgender status or gender dysphoria.
The regulations represent the first state regulatory action in the nation to affirm that harassment and other forms of discrimination, by both public and private entities, on the basis of a person’s gender identity, transgender status, or gender dysphoria is considered unlawful discrimination. Under state law, the New York State Division of Human Rights has the statutory authority to promulgate regs interpreting the Human Rights Law. Further, while discrimination against transgender people has been specifically forbidden in New York by Executive Order since 2009, in practice that order only protects state workers.
Additionally, New York currently has limited pockets of legal protection for transgender people because of municipal ordinances or laws that also ban harassment or discrimination, to varying degrees. However, many municipalities do not guarantee these protections, and there is no statewide ban on discrimination or harassment for individuals not employed by the state. The Governor’s latest action will ensure that all transgender individuals do not lose their rights simply by traveling from one county or city to another.
The new regulations, introduced on October 22, are subject to a 45-day notice and comment period before full implementation.
Addressing some recent confusion regarding the OFCCP’s infographic on protected veterans, Director Patricia A. Shiu clarified that the agency has not changed the definition of “protected veteran.” Shiu was one of several speakers featured at the National Employment Law Institute’s (NELI) Thirty-Third Annual Affirmative Action Briefing in Chicago, Illinois on October 30, 2015. The briefing was chaired by affirmative action expert John C. Fox, President and a founder of Fox, Wang & Morgan P.C. In addition to addressing the confusion regarding the infographic, Shiu discussed the agency’s new regulations on sexual orientation and gender identity, particularly in regard to transgender workers. The director also addressed the agency’s use of letters providing advance notification of compliance reviews, and the OFCCP’s recent celebration of its 50th Anniversary.
VEVRAA infographic confusion. In August 2015, the OFCCP announced that it had posted on its website a new infographic entitled, “Am I a Protected Veteran?” According to the agency announcement, the new infographic was designed to help veterans quickly and easily navigate the “protected veteran” categories to determine their eligibility for coverage under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA).
VEVRAA, at 38 U.S.C. Section 4212(d), requires covered federal contractors to report annually to the Secretary of Labor on their employees and new hires who belong to the specific categories of veterans protected under the statute. Under the most recent amendments to the statute, those categories are: (1) disabled veterans; (2) veterans who served on active duty in the Armed Forces during a war or in a campaign or expedition for which a campaign badge has been authorized; (3) veterans who, while serving on active duty in the Armed Forces, participated in a United States military operation for which an Armed Forces service medal was awarded pursuant to Executive Order 12985 (61 FR 1209); and (4) recently separated veterans.
The OFCCP’s recent revisions to its regulations implementing VEVRAA (41 CFR Part 60-300), published in the Federal Register on September 24, 2013 (78 FR 58614–58679), and effective as of March 24, 2014, require federal contractors to establish a variable hiring benchmark for protected veterans as well as impose new data collection and recordkeeping requirements. Among the data collection requirements, the revised regulations at 41 CFR Part 60-300.42 require contractors to invite applicants to self-identify as protected veterans at both the pre-offer and post-offer stages of the hiring process. At the pre-offer stage, contractors must extend an invitation to self-identify generally as a “protected veteran.” The relevant FAQ section on the OFCCP website explains that, at the post-offer stage, contractors may—but are not required to—invite applicants to voluntarily self-identify as a protected veteran using the individual categories for protected veterans as defined in the text of the VEVRAA statute. In other words, contractors need only invite those offered a job to indicate whether they are protected veterans under any of the VEVRAA categories.
As to coverage under the second category of protected veterans—active duty wartime or campaign badge veterans—the infographic asks “Did you serve on active duty during one or more of the periods of war outlined in 38 U.S.C. § 101?” (emphasis added). In a footnote, the infographic states: “Period of War Dates: Korean Conflict June 27, 1950 – January 31, 1955; Vietnam Era February 28, 1961 – May 7, 1975 for veterans serving in the Republic of Vietnam or August 5, 1964 – May 7, 1975 for all other cases; Persian Gulf War August 2, 1990 – current.”
In mid-October 2015, two months after the OFCCP posted the infographic on its website, a couple of contractor community vendors posted blogs/memos/tweets with headlines/tweets stating that the OFCCP had “broadened” or “expanded” the definition of protected veteran or at least had given a broader interpretation as to who is a “protected veteran” under VEVRAA than the agency had previously indicated. This assertion was apparently based on the fact that the OFCCP used the term “period[s] of war” (as outlined in 38 U.S.C. Section 101) when detailing the category of active duty wartime or campaign badge veterans in the infographic, while the VEVRAA statute (at 38 U.S.C. Section 4212(a)(3)(ii)) and the OFCCP’s implementing regulations (at 41 C.F.R. Section 60-300.2(b)) use the term “during a war.”
In a presentation on the previous day of the briefing, Fox, noting the vendors’ assertions, explained that the term “during a period of war” covers many veterans who did not serve “during a war” (given that Congress has not declared “war” since World War II) and “during a period of war” covers many veterans since World War II who did not receive a campaign badge or service medal, including many who fought in Iraq and many now returning from active duty throughout the Middle East. Thus, the definition used in the infographic would put a lot more veterans into a contractor’s collection of employment data. He also explained that the OFCCP does not have the authority to expand the categories of protected veterans beyond those set forth in the VEVRAA statute and added that the infographic does not have the force and effect of law.
During the question and answer session following Shiu’s prepared remarks, Fox asked Shiu whether the OFCCP had intended to change the definition of “protected veteran” through the agency’s description of “active duty wartime or campaign badge veterans” in the infographic. Shiu responded that not only did the OFCCP not intend to change the definition, but the Department of Labor’s Solicitor’s Office (i.e. the OFCCP’s attorneys) maintains that the agency did not do so.
In addition, Shiu told the audience that the infographic was intended to help make it easier for protected veterans to self-identify, and, to the extent that there is any confusion, they should put their suggestions and thoughts into writing and submit them to Debra Carr, the director of the OFCCP’s Division of Policy and Program Development, who will pass them on to the Solicitor’s Office to clear up any misinformation.
Fiftieth Anniversary. In her prepared remarks, Shiu stated that 2015 was “no ordinary year” for the OFCCP because the agency marked its 50th Anniversary on September 24. After a brief review of the history of Executive Order (EO) 11246 and the OFCCP, Shiu encouraged the audience to visit the agency’s 50th Anniversary webpage. EO 13672, issued on July 21, 2014, which amended EO 11246 to add sexual orientation and gender identity to the list of protected categories, is “another chapter of the civil rights journey,” she said. Employers “have the power to create ripples of hope that translate into tangible jobs,” Shiu asserted. “You are called to lead by example,” she stated, and the OFCCP “will be there beside you.”
Sexual orientation and gender identity. On April 8, 2015, the OFCCP’s final rule on revised regulations to enforce EO 13672 took effect. The final rule revises the OFCCP’s regulations at 41 CFR Parts 60-1, 60-2, 60-4, and 60-50, and it was published in the Federal Register on December 9, 2014 (79 FR 72985-72995). It applies to federal contractors who hold contracts entered into or modified on or after the final rule’s effective date.
The rule prohibits covered federal contractors from discriminating against an applicant or employee based on sexual orientation or gender identity and requires contractors to take affirmative action to ensure equal employment opportunity for LGBT workers. Shiu stated that regulations regarding sexual orientation and gender identity are different than those covering other protected categories because there is no requirement that federal contractors ask workers to self-identify. Moreover, the OFCCP’s regulations do not require contractors to conduct any data analysis with respect to the sexual orientation or gender identity of their applicants or employees. In audits, the OFCCP will examine a contractor’s personal policies, Shiu said. For individual complaints, the OFCCP will examine each one on a case-by-case basis.
Fox asked Shiu whether federal contractors must allow a biological male transitioning to become a woman to enter a company’s female bathroom facilities and vice-versa. While again emphasizing that every case depends on its specific facts, Shiu responded that contractors generally would have to allow transitioning employees such access, adding that transgender employees are no more likely to engage in criminal activities than any other category of worker. In addition, Shiu referenced OSHA’s sanitation standard, which requires that all employers under its jurisdiction provide employees with sanitary and available toilet facilities, so that employees will not suffer the adverse health effects that can result if toilets are not available when employees need them.
As a follow-up, Fox asked whether federal contractors must allow a biological male transitioning to become a woman access to the female shower room of a corporate exercise facility. That is a trickier issue, Shiu said, adding that the OFCCP has not yet developed guidance to address it. Along those lines, Fox asked if the OFCCP will develop a model policy regarding transgender workers. Shiu reported that the OFCCP is working with the Williams Institute at UCLA law school to develop such a policy. In the meantime, employers may want to review the Office of Personal Management’s policy, which Shiu said she understood to be one of the best.
In sum, Shiu observed that issues regarding sexual orientation and gender identity in the workplace are complicated, and she said the contractors should reach out to the OFCCP for guidance with specific questions.
CSALs. The OFCCP sent its last round of Corporate Scheduling Announcement Letters (CSALs) in November 2014. Sent as a courtesy to federal contractors, the CSAL provides advance notification of compliance reviews and is intended to facilitate the contractor’s production of materials and information should that contractor receive an audit scheduling letter and be selected for an evaluation. The OFCCP’s audit scheduling cycle for supply and service contractor establishments is based on its Fiscal Year (FY), which runs from October 1 through September 30. In past practice, each Federal Contractor Selection System (FCSS) scheduling cycle has generally included two scheduling list releases per FY.
On the day of the briefing prior to Shiu’s appearance, Fox pointed out that the OFCCP did not send a second round of CSALs for FY 2015, and is still working of the same list of 2,500 establishments from the round sent in November 2014. In light of this circumstance, Fox asked Shiu if the agency will continue sending CSALs in the future. Stating that CSALs are voluntary on the part of the agency (i.e. not required of the OFCCP by law), Shiu said that she thinks they are important and that the agency will continue to send them.
The speakers. As OFCCP Director, Shiu oversees a staff of 650 employees nationwide. She also serves on the National Equal Pay Enforcement Task Force and represents the Secretary of Labor on the federal Interagency Working Group of the White House Initiative on Asian Americans and Pacific Islanders.
Fox is the President and a founder of Fox, Wang & Morgan P.C. in Los Gatos, California. He leads large and complex litigation matters in state and federal courts, in cases involving wage-hour and discrimination class actions, trade secret claims, employment contract disputes, wrongful termination, corporate investigations, and the use of statistics in employment matters. Fox previously served as Executive Assistant to the Director of the OFCCP, where he was responsible for all enforcement and policy matters.
NELI’s Thirty-Third Annual Affirmative Action Briefing was held in Chicago on October 29-30, 2015. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: www.neli.org.
* Update: In December 2015, the OFCCP posted two new FAQs to address the confusion regarding the agency’s infographic on protected veterans. These FAQs: (1) confirm that the OFCCP has not changed (and cannot change) the definition of “protected veteran” under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (VEVRAA); and (2) clarify how the OFCCP determines the scope of the “active duty wartime” category of protected veteran.
An employer’s attempt to explain its side of a dispute in a collective action alleging that it improperly classified “fit models” as independent contractors came close to crossing the line into inappropriate communications found a court in Agerbrink v. Model Service LLC dba MSA Models. Although the court declined to enjoin the company’s chief operating officer (COO) or the employer itself from discussing the litigation with putative class members, it did concluded that a corrective notice was required and placed limited restrictions on future communications to address any harm caused by an email and to protect against future harm.
The plaintiff filed a collective action alleging that the employer violated her FLSA rights and those of other “fit models” by misclassifying them as independent contractors. At a pretrial conference, she raised concerns about an email sent by the COO to members of the putative class. The plaintiff contended that the email contained statements that were misleading, coercive, and likely to chill participation and confuse potential opt-in plaintiffs.
Employer’s relationship with models. Of critical concern to the court was the business relationship between the employer, a modeling agency, and the models. Was the communication from the agency to the models inherently coercive? Here, the court observed that the potential opt-in plaintiffs may be inclined to defer to the defendants because of the nature of their relationship. The models not only were economically dependent on the agency, but also looked to it for “guidance.” As a result, the fact that the models relied on the employer for “professional advice” made it less likely they would question information they received from a senior executive and, therefore, more likely they would be misled by misrepresentations or omissions in the email.
Moreover, the court found the email’s depiction of independent contractors versus employees as one-sided by casting independent contractors in a more positive light. However, it concluded that the statements did not come across as a “statement of law,” nor did they suggest a legal test used by courts in deciding employee status. Thus, while the description of independent contractors and employees was selective, it was not so misleading as to require correction.
Tax status. The court was also troubled by the implications of the email that any change in tax status would be negative. The defendants were correct that the lawsuit had “foreseeable outcomes that could well impact the tax status and resulting tax obligations of the models.” But, the court found the email’s discussion of tax status misleading in its one-sided presentation of the tax benefits and responsibilities of independent contractors and employees. The email suggested that independent contractors paid fewer taxes because they may deduct “substantial legitimate business expenses” and have “no income withholding for taxes,” whereas employees “are limited in what employment business expenses they can deduct” and “have federal, state and city taxes and social security withheld from their pay.” However, the email did not mention that independent contractors are still liable for income tax, but pay taxes directly rather than having them withheld from earnings.
The potential for this omission to mislead was compounded because the models looked to the employer for “professional advice.” Because the email cataloged specific differences between the tax liabilities of employees and independent contractors, the court pointed out that the putative class members would have no reason to question its accuracy. Given the parties’ relationship, the court found this aspect of the email both coercive and misleading.
Employer’s interest in litigation. The court also disagreed with the defendants’ argument that the employer was not obligated to disclose its interests in putative class members’ non-engagement in the lawsuit, or that the email’s acknowledgement that the employer was defending the lawsuit clearly meant that it was being sued and that its interests were adverse to the plaintiff’s and putative class members. In light of their ongoing business relationship, the models may presume that their interests are aligned with the employer’s, and therefore may not question the email’s “advice.” Thus, the court found that the email’s failure to explicitly acknowledge the defendants’ specific adverse interests had the potential to mislead by omission.
Corrective measures. Still, while the court found that the email had the potential to mislead, it determined that its task was to tailor “the narrowest possible relief” which would protect the respective parties. As a result, the court ordered a corrective notice and a limited restriction on future communications; however, it declined to enjoin the COO or the employer from discussing the litigation with the putative class members.
You’ve noticed it: A new supervisor comes in and heads roll—and often, it’s the older heads. It’s not surprising in itself, because often a business chooses to bring in new management in order to make changes. But how many times do the changes made by new management result in litigation? Regardless of the outcome, employers must defend such lawsuits, a time-consuming and expensive proposition.
Consider the apparently ham-handed behavior of the new supervisors in the cases below:
Insubordinate shoulder shrug. Take, for example, a 56-year old truck driver with a 20-year unblemished work history. His new supervisor fired him on the spot for insubordination because, during a routine morning meeting where the supervisor asked employees whether they were having any problems with their trucks, the driver, whose mouth was full of coffee, shrugged his shoulders to indicate he was not. Present at the meeting for the first time were two newly hired younger employers, one of whom—the 19-year-old with no feeder-truck driving experience—took over the fired employee’s duties.
Also notable was the fact the company’s written policy for non-serious offenses, which required prior notice in the form of a warning or written write-up, was not followed. Although the district court had granted the employer summary judgment on the employee’s age discrimination claim, finding no fact issues as to pretext, the Fifth Circuit reversed and remanded in an unpublished opinion (Salazar v. Cargill Meat Solutions Corp., 5th Cir., October 8, 2015, unpublished).
Meeting the metrics isn’t enough. Or what about a manufacturing supervisor in her 50s, who had previously met expectations in her performance reviews, but whose new manager began giving her performance reviews where she met all objective, metrics-based goals, but said she did not “meet expectations?” Meanwhile, the reviews he gave to three other younger supervisors were that they had not met their objective goals but did meet his expectations. Did his actions reflect age bias, or was he legitimately addressing other aspects of the job such as leadership, knowledgeability, and accountability?
By the way, those negative performance evaluations kept her from receiving salary increases or performance bonuses. He also put her on a PIP; none of the younger supervisors, though they continued to not meet metrics-based goals, were placed on a PIP. She eventually got a new manager and was able to successfully complete the PIP and get a salary increase. She sued anyway, and the federal district court in Puerto Rico allowed her age discrimination and retaliation claims to go to a jury (Colon v. Medtronic, Inc., D. P.R., August 27, 2015).
Disparate discipline. Then there was the case of the discharged 56-year-old radiology technologist who during 20 years had incurred only one disciplinary discussion and had become the Lead CT Technologist. After a new supervisor’s arrival, however, she received 26 employee discussions, two verbal warnings, two written warnings, and three 90-day action plans over the next two years. She was ultimately terminated “for continued occurrences of failure to satisfactorily perform the responsibilities of her position.” Her replacement was 32 years old.
But she presented evidence that her replacement was not disciplined for similar “incidents.” Specifically, she identified four times in a two-month period where her supervisor counseled her eventual replacement for patient-care and work-performance errors, but which did not result in formal discipline; she contrasted that to evidence that she was placed on a 90-day action plan after four incidents over a three-month period. Noting that the hospital made no attempt to distinguish the replacement’s substantially identical conduct or the supervisor’s disparately imposed discipline, the court pointed out that the hospital relied on this action plan as the foundation for the employee’s later discipline and ultimate termination. It also noted that the new supervisor told her she was “too old to cry.” and allowed her age discrimination claims to proceed to a jury (Sampson v. Sisters of Mercy of Willard, Ohio, N.D. Ohio, June 29, 2015).
Lesson for managers
In order to minimize the risks, employers might want to consider proactive litigation avoidance training for new managers, especially in the area of age discrimination. A word to the wise, in advance, might have made new managers more aware of these potential pitfalls:
- If you’re going to raise standards, raise them for everyone. If new management has been brought in—or promoted from within—to raise performance standards, fine. Just make sure that the standards are raised objectively for all performers, not just for a select few who have been singled out for harsher treatment, particularly if they are performing the same job as younger counterparts.
- If you’re going to crack down, crack down on everyone’s violations. This is a corollary to Number 1: Tightening up discipline can be an appropriate goal in a workplace that has become too lax. If you tolerate behavior in a 25-year-old because you think it’s funny, but you write-up the same behavior in a 55-year-old because it’s not funny anymore, you’re asking for trouble.
- Follow procedures. When the policy says progressive discipline, follow it. New managers shouldn’t get to make up new disciplinary procedures or skirt the old ones—at least not without clear guidance from HR and, if necessary, employment counsel.
- Don’t be cruel. New managers sometimes feel the need to prove themselves. Perhaps that was a factor in some of the “gotcha” moments from the cases above. For example: Firing someone for insubordination on the spot because he didn’t verbally answer? Having decidedly different and apparently subjective expectations for an older manager that appeared to be a moving target? After apparently unprecedented “piling on” with disciplinary action, telling an older worker she was “too old to cry?” Each of these examples suggests an inexperienced or frustrated supervisor who was not carefully considering the possible repercussions of his or her actions. Those are actions you want your clients to avoid.