Supreme Court Substantially Limits Whistleblower Protections under Dodd Frank

On February 21, 2018, the US Supreme Court significantly limited the protections whistleblowers have under the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd Frank), by holding that whistleblowers who report suspected securities violations internally to their employer are NOT protected from retaliation under Dodd Frank. This ruling clarifies an area of considerable liability for publicly traded companies (retaliation lawsuits relating to financial disclosures) and reinforces an employer’s ability to consistently and lawfully enforce workplace policies.

Some Background on the Issue

Among its provisions, Dodd Frank affords broad protection from retaliation for employees who report actual or suspected violations of the securities laws to the authorities. Over time, this provision in the law was interpreted by some courts to mean that employees who reported violations to their employers were protected under the law to the same extent as an employee who reported such activity to the Securities and Exchange Commission (SEC).

Retaliation arising out of internal reports relating to the company’s financial disclosures have been a significant risk for employers who lawfully enforced their workplace policies, and in so doing, held employees who complained of alleged securities violations to the same standards as other employees. The court’s ruling affirms that employees only have a right to sue under Dodd Frank when they report violations to the SEC, thereby limiting the scope of retaliation lawsuits under the Act.

The Effects of This Ruling

This is an important ruling for employers who often face whistleblower lawsuits as a “last resort” by employees who otherwise lack a valid reason to sue. However, in viewing the effects of this case, employers should use caution and should understand that this ruling only limits the types of whistleblower lawsuits that an employee may bring; whistleblower claims are still alive and well.

Employers must still protect whistleblowers from retaliation under state and federal law and can face substantial liability for not doing so. Additionally, employees continue to have vast protections to complain to their employer and law enforcement and governmental agencies relating to their employment terms and conditions and suspected violations of the law.

Finally, all employers (publicly traded and private) should take this time to ensure their whistleblower policies have clear anti-retaliation provisions to encourage internal reporting of suspected violations of the law, that the employee complaint hotline is functional and effective, and that all employees receive training on internal reporting. By doing so, employees may be encouraged to make use of internal reporting mechanisms and feel less compelled to take their complaints to external parties, be they the SEC or other agencies.

Washington Joins the “Ban the Box” Bandwagon

Effective June 6, 2018, Washington employers will no longer be permitted to ask applicants about arrests or convictions, or to receive information through a criminal background check, prior to making a determination as to whether the applicant is otherwise qualified for a position. This new law is known as the Fair Chance Act (the Act).

Prohibited Activities Under the Act

Under the Act, an employer is prohibited from doing any of the following before making an initial determination that an applicant is otherwise qualified for the position:

  • Asking orally or in writing about the applicant’s criminal record;
  • Receive information through a criminal history background check; or
  • Otherwise obtaining information about the applicant’s criminal record.

For purposes of the Act, an applicant is “otherwise qualified for the position” when the applicant meets the basic criteria for the position as set out in the advertisement or job description without consideration of a criminal record.

The Act also limits the content of an employer’s advertisements for job openings and hiring policies by specifically prohibiting:

  • Advertising employment openings in a way that excludes people with criminal records from applying (e.g., ads that state “no felons” or “no criminal background”); and
  • Maintaining any policy or practice that automatically or categorically excludes individuals with a criminal record from consideration prior to an initial determination that the applicant is otherwise qualified for the position.

o   Such prohibited policies and practices include rejecting an applicant for failure to disclose a criminal record prior to initially determining the applicant is otherwise qualified for the position.

Activities and Employers Not Covered by the Act

The Act does not prohibit or limit criminal history background inquiries at the pre-employment stage in the following circumstances:

  • An employer hiring a person who will or may have unsupervised access to children under the age of 18 or a vulnerable adult as defined under the law;
  • The employer, including a financial institution, is permitted or required under federal or state law to conduct criminal history background inquiries for employment purposes;
  • Employment is sought with certain law enforcement and criminal justice agencies; or
  • The applicant will be a nonemployee volunteer.

Note: The Act expressly states that it does not impose any obligation on employers to provide accommodations or job modifications in order to facilitate the employment or continued employment of an applicant or employee with a criminal record or who is facing pending criminal charges.  Thus, employer’s may still enforce their attendance policies fairly and consistently, regardless of whether the applicant or employee in question has a criminal record or is currently involved in criminal proceedings.


Employers in Washington and those with employees in the state should take this opportunity to review their hiring policies and practices, including content on applications, interview procedures and questions, and any pre-employment screening, to ensure they comply with Washington’s Fair Chance Act.

While not specifically required by the Act, employers should consider adopting consistent procedures for extending written offers of employment to applicants who are determined to be otherwise qualified for the position, subject to the applicant passing a criminal history inquiry. Such a procedure will assist employers in showing that an “initial determination” of the applicant’s qualification for the position was made and will demonstrate that any inquiry into an applicant’s criminal history occurred after the applicant was deemed otherwise qualified for the position.

Finally, in determining the impact of an applicant’s criminal record on his or her qualifications for a position, employers should consider following the process supported by the EEOC, which includes: inquiry into the nature and gravity of the offense or conduct; the time that has passed since the offense occurred; and the nature of the job held or sought (i.e., is the nature of the offense related to the essential functions of the position?).

NLRB Whiplash- Previous Joint Employer Standard Back on the Table

In an unfortunate move (though likely temporary), the NLRB elected to vacate its own ruling in the recent Hy-Brand joint employer case due to a conflict of interest involving one of the board members.  According to a report by the inspector general, one of the board members had previously represented an employer before the board on the same issue of joint employer status and should not have participated in the Hy-Brand case.

What the Courts Decision Means for Employers

Hy-Brand had overruled the infamous Browning-Ferris case that set forth a test for determining joint employer status that was nearly impossible for employers to pass. Now with Hy-Brand vacated, Browning-Ferris is back along with its pro-employee interpretation of joint employer status.

According to Browning- Ferris, a business qualifies as a joint employer if it exhibits indirect control or the ability to exert such control over employees. Thus, a franchisor that reserves the authority to control the terms and conditions of employment can be liable as a “joint employer. “


With the old standard back in play, employers, particularly franchisors, should exercise caution in the terms of franchisor agreements to ensure all employment decisions and control over the franchisee’s employees come from the franchisee, or run the risk of becoming liable for the franchisees mistakes.

Stay tuned for more developments that are sure to come soon.

New York City Adds Safe Time to Existing Sick Leave Law

Starting May 5, 2018, New York City employers must permit employees to take paid sick leave when they or their family members are victims of family offense matters, sexual offenses, stalking, and human trafficking.  These changes come through an amendment of New York City’s Earned Sick Time Act which will now be known as the Earned Sick and Safe Time Act (Act).  Thus, employers should modify their sick leave policies accordingly.

Added Uses for Sick Time

The amendments to the Act expand the reasons an employee may request time off (paid or unpaid) under the sick leave law, but not the amount of leave that must be provided.  Under the amendments, an employee may request leave if the employee or an employee’s family members has been the victim of a family offense (including domestic violence and disorderly conduct), sexual offense, stalking or human trafficking and needs time off to do any of the following:

  • Obtain services from a domestic violence shelter, rape crisis center, or other shelter or services program;
  • Participate in safety planning, temporarily or permanently relocate, or take other action to increase safety to the employee or employee’s family members from future family offense matters;
  • Meet with a civil attorney or other social service provider to obtain information and advice on, and prepare for or participate in any criminal or civil proceedings;
  • File a complaint or domestic incident report with law enforcement;
  • Enroll children in a new school; or
  • Take other action necessary to maintain, improve, or restore the physical, psychological, or economic health or safety of the employee or the employee’s family members, or to protect those who associate or work with the employee.

Expanded Definition of Family Member

The Act also expands the definition of family member under the sick leave law for both sick and safe time purposes.  This term will include:

  • Any individual related by blood to the employee; and
  • Individuals whose close association with the employee is the equivalent of a family relationship.

Same Rules for Absences and Supporting Evidence

Employers are still prohibited from asking for documentation relating to the employee’s leave unless the absence is for more than three consecutive work days.  The Act additionally prohibits employers from requesting or requiring the employee to disclose details relating to the employee’s or employee’s family member’s status as a victim of family offenses, sexual offenses, stalking, or human trafficking as a condition of providing leave.

Preparing for this Change

Employers will be required to provide new employees with notice of their rights under the Act.  It is anticipated the New York City Department of Consumer Affairs will provide a model notice on its website closer to the effective date of the Act.  Employers should keep an eye out for this notice and prepare to provide it to new hires starting May 5.  Current employees must be provided with the expanded notice no later than June 4, 2018.

Employers should also revise their sick leave policies, or PTO policies, to expand the permissible reasons for leave as well as the definition of family member in their policy.  Such policies should be distributed to all employees and all recipients should sign an acknowledgement of their receipt and understanding of it.

California Alert: Wage and Hour Law Just Changed – Retroactively

On March 5, 2018, the California Supreme Court settled a previously ambiguous area of wage and hour law in California: How an employee’s overtime rate should be calculated when an employee has earned a flat sum bonus during the pay period.   Unfortunately, the court decided the matter squarely against employers and determined that its ruling should apply RETROACTIVELY.  As a result, California employers who pay their employees a flat sum bonus need to take immediate action to reduce the potential for wage and hour claims.

Some Background on the Issue

To better understand the impact of this case, it’s necessary to understand how the payment of non-discretionary bonuses impact an employee’s overtime compensation.  Non-discretionary bonuses are those that an employer pays when the employee meets certain criteria, such as level of production or by working a specified number of days or specific days in the week.  Such bonuses are different from discretionary bonuses, such as a holiday bonus, which the employer may choose to pay or not at their discretion.

When an employee earns a non-discretionary bonus during a pay period, the employer must include the bonus in the calculation of the employee’s regulate rate of pay and corresponding overtime compensation. Regular rate is calculated by adding all compensation earned by an employee during the pay period and dividing that number by the total hours actually worked by the employee. Compensation included in the regular rate calculation includes hourly pay, piece rate, commissions, non-discretionary bonuses, and the value of meals and lodging.  The employee’s overtime is calculated by dividing the regular rate by ½ and multiplying that number by the total overtime hours worked (in California, generally all hours over 8 in a day and 40 in a week).

Thus, as the basis for calculating the overtime rate, the manner in which regular rate of pay is calculated can have a significant impact on the employee’s overtime compensation.

The New Rule

The employer in Alvarado v. Dart Container Corporation of California calculated its employees overtime for non-discretionary attendance bonuses in compliance with the federal Fair Labor Standards Act (and similar to the formula discussed above):

  1. Multiply the number of overtime hours the employee worked in the pay period by the employee’s straight time rate (i.e., the employee’s normal hourly rate).  This gave the employer the employee’s base hourly pay.
  2. Add (a) the total hourly pay for non-overtime work during the pay period; (b) any non-hourly compensation the employee earned during the pay period, including any attendance bonuses; and (c) the base hourly pay (from step one above).  The result is the total base pay.  Divide the total base pay by the total number of hours the employee worked, including overtime hours.  This gives the regular rate.
  3. Multiply the regular rate of pay from (step two) by the total overtime hours worked and then divide that amount in half.  The result is the overtime premium.
  4. Add the base hourly pay (from step one) and the overtime premium (from step 3) to get the total overtime compensation.

The employee sued the employer claiming that the employer’s method of calculating overtime compensation diluted the employee’s regular rate of pay and reduced the employee’s overtime compensation by including overtime hours when calculating the regular rate on the employee’s attendance bonus.  The employee advocated for the formula used by the Division of Labor Standards Enforcement (DLSE) in its Enforcement Manual which allocates the attendance bonus only to non-overtime hours worked in the pay period.

To the consternation of the employer, the court sided with the employee.  The court found that since the attendance bonus is earned regardless of whether the employee works any overtime hours, it should be treated as being earned by only non-overtime hours.  Otherwise, the bonus would act to reward employers for having employees work overtime by decreasing the employee’s overtime pay rate the more hours the employee worked.

Accordingly, the court found the following method appropriate under California law:

  1. Calculate the overtime compensation attributable only to the employee’s hourly wages, by multiplying the employee’s hourly rate by 1.5 and multiplying that number by the number of overtime hours.
  2. Calculate the overtime compensation attributable only to the employee’s bonus, by dividing the attendance bonus by the number of non-overtime hours the employee worked.  Then multiply that number by 1.5 and multiply that number by the number of overtime hours worked.
  3. Add the amounts in step one and two to get the total overtime compensation for the pay period.

As the court noted, the key distinction between the employer’s method and the one advocated by the employee was the divisor used to calculate the per-hour value of the bonus: the employer divided the bonus by the total hours actually worked (regular and overtime hours) while the employee divided the bonus only by the non-overtime hours worked.  The employee’s method was found marginally more favorable for employees.

As a final nail in the coffin of California employer’s, the court determined that this new rule, and all wage and hour liability associated with it, should apply retroactively.  This means employers may be held liable for their past and current practices of paying out overtime for attendance bonuses if they used the method permitted by the FLSA, even if those payments occurred before this ruling.

The only saving grace is that this ruling was limited to attendance bonuses and other flat sum bonuses comparable to attendance bonuses.  Thus, payment of overtime for production or piecework bonuses is unchanged by this ruling and employers may still follow the formula found in the FLSA.  Indeed, even the DLSE uses a method similar to that found in the FLSA for calculating overtime for such bonuses.

Some Takeaways

California employers who pay their employee’s attendance bonuses should immediately review their procedures for paying out overtime compensation for such bonuses to ensure they are compliant with this new rule.  The wage and hour implications of incorrectly paying overtime are severe and include potential statutory and civil penalties.  In addition, wage and hour violations are prime subject matter for class action lawsuits.  As a result, this new ruling could trigger class claims if not handled properly.

California employers who pay their employees attendance or other similar flat sum bonuses may also want to consider having their payment practices reviewed by legal counsel familiar with California’s wage and hour laws.  Legal counsel may also be able to assist employers in crafting the messaging to employees relating to any changes in their overtime compensation from this new rule so as not to put employees on notice of any potential wage and hour issues.

How NOT Hiring an Employee Could Hurt Your Business

Human Resources personnel usually don’t give much thought to antitrust concerns, issues usually left to the legal team and compliance professionals, but HR actions have recently become an antitrust issue with possible civil and criminal penalties.

The Way It Used to Be

Prior to 2016, it wasn’t uncommon for employers to agree not to hire one another’s employees, and they didn’t have much risk in doing so. The Department of Justice (DOJ) and the Federal Trade Commission (FTC) changed this with guidance stating that agreements between employers to limit or fix employment terms for potential hires may violate antitrust law. The result: potential criminal prosecution against individuals, the company, or both.

The Growing Risk

The DOJ/FTC guidance is a clear red flag, but it’s not the only one:

  • In 2012, the DOJ brought enforcement actions under the antitrust laws against Silicon Valley companies like Apple, Google, and Adobe for their employee “no-poach” agreements. 
  •  Following these enforcement actions, employees brought class action lawsuits against the Silicon Valley companies, resulting in nearly $1 billion in settlements.
  • In a recent case, a class action lawsuit was brought against Duke University and University of North Carolina’s School of Medicine for agreeing to prohibit lateral faculty moves between the schools. 
  • Finally, in a speech in early 2018, the head of the Antitrust Division of the DOJ confirmed that there are ongoing criminal investigations into companies with similar unlawful agreements.

Reduce Your HR Antitrust Risk

To reduce your antitrust risk, it is highly recommended that you take the following steps:

  1. Expand antitrust policies to include agreements related to employees. Your policies should clearly prohibit discussions or agreements with other employers relating to employees’ wages, salaries, benefits, terms of employment, and job opportunities.
  2.  Include HR personnel in your antitrust training. When offering antirust training, be sure to include all HR personnel and provide scenarios specific to the HR setting. Consider offering HR-specific antitrust training just for HR personnel.
  3. Clearly document your reasons for not hiring the employees of competitors. Defending against allegations will be easier if you have a system for documenting the lawful reasons for your employment decisions.
  4. Be diligent about internal documentation and communication. One poorly worded email or note-to-self about a competitor’s employee being “off limits” could trigger a lawsuit or regulatory investigation.
  5. Have legal counsel review information exchanges involving terms of employment. Without safeguards to anonymize and aggregate information, such exchanges can increase antitrust risk.

Why Employers Should Avoid Jumping the #MeToo Gun

A recently filed lawsuit against an employer following a #MeToo-influenced termination may mark the beginning of a new wave of liability flowing from the movement.

An Interesting Twist

New York comedian Aaron Glaser filed the lawsuit against his former employer, Upright Citizens Brigade (UCB), alleging that he was terminated following a biased investigation into allegations that he raped and drugged several women.  Glaser further alleges he was not questioned or presented with any information concerning the allegations of his misconduct other than a statement that “in the past people feel as though you raped them,” along with information that the alleged conduct had occurred approximately 6 years earlier.  Based on these allegations, Glaser alleges he was terminated and banned from entering UCB premises.

Following his termination, Glaser claims that his termination and banning were leaked by his former employer and posted on social media despite being told they would remain confidential.  As a result, according to Glaser, he was unable to find work in other venues.

Glaser’s allegations against his former employer include gender discrimination (based on his termination during a movement in the comedy community labeled “believe all women”); hostile work environment; retaliation; and wrongful termination (for his termination as a result of the allegedly biased investigation).

The Takeways

Regardless of whether Glaser’s claims have any merit, they point to the importance of a fair, unbiased, and evidence-based investigation.  Employers should resist the court of public opinion and the pressures of social media movements and instead hold to their workplace policies and investigative procedures. These should include:

  • Investigations only by unbiased, neutral, parties. Where necessary, a neutral third-party may be appropriate.
  • Interviews of the complaining party as well as the alleged wrongdoer.
  • Interviews of any witnesses to the alleged misconduct.
  • Review of any relevant communications between the complaining party, alleged wrongdoer, and third-parties.
  • Thorough documentation of any findings of the investigation.
  • Notice to the alleged wrongdoer as to whether the complaint was substantiated and what if any policies were violated.
  • Appropriate disciplinary action to stop the misconduct and to prevent it from recurring. This may be termination, or it might be a written warning and mandatory training.
  • Notice to the complaining party as to whether his or her complaints were substantiated and whether appropriate disciplinary actions were taken. In most instances, the specific disciplinary actions taken should not be disclosed.
  • Confidentiality of the investigation and findings by the employer. Only those persons with a need to know the information should be informed of the existence of the investigation or employer’s findings.

NEW LAW: Spokane (WA) Enacts Ban-The-Box Legislation

The Spokane city council recently passed Ordinance No. C-35564 (The Fair Chance Hiring Ordinance), which goes into effect on June 14, 2018.

When this new law goes into effect, Spokane employers can no longer inquire about an applicant’s criminal history until after the applicant has either:

  • participated in an in-person, telephonic, or video interview or
  • received a conditional offer of employment.

In addition, under the new law, Spokane employers will be prohibited from advertising job openings in such a way that excludes individuals with arrest or conviction records.  Specifically, job postings cannot include language like “no felons,” “no criminal background,” or similar language that conveys a message that people with a criminal history are discouraged from applying.  This does not, however, preclude an employer from including in a job posting a requirement that an applicant undergo a criminal background check as a part of the hiring process – provided that the job posting does not state that an arrest or conviction record will automatically eliminate an applicant from consideration for that position.

This new law does not apply to the following Spokane employers:

  • any employer hiring an employee who will have unsupervised access to children or a “vulnerable person;”
  • any law enforcement agency;
  • any position where criminal background checks are specifically permitted or required under state or federal law.

Recommendation for employers

It is recommended that all Spokane employers review the hiring practices to insure compliance with the new laws.  In addition, employers need to provide training to those people involved in the hiring process about the new ban the box requirements, as these requirements impact the interview process. Finally, all Spokane employers should review their job applications and verify that any inquiries regarding criminal history are removed from the application before June 14th.


NEW LAW: Kansas City (MO) Enacts Ban-The-Box Legislation

On February 1, 2018, the Kansas City (MO) city council passed the Kansas City ban-the-box ordinance, which goes into effect on June 9, 2018.

When this new law goes into effect, Kansas City employers with six or more employees can no longer inquire about an applicant’s criminal history until the applicant is in “the final selection pool of candidates from which a job will be filled” (i.e. after the applicant has been interviewed for the position and the employer has determined the individual is otherwise qualified for the position).

In addition, under the new law, an employer cannot refuse to hire (or promote) an applicant because of candidate’s criminal history, unless “the employer can demonstrate that the employment-related decision was based on all information available including consideration of the frequency, recentness and severity of a criminal record and that the record was reasonably related to the duties and responsibilities of the position.”

For purposes of this new law, the term “criminal history” includes:

  • Record of a conviction, or a plea of guilty or no contest, to a violation of a federal or state criminal statute or municipal ordinance;
  • Records of arrests not followed by a valid conviction;
  • Convictions which have been, pursuant to law, annulled or expunged;
  • Pleas of guilty without conviction;
  • Convictions for which a person received a suspended impositions of sentence; and
  • Misdemeanor convictions where no jail sentence can be imposed.

Recommendation for employers

It is recommended that all Kansas City employers review the hiring practices to insure compliance with the new laws.  In addition, employers need to provide training to those people involved in the hiring process about the new ban the box requirements, as these requirements impact the interview process. Finally, all Kansas City employers should review their job applications and verify that any inquiries regarding criminal history are removed from the application before June 9th.

2017 EEOC Litigation Data Released

The EEOC recently released the national enforcement data for the 2017 fiscal year.  According to this report, the total number of EEOC charges received in 2017 decreased from 91,503 received in 2016 to 84,254 received in 2017.

In addition, according to the report, in 2017, the EEOC resolved 99,109 charges and secured more than $398 million for victims of discrimination in private, federal and state and local government workplaces.  Most notably, the EEOC received 6,696 sexual harassment charges and 1,762 LGBT-based sexual discrimination charges and obtained $46.3 million and $16.1 million in monetary benefits respectively for resolving these charges.

Retaliation claims remain the most popular claims filed. Race claims, Disability claims, Sex/Gender claims and Age discrimination charges round out the top five.  The total breakdown of charges by type is as follows:

Retaliation 41,097 48.8%
Race 28,528 33.9%
Disability 26,838 31.9%
Sex/Gender 25,605 30.4%
Age 18,376 21.8%
National Origin 8,299 9.8%
Religion 3,436 4.1%
Color 3,240 3.8%
Equal Pay Act 996 1.2%
Genetic Information Non-Discrimination Act 206 0.2%

In addition, the EEOC has also released the breakdown of claims received by state.  The top 10 states are:

   Type of Charge
Total Charges Retaliation Race Disability Sex/Gender Age
Texas 8,827 4,740 2,999 2,642 2,740 1,975
Florida 6,858 3,486 2,153 2,222 2,041 1,366
California 5,423 2,752 1,811 1,915 1,500 1,374
Georgia 4,894 2,434 1,864 1,362 1,596 807
Pennsylvania 4,516 2,133 1,195 1,647 1,293 1,118
Illinois 4,392 2,382 1,663 1,414 1,399 1,032
North Carolina 3,752 1,854 1,447 1,210 1,034 751
New York 3,690 1,711 1,095 1,052 1,142 858
Virginia 2,730 1,201 966 864 818 518
Tennessee 2,640 1,318 970 808 815 528

The full state breakdown of claims is available here.

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