On June 30, the Third Circuit ruled that Allegheny Port Authority’s (Port Authority) policy prohibiting political and social adornments on employee uniforms is likely unconstitutional.

In April 2020, Port Authority began requiring its uniformed employees to wear masks at work. When some employees wore masks bearing political or social-protest messages, Port Authority prohibited such masks out of concern they would disrupt the workplace. Several employees who wore masks expressing support for Black Lives Matter were disciplined under the policy. The employees, together with their union, filed suit alleging that Port Authority’s policy violated their First Amendment rights. The Western District of Pennsylvania entered a preliminary injunction rescinding the discipline and preventing Port Authority from enforcing its policy. On Wednesday, the Third Circuit affirmed the District Court’s order.

The Third Circuit noted that government employers may limit speech of their employees more than they may limit speech of the public, but those limits must still comport with the protections of the First Amendment. It held that Port Authority did not meet its burden of showing its policy is constitutional.

When employees speak as citizens, rather than pursuant to official duties, on matters of public concern, the Court applies a balancing test that weighs an employee’s interest in speaking against the government employer’s interest in quelling such speech. The Third Circuit found that Port Authority employees were speaking as citizens and that the mask rules restricted speech on matters of public concern. Indeed, the policy was instituted specifically to prevent commentary on political and social issues. Accordingly, to establish the constitutionality of its policy, Port Authority had to show its interests outweighed those of its employees.

The Third Circuit upheld the District Court’s finding that Port Authority failed to make this showing because it could not demonstrate more than a minimal risk of workplace disruption. Further, Port Authority itself publicly supported Black Lives Matter and consistently allowed employees to wear social protest and political buttons on their uniforms without incident, despite having a longstanding policy prohibiting such buttons.

The Third Circuit also found a subsequent modification to the mask policy, which restricted masks to limited styles and colors, to be likely unconstitutional. Specifically, the Court reasoned:

For many years, Port Authority has not enforced its political-button prohibition. And it became concerned about political masks in response to growing division over the messages on those masks. These facts suggest that the prevailing political conditions, rather than employees’ mode of speech, dictates how contentious employees’ workplace political debates will be.

As a result, Port Authority failed to show the mask ban was sufficiently tailored to address the service disruption concern it advanced in support of the policy.

Public employers that restrict social and political messages by employees during working hours should carefully review their policies to make sure they are consistently enforced and narrowly tailored to address the concern posed by such speech in the workplace. Should you need assistance with this, the Labor and Employment attorneys at Ballard Spahr LLP have experience advising public and private employers in policies and compliance and any other labor-related issues that may arise. 

Joseph Kennedy coached football at Bremerton High School, a public school in Washington State. After football games, Kennedy led prayers at the 50-yard line among players, coaches, fans, and, sometimes, politicians. The Bremerton School District, believing that Kennedy’s prayers might be coercing students, suspended Kennedy after he continued conducting post-game prayers. Kennedy sued, alleging that his suspension violated his First Amendment rights under the Free Speech and Free Exercise Clauses. The School District argued that Kennedy’s prayers would be a prohibited government “endorsement” of religion under the Supreme Court’s decision in Lemon v. Kurtzman, 403 U. S. 602 (1971).

The Ninth Circuit found in favor of the School District, determining that a reasonable observer would consider Kennedy’s prayers to be government action endorsing religion. The Supreme Court, however, disagreed and found that the Ninth Circuit’s “endorsement” analysis was incorrect. Instead, the Court instructed that questions about a government employee’s First Amendment rights “must be interpreted by reference to historical practices and understandings, ” not the Lemon (i.e., “endorsement”) test. Indeed, the Court expressly held that it has “abandoned Lemon and its endorsement test.”

The Supreme Court’s 6-3 decision in favor of Kennedy alters the analysis of First Amendment rights of government employees. Instead of determining whether a reasonable person will view an employee’s actions as a government endorsement of religion, courts must now ask whether the action is historically considered an establishment of religion. This approach seemingly results in more protections offered to a government employee’s religious activities, even if conducted on government grounds.

The decision, found here, applies only to public employers. Under Title VII (and state law equivalents), private employers are prohibited from taking adverse action against an employee because of his/her religion. Title VII also provides employees a right to request a reasonable accommodation for religious reasons. An accommodation must be given unless it would create an undue hardship (which is considered more than a minimal burden on operation of the business).  

All employers – public and private – should consider their policies and the applicable legal standard when faced with an employee’s exercise of religion in the workplace and consult counsel as needed.

On June 23, 2022, the 50th anniversary of Title IX, the U.S. Department of Education released its proposed changes to Title IX regulations, which codify protections for LGBTQ+ students from discrimination based on sexual orientation, gender identity, and sex characteristics. The regulations aim to restore protections for students against all forms of sex-based harassment, ensure prompt and effective action, and eliminate the requirements of a live hearing and cross-examination. Notably, the proposed rule does not address Title IX’s application to school sports, but the Department’s press release indicates that it will address school athletics in a separate rulemaking process.

Attorneys in Ballard Spahr’s Education Industry Group cover the proposed changes at length in a legal alert that can be found here.

On June 9, 2022, the Philadelphia City Council passed an ordinance that would require covered employers to make available to eligible employees a commuter transit benefit program. The bill is currently awaiting the Mayor’s signature, which many expect will occur shortly.  To read more about this development, please see our Alert on this development.

More Pay Transparency Laws

Our last edition focused on the new pay transparency law in New York City.  The New York State Legislature passed Senate Bill 9427A, which would impose salary disclosure requirements similar to those issued in New York City.  The bill would require employers to disclose the compensation or a range of compensation (i.e., the minimum and maximum annual salary or hourly range of compensation) for each job, promotion, or transfer opportunity that can or will be performed, at least in part, in New York State. 

In addition, the New York State law would require the posting to include a job description, if such a description exists.  The bill also includes anti-retaliation language that states that “[n]o employer shall refuse to interview, hire, promote, employ or otherwise retaliate against an applicant or current employee for exercising any rights under this section.” 

If the Governor signs the bill, it would take effect 270 days later.  Non-compliant employers shall, thereafter, be subject to civil penalties of up to $1,000 for a first violation, $2,000 for a second violation, and $3,000 for a third or subsequent violation. 

Other localities in New York, in addition to New York City, have enacted or introduced pay transparency legislation, including:

  • amended § 215-3 of its city code to require employers with four or more employees based in Ithaca to disclose the “minimum and maximum hourly or salary compensation” in job postings. The ordinance goes into effect September 1, 2022.
  • amending § 700.03 of the county’s Human Rights Law, that requires employers to include a salary range when posting job opportunities and restricts inquiry into prospective employees’ wage history. The requirements apply to employers with four or more employees who post for positions that are “required to be performed, in whole or in part, in Westchester County.” The law goes into effect early November 2022.
  • introduced a law amending the Albany County Omnibus Human Rights Law to require employers to provide the minimum and maximum salary or hourly wage on job postings. The law is pending further review by legislature committees.

S8922A Warehouse Worker Protection Act

The New York Legislature passed Senate Bill S8922A, known as the Warehouse Worker Protection Act, on June 3, 2022. Should the Governor sign the bill, the law would require warehouse distribution centers—which include those that employ 100 or more employees at a single center or 500 or more employees at centers throughout New York State—to provide their employees written descriptions of work-related quotas they are expected to meet.

Work-related quotas are defined as standards that mandate, within a defined time period, an employee’s specified productivity speed, quantified number of tasks, or quantified amount of material to be handled or produced. The law would prohibit quotas that interfere with required meal or rest periods or use of bathroom facilities.

The bill also imposes recordkeeping requirements on employers and includes a right to request for current and former employees to obtain certain records, such as written descriptions of quotas that affected the employees. Employers would also be subject to the bill’s anti-retaliation provision.

The law would take effect 60 days after the Governor signs the bill. Civil penalties issued for non-compliance could be up to $1,000 for the first violation, $2,000 for a second violation, and $3,000 for all subsequent violations.

Expanding Protections for Freelancers: Freelance Isn’t Free Act

Both the New York State Senate and the State Assembly have passed Bill S83698, expanding on a 2017 New York City specific version of the Freelance Isn’t Free Act. The previous bill established a legal definition for freelance labor in New York City and aimed to help freelancers resolve payment issues with their clients. S83698 expands the protections for freelancers state-wide and provides coverage to freelancers who live in other states but conduct business with New York based companies.

The recent act will mandate “that any hiring party across the state retaining a freelancer’s services for at least $250 provide such freelancer with a detailed written contract and timely and full payment.” If the contract does not specify a “timely manner,” then the hiring party must pay the contracted party “no later than thirty days after the completion of the freelance worker’s services under the contract.” Additionally, the bill contains an anti-retaliation provision to further protect freelance workers.

The new legislation comes as a response to the many unlawful payment practices complaints filed by freelance workers amidst the COVID lockdown.  Independent contractors, unlike regular employees, are not protected by the same minimum wage laws and are generally not eligible for unemployment and workers compensation.

The bill is set to be delivered to the Governor for either a signature or veto. If the Governor signs the bill, it will take effect 180 days later.  A violation of any of the law’s provisions may result in penalties up to $25,000.

The Consumer Financial Protection Bureau (CFPB) issued a Request for Information (RFI) regarding employer-driven debt. Specifically, the CFPB is interested in “debt incurred to an employer or an associated entity, taken on in pursuit or in the course of employment.” Comments must be received by Wednesday September 7, 2022.

The CFPB is seeking  input from all workers, including independent contractors and others who are not considered “employees” under the Fair Labor Standards Act.

One example of an employer-driven debt product is “Training Repayment Agreements.” In these agreements, the worker is required to repay their employer or a third-party entity for the costs of  employer-required training, if they separate within a set time period. Another example is debt owed to an employer, or third-party entity, for the upfront purchase of equipment or supplies that are required by the employer, but that it does not provide or pay for.

The CFPB plans to analyze the information received to better understand the “relationship between labor practices and the market for consumer financial products or services” and to identify “priority areas for future action.”

The CFPB continues to demonstrate an interest in this area. In January of 2022, the U.S. Department of Transportation announced that it will be working with the CFPB and the U.S. Department of Labor to create a Truck Leasing Task Force, focused on investigating “predatory truck leasing arrangements.” In March of 2022, the agency released a blog post discussing the results of a roundtable event it hosted interviewing worker organizations and labor unions. As a result of those talks, the agency stated that it will “continue to analyze information about [employer-driven] debts and their collection by employers and third-party debt collectors to determine how best to address harm to workers” as well as “any potential violations of federal consumer financial law.”

Ballard Spahr LLP’s Labor and Employment and Consumer Finance attorneys are prepared to answer questions regarding the RFI or more generally about employer-driven debt products.

In May 2022, Colorado legislators passed a law that bans employee non-compete clauses for workers making less than six figures annually.  Governor Jared Polis (D) signed the bill into law on June 8, 2022, giving it an effective date of August 10, 2022.

In short, HB 22-1317, imposes an income-based minimum on enforceable non-compete agreements between employers and employees.  The new restrictions apply to employment contracts signed or renewed after the legislation’s effective date. 

Colorado law already limited the use of non-competes to executives, corporate officers, and their professional staff, but this latest measure adds a “highly compensated” standard that will start at $101,250 and increase annually a figure that will be indexed and set by the Colorado Department of Labor for “highly compensated” employees and will increase proportionately to inflation. 

As companies evaluate their employment practices and operate in remote work environments, it is also worth noting that choice-of-forum and choice-of-law provisions applicable to non-competes may not mandate adjudication outside of Colorado, if the worker primarily resided or worked in Colorado at the time their employment was terminated. This could pose a special challenge for employers which are increasingly relying on a remote workforce.

The Colorado law sets a lower bar for non-solicitation clauses that prevent employees from poaching their former employer’s customers, allowing businesses to impose those restrictions on workers making up to 60% of the “highly compensated” standard, i.e. $60,750 for 2022.

The new Colorado law leaves untouched existing exceptions for restrictive covenants imposed as part of the sale of a business or its assets, or to protect trade secrets.

The law marks a trend in state-level action addressing non-compete agreements: 10 other states have passed laws in the last six years to ban non-competes for low-wage workers, although the income thresholds in those laws vary widely from about $30,000 of annual income in New Hampshire, $75,000 in Illinois, to $100,533 in Oregon, and now Colorado.  Note that Colorado was the first state to criminalize the use of non-competes exceeding the permissible scope of Colorado state law.  To read more about that development, see our earlier Alert here.

Ultimately, employers must be cognizant of the state laws that apply to their restrictive covenant agreements in a legal landscape that is increasingly a patchwork of incongruent laws.  Choice of forum provisions and choice of law provisions represent a potential option for certain employers seeking streamlining, but their enforceability depends on state laws.

For the second time in two weeks, the U.S. Supreme Court has ruled against a company seeking to compel individual arbitration of Fair Labor Standards Act (FLSA) collective action claims.  In Southwest Airlines Co. v. Saxon, the Court held that the plaintiff’s claims were exempt from arbitration under Section 1 of the Federal Arbitration Act (FAA), which exempts from the statute’s ambit “contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce.”  The decision resolves a split between the Seventh and Fifth Circuits on this technical statutory issue.  As in its May 27 ruling in Morgan v. Sundance, the Court based its conclusion on the plain text of the FAA, rather than its pro-arbitration purposes.  

In order to move passenger, commercial, and mail cargo, Southwest employs both ramp agents, who physically load and unload baggage, airmail, and freight, and ramp supervisors, who train and supervise ramp agents but also frequently step in to load and unload cargo alongside ramp agents.  Saxon brought a putative collective action, alleging that Southwest failed to pay ramp supervisors proper overtime wages.  Southwest moved to compel individual arbitration pursuant to an arbitration agreement in Saxon’s employment contract.  The district court compelled arbitration, but the Seventh Circuit reversed, holding that Saxon’s claims were exempt from arbitration under Section 1 of the FAA because the act of loading cargo onto a vehicle to be transported interstate is itself commerce, as that term was understood when the FAA was enacted in 1925.  The Supreme Court affirmed the Seventh Circuit opinion.

Examining the “text” of the FAA, the Court held that Saxon was a “worker” “engaged” in foreign or interstate “commerce” within the meaning of Section 1, based upon the dictionary definitions of those terms as understood during the time the FAA was enacted.  It further held that “[c]ontext confirms this reading,” because the application of various canons of statutory construction “point to the same place” as the dictionary definitions.  Notably, Southwest argued that Section 2 of the FAA broadly requires courts to enforce arbitration agreements in any “contract evidencing a transaction involving commerce,” while Section 1 provides only a narrow exception.  According to Southwest, this demonstrated the FAA’s “pro-arbitration purposes” and counseled in favor of an interpretation that erred on the side of fewer Section 1 exemptions.  However, the Court disagreed, explaining that:

To be sure, we have relied on statutory purpose to inform our interpretation of the FAA when that “purpose is readily apparent from the FAA’s text.” AT&T Mobility LLC v. Concepcion, 563 U. S. 333, 344 (2011).  But we are not “free to pave over bumpy statutory texts in the name of more expeditiously advancing a policy goal.”  New Prime [Inc. v. Oliveira], 586 U. S., at ___ (slip op., at 14).  Here, §1’s plain text suffices to show that airplane cargo loaders are exempt from the FAA’s scope, and we have no warrant to elevate vague invocations of statutory purpose over the words Congress chose.

Justice Thomas wrote the opinion of the Court, in which all of the other Justices joined, except for Justice Barrett, who took no part in the consideration or decision of the case.

We will be watching to see if this theme of “text versus statutory purpose” continues to resonate in the two remaining arbitration decisions that are expected from the Court this term.

In the recent decision in Hexcel Corp. v. Lab Commission, the Utah Court of Appeals affirmed a decision by the Utah Labor Commission that Hexcel was liable for discrimination and/or retaliation when it fired an employee because of his disability and related request for accommodation.

Michael Pickard had worked as a maintenance electrician. He injured his back in an accident at work. After the injury, his doctor recommended that he not stand, sit, or walk for extended periods. Mr. Pickard requested that Hexcel accommodate his injury by allowing him to work eight-hour shifts, instead of his normal 12- hour shift. The employer denied the request because it was “short-staffed,” so Mr. Pickard resumed his normal work schedule.

Long before Mr. Pickard’s accommodation request, Hexcel had instituted a rule against sleeping on the job. However, this rule was not enforced. Later, the company circulated a memorandum expressing its intent to begin enforcing the no-sleeping rule and informing its employees that a violation would result in termination. Even after this, Hexcel’s enforcement of the no-sleeping rule was inconsistent. Some employees violated the rule, but were not terminated—or even disciplined—for their infractions.

In addition, the exact parameters of the no-sleeping rule were not clearly established. When employees asked about the rule, they were given conflicting explanations. Some were told that they could nap on their breaks as long as they were in the designated breakroom. Other workers were told that they could nap anywhere, as long as they were on a break. Hexcel never put these “evolutions and modifications” of the rule into writing.

A few months after the company denied Mr. Pickard’s request for accommodation, he was caught sleeping in a company truck during a brief break and was fired.

The Commission determined that Mr. Pickard had made out a prima facia case of discrimination on the basis of his disability, and that Hexcel’s allegedly nondiscriminatory basis for firing him based on the no-sleeping rule was pretextual, because the rule was “incoherent” and inconsistently applied. The Commission awarded damages for lost wages, out-of-pocket medical expenses, and the amount of withdrawals Mr. Pickard had made from his savings and 401(k) accounts to cover living expenses during the time he was unemployed.

The Utah Court of Appeals affirmed, finding that the Commission’s determination was supported by substantial evidence and was not clearly erroneous. The court modified the damages award, however. It concluded that in granting Mr. Pickard damages for lost wages, plus the funds he had to withdraw from his savings accounts to compensate for these lost wages, the Commission had given him an impermissible “double recovery.”

Although the court reduced the amount of Mr. Pickard’s damages, the Hexcel case serves as a warning and reminder to employers that taking an adverse action against an employee on the basis of an inconsistent, unclear policy can have serious consequences and lead to costly litigation. Fortunately, preventing successful discrimination/retaliation claims can be a simple matter of routinely reviewing and updating your company’s handbook, policies, and verifying consistent compliance with the same. Should you need assistance with this, the Labor and Employment attorneys at Ballard Spahr LLP have decades of experience in advising public and private employers in policies and compliance and any other labor-related issues that may arise. 

The United States indicted DaVita, Inc., and Kent Thiry, DaVita’s former Chief Executive Officer, last year alleging that they had violated Section 1 of the Sherman Act by engaging in “Conspiracy in Restraint of Trade to Allocate Employees.” The essential elements of the criminal charges were alleged agreements with competitors not to poach each other’s employees.

The trial began that on April 4, 2022, was among the first of its kind since the Department of Justice (DOJ) and the Federal Trade Commission (FTC) issued guidance in 2016 stating that the DOJ would prosecute naked no-poaching or wage-fixing agreements. On April 15, 2022, a federal jury found both DaVita and Thiry not guilty of criminal conspiracy. Additionally, on April 14, 2022, a federal jury in Texas found the owner of a physical therapy staffing company, Neeraj Jindal, and John Rodgers, a former clinical director of the company, not guilty of criminal charges related to employee wage-fixing.

While these verdicts may signal that juries are skeptical of the government’s efforts to criminally prosecute companies or individuals in these labor/employment cases, it is unlikely that the DOJ will cease pursuing these types of matters.

Ballard Spahr’s Labor and Employment and Antitrust Groups are prepared to answer questions regarding antitrust issues in the context of the labor market, as well as non-solicitation and no-poach provisions and have written a full alert on this matter here. Please contact us if we can assist you in understanding your company’s legal requirements and the measures your business must take to remain in compliance with applicable law.