The Tax Cuts and Jobs Act, the sweeping new federal tax law enacted at the end of December 2017, contains a provision that will likely have a significant effect on how employers resolve claims involving sexual harassment.
Section 13307 of the Act eliminates the business deduction for: (1) any settlement or payment related to sexual harassment or sexual abuse that is subject to a confidentiality agreement; and (2) attorney fees related to such a settlement. The provision applies to settlements, payments, and attorney fees paid or incurred after the date the law was enacted.
Section 13307 leaves open questions as to whether deductions are eliminated for confidential settlements involving multiple employment claims, where only one of the claims is sexual harassment. Also unclear is whether related claims arising out of sexual harassment or sexual abuse, such as assault, battery, and intentional infliction of emotional distress, are covered by Section 13307.
In addition, while it seems unlikely, it is not clear that Section 13307 only affects the employer's tax deductions. Although Section 13307 amends Section 162 of the Internal Revenue Code, which addresses the deduction of business expenses, it could result in the elimination of any deduction by the victim for attorney fees incurred that are paid by the employer.
Employers seeking to preserve their tax deductions for payments made and attorney fees incurred in connection with sexual harassment and related claims may do so by not including confidentiality provisions in their settlement agreements. However, confidential settlements of multiple or related claims will require careful analysis to avoid running afoul of the new law. Employers settling such cases are well advised to consult their legal and tax professionals before including any kind of confidentiality provision.
Ater Wynne's employment group can help with settlement and prevention strategies.
Scandals involving sexual harassment are nothing new. The televised testimony of Anita Hill at the 1991 senate confirmation hearings on the appointment of Clarence Thomas to the U.S. Supreme Court increased public awareness of the issue when Ms.Hill testified to persistent and graphic instances of sexual harassment she endured while working for Mr.Thomas at the EEOC. Her account was largely dismissed and Justice Thomas’ appointment to the Supreme Court was affirmed by the senate.
Today, we hear almost daily news reports about sexual harassment as bad or worse than what Ms. Hill testified to almost 17 years ago. One has to wonder, how there could be so little progress on the sexual harassment front?
Historically, sexual harassment and sexual assault have been used as a tactic to keep women in their place. Indeed, it has long been recognized that sexual harassment is more often about power than ignorance or lust. It is precisely for this reason that sexual harassment remains rampant, despite laws and processes designed to protect employees from it.
To rid the workplace of sexual harassment, companies need to take a hard look at what they might be doing to perpetuate it. Here are just a few practices that are contributing to the problem:
Most companies have anti-harassment policies and complaint procedures. Clearly, just having a policy and procedure in place is not enough in most cases. Employers need to recognize that ridding the workplace of sexual harassment requires some serious introspection and a willingness to remedy whatever they may be doing to perpetuate the problem.
Ater Wynne's employment group can review your workplace policies and provide training and other solutions to prevent and address workplace harassment.
On July 25, the Department of Labor issued an all agency memorandum announcing an increase in the fringe rate contribution required under the Service Contract Act (SCA). The rate will increase from $4.27 to $4.41 per hour, effective August 1, 2017. The SCA sets prevailing wages and benefits that federal contractors who provide certain services to the federal government must pay to their employees.
The memorandum also reminds federal contractors of their obligations under Executive Order 13706, which requires covered contractors to provide employees with up to 56 hours of paid sick leave annually. Executive Order 13706 applies to new contracts with the federal government arising out of solicitations issued on or after January 1, 2017. Sick leave paid to comply with Executive Order 13706 may not be credited to satisfy contractor obligations under the SCA.
In response to court challenges to the federal overtime rule that was scheduled to go into effect on December 1, 2016, the Department of Labor (DoL) has decided not to advocate for the minimum weekly salary ($913) required by the final rule. Instead, the DoL plans to issue a Request for Information (RFI) to aid in formulating a proposal to revise the current overtime regulations contained in CFR Part 541. In response to President Trump's Executive Order 13777, entitled "Enforcing the Regulatory Reform Agenda," the RFI is directed at reducing regulatory burden. The RFI, which is scheduled to be published on July 26, 2017, asks for comment on the following questions:
Interested employers are encouraged to weigh in on all of these important questions.
The Oregon legislature recently enacted an expanded Equal Pay Act designed to eliminate discriminatory pay practices based on race, color, religion, sex, sexual orientation (as defined in ORS 174.100), national origin, marital status, veteran status, disability, or age.
Section 2 of the Act (amending ORS 652.220) prohibits discrimination in the payment of compensation based on protected class for work of "comparable character," defined as work requiring “substantially similar knowledge, skill, effort, responsibility and working conditions in the performance of work, regardless of job description or job title.” To insure that employers do not perpetuate the effect of other employers' past discriminatory pay practices, the law precludes employers from screening applicants based on current or past compensation, determining compensation for a position based on an applicant’s current or past compensation, or seeking a salary history of an applicant until an offer of employment has been made.
Differentials in pay for work of comparable character are permissible only when they are based solely on one or more of the following factors: (1) a seniority system; (2) a merit system; (3) a system that measures earnings by quantity or quality of production, including piece-rate work; (4) workplace locations; (5) travel, if travel is necessary and regular for the employee; (6) education; (7) training; and (8) experience. Amounts owed to an employee because of the failure of the employer to comply with the Act are defined as “unpaid wages.”
Individuals may address violations of Section 2 by filing a complaint with the Commissioner of BOLI under ORS 659A.820, a civil action under ORS 652.230, or a civil action under 659A.885. Violations of Section 4 of the Act, which makes it unlawful under Chapter 659A to request a salary history of an applicant, may also be addressed under ORS 659A.885. Each of these options affords a prevailing plaintiff a different remedy:
The potential ramifications of Oregon’s Equal Pay Act are significant. An employer’s inability to substantiate a pay differential based exclusively on permissible factors may be sufficient to establish liability without the need to prove discriminatory intent. This means that employers who have never intentionally discriminated, but historically set compensation by relying on salary history or other factors made impermissible under the Act could face monumental financial exposure. Employers may not reduce the compensation of an employee to comply with their obligations under Section 2, so employers who wish to correct the results of past practices will presumably need to raise salaries of all of the employees who were negatively impacted. Also, it is unclear whether a violation of ORS 652.220 may also result in a late payment penalty under Oregon’s final pay law, or whether an individual must elect between the available statutory remedies.
The good news is that employers who want to get ahead of this issue have some time to comply. The prohibition on requesting salary histories of applicants goes into effect 91 days after the end of the current legislative session, but the private right of action to enforce it does not go into effect until January 1, 2024. The rest of the Act's provisions go into effect on January 1, 2019.
Employers who need help analyzing their pay practices and complying with the Equal Pay Act may contact Ater Wynne's employment group for assistance.
The Defend Trade Secrets Act (DTSA) provides an important tool for protecting trade secrets from misappropriation by affording owners a federal right of action for misappropriation of trade secrets related to a product or service used, or intended for use in interstate or foreign commerce. The DTSA provides a variety of remedies that track those available under state uniform trade secret statutes, such as actual damages, damages for unjust enrichment, royalties, injunctive and exemplary relief, and attorney fees.
However, the DTSA differs from uniform state laws in some significant respects. The DTSA provides, in extraordinary circumstances, for the ex parte seizure of property to prevent the propagation or dissemination of the trade secret. The DTSA further expands trade secret protection by enabling trade secret owners to seek nationwide relief, without preempting state law remedies. Another significant feature of the DTSA is the immunity from criminal and civil liability it provides to whistleblowers who comply with the Act's reporting provisions.
Employers are required to notify employees and contractors who are subject to confidentiality agreements of the DTSA's immunity provisions. An employer may comply by including the notice in the confidentiality agreement, or by including a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for suspected violations of the law. An employer that fails to comply with the notice requirement may not be awarded exemplary damages or attorney fees in an action under the DTSA. The statute applies to contracts governing confidentiality entered into on or after May 11, 2016.
Confidentiality provisions are commonly included in employment and independent contractor agreements, confidentiality/proprietary rights agreements, noncompete and nonsolicitation agreements, and in separation/release agreements, among other employment documents. Employers who have written contracts with employees or contractors entered into on or after May 11, 2016, containing confidentiality obligations should consider adding the DTSA disclosure and perhaps also reviewing their handbook.
Employers may contact Ater Wynne's employment group for assistance with DTSA compliance.
We recently reported on BOLI 's new guidance overturning its long-standing interpretation of ORS 652.020, Oregon's overtime rule applicable to manufacturing establishments. The Oregon Legislature has now weighed in on this issue.
Under ORS 652.020, nonexempt employees working in mills, factories, and manufacturing establishments must be paid overtime for hours worked in excess of 10 in any day and hours worked in excess of 40 per week. BOLI's prior interpretation of that rule required employers to calculate overtime hours worked on both a daily and weekly basis and pay the greater of the two. Under the new guidance, employers are required to pay both daily and weekly overtime.
The revised BOLI guidance has raised many questions. Not only has BOLI done an about-face, the timing of the new guidance is puzzling as the interpretation of the manufacturing overtime rule is the subject of a pending class action filed in Multnomah County Circuit Court, which is likely to resolve the issue.
In an attempt to address the uncertainty created by the new guidance in the manufacturing sector, the Oregon Legislature introduced a bill last Thursday to put the issue to rest. Under SB 984, manufacturers would only be required to pay the greater of the daily or weekly overtime.
Ater Wynne's employment group is available to answer questions regarding the application of the manufacturing overtime rule and other wage and hour concerns.
Federal legislators have renewed steps to repeal -- or at least undermine -- the prevailing wage requirements under the Davis-Bacon Act, which mandates payment of prevailing wages and benefits to workers employed under federally-funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works.
U.S. Senator Jeff Flake (R-Ariz.) recently introduced the Transportation Investment Calibration to Equality (TIRE) Act, which would eliminate prevailing wage requirements under the Davis-Bacon Act on all federal highway construction contracts. In addition, U.S. Senator Mike Lee (R-Utah) introduced a bill to repeal all prevailing wage requirements under the Davis-Bacon Act (S. 244), and Representative Steve King (R-Iowa) re-introduced a companion bill in the House (H. 743), entitled the "Davis-Bacon Repeal Act."
Federal law also requires federal contractors who provide certain services and manufactured goods to the Federal Government to pay prevailing wages under the McNamara-O'Hara Service Contract Act and the Walsh-Healey Public Contracts Act, respectively. Although previous steps to repeal these laws failed (see., e.g., S. 1229 (1993), co-sponsored by Senator John McCain (R-Ariz.)), it seems likely that repeal efforts will be renewed under the current administration.
Already complex prevailing wage requirements were expanded under the Obama administration. Mistakes can be expensive and result in debarment. Federal contractors are, therefore, well-advised to stay informed and comply with their obligations. Ater Wynne's labor and employment attorneys can provide assistance with your wage and hour questions.
In January, BOLI issued new guidance expanding the scope of overtime compensation owed to nonexempt employees who work in mills, factories, or manufacturing establishments. The new guidance reverses BOLI's long-standing interpretation on this issue.
Under Oregon law, most nonexempt employees who work in mills, factories, and manufacturing establishments must be paid overtime for hours worked in excess of 10 in any day and hours worked in excess of 40 per week. ORS 652.020; ORS 653.261. Until recently, BOLI advised manufacturers that "when employees who are entitled to daily overtime have worked more than 40 hours in the workweek and have also exceeded the maximum number of hours on one or more days, thereby earning daily overtime, the employer should calculate overtime hours worked on both the daily and weekly bases and pay the greater amount." However, under the new guidance, BOLI states that covered employers must pay daily and weekly overtime compensation because "[t]he two statutes enact distinct overtime requirements and serve different purposes with respect to restrictions on hours worked by employees."
For example, if a manufacturing establishment employee works three daily overtime hours and one weekly overtime hour, under BOLI's previous interpretation of the overtime statutes, the employee should receive three hours of overtime compensation. Under BOLI's new interpretation, the employee should receive four hours of overtime compensation. Additional examples and information are available on BOLI's Technical Assistance website.
BOLI does not explain the reason for this sudden about-face, which is bound to catch many employers unaware. In addition, the interpretation of the manufacturing overtime rule is currently being considered in a pending class action. In light of these events, manufacturing companies in Oregon are well-advised to review their overtime practices with counsel. Ater Wynne's employment group is available to assist with any questions on BOLI's new guidance.
Today, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction blocking the U.S. Department of Labor ("DOL") from implementing its latest revisions to the Fair Labor Standards Act ("FLSA").
In March 2014, President Obama issued a memorandum directing the Secretary of Labor to "modernize and streamline" the existing overtime regulations for executive, administrative, and professional employees. On May 23, 2016, the DOL published the Final Rule, increasing the salary level required to qualify for "white collar" overtime exemptions from $23,660 ($455 per week) to $47,476 ($913 per week). Additionally, the Final Rule increased the total annual compensation requirement for "highly compensated employees" from $100,000 to $134,000. The Final Rule was to take effect on December 1, 2016, with a mechanism for automatically updating the salary and compensation levels every three years.
A coalition of 21 states and more than 50 business organizations challenged the DOL's Final Rule in federal court, arguing that the Obama administration overstepped its authority. The court ultimately concluded that the states established a prima facie case that the DOL's salary level under the Final Rule and the automatic updating mechanism are without statutory authority and issued a nationwide preliminary injunction.