The Legal Line

Trump Administration Rejects Side Work and 20% Rules for Paying Tip Credit Wage to Tipped Employees

posted Nov 27, 2018, 7:01 AM by Adam Chandler

The 20% Rule is dead. Or is it?  Only last month, we wrote about the 9th Circuit’s decision in Alec Marsh v. J. Alexander’s, in which the Court of Appeals joined with other circuits and gave deference to and enforced the U.S. Department of Labor’s guidance concerning the amount of side work that tipped employees may perform before they must be paid at the full minimum wage.  On November 8, 2018, the Trump Administration’s DOL revived an opinion letter from the waning days of the Bush Administration, which was subsequently withdrawn by the Obama Administration.  By doing so, the Trump administration has called into question the continued validity of the 20% Rule and put in place a new standard that will likely raise new questions.  What should you do?

For more than 30 years, the DOL’s Field Operations Handbook (“FOH”) provided guidance on the issue of when tipped employees could be paid the tip credit rate versus when they had to be paid the full minimum wage.  Generally, under this guidance, tipped employees could be paid at the tip credit rate even for non-tipped duties so long as those duties were “incidental” to service and did not amount to more than 20% of the employee’s tip credit hours in a workweek.  Over the years, the DOL and the courts have refined what it meant for duties to be considered “incidental” to service.

The November 8, 2018 Opinion Letter turns the 20% Rule on its head, while at the same time redefining what duties tipped employees may perform.  The Opinion Letter further states that it supersedes the prior inconsistent statements in the FOH and that a revised FOH statement will be forthcoming.  Until that revised FOH is published, the Opinion Letter sets out the following standards:

Time Standards under the Opinion Letter 

In the Opinion Letter, the DOL states that it does not intend to place a limitation on the amount of duties a tipped employee may perform contemporaneous with direct customer-service duties.  In addition to performing duties contemporaneous with customer service, tipped employees may also perform such duties for a “reasonable time immediately before or after performing such direct-service duties.”

One important caveat from the DOL is that, while there is no limit on the amount of time tipped employees can perform various duties while serving customers, employers must still comply with the requirements of Act.  For example, tips plus wages must still equal or exceed the full minimum wage.

Allowable Duties under the Opinion Letter

Rather than the FOH’s non-exhaustive lists of types duties that are or are not “incidental” to service, the Opinion Letter points to two sources of duties that are allowable for tipped occupations.  If the duties performed are found on these lists, they can be paid at the tip credit rate.  If they duties are outside these lists, they must be paid at the full minimum wage, unless the time spent in the task is de minimis.

One of the sources cited by the Opinion Letter is a preexisting DOL regulation, 29 C.F.R. § 56(e), which provides that servers may clean and set tables, toast bread, make coffee and occasionally wash dishes or glasses.

The other source cited by the Opinion Letter is the duties listed in the appropriate tip-producing occupation found on the Occupational Information Network (“O*NET”) at  O*NET lists the following tasks under the category “Waiters and Waitresses”:
  • Take orders from patrons for food or beverages.  
  • Check with customers to ensure that they are enjoying their meals and take action to correct any problems.  
  • Check patrons' identification to ensure that they meet minimum age requirements for consumption of alcoholic beverages.  
  • Collect payments from customers.  
  • Write patrons' food orders on order slips, memorize orders, or enter orders into computers for transmittal to kitchen staff.  
  • Prepare checks that itemize and total meal costs and sales taxes.  
  • Present menus to patrons and answer questions about menu items, making recommendations upon request.  
  • Remove dishes and glasses from tables or counters and take them to kitchen for cleaning.  
  • Serve food or beverages to patrons, and prepare or serve specialty dishes at tables as required.  
  • Clean tables or counters after patrons have finished dining.  
  • Prepare tables for meals, including setting up items such as linens, silverware, and glassware.  
  • Explain how various menu items are prepared, describing ingredients and cooking methods.  
  • Assist host or hostess by answering phones to take reservations or to-go orders, and by greeting, seating, and thanking guests.  
  • Escort customers to their tables.  
  • Perform cleaning duties, such as sweeping and mopping floors, vacuuming carpet, tidying up server station, taking out trash, or checking and cleaning bathroom.  
  • Inform customers of daily specials.  
  • Prepare hot, cold, and mixed drinks for patrons, and chill bottles of wine.  
  • Roll silverware, set up food stations, or set up dining areas to prepare for the next shift or for large parties.  
  • Stock service areas with supplies such as coffee, food, tableware, and linens.  
  • Bring wine selections to tables with appropriate glasses, and pour the wines for customers.  
  • Fill salt, pepper, sugar, cream, condiment, and napkin containers.  
  • Describe and recommend wines to customers.  
  • Perform food preparation duties such as preparing salads, appetizers, and cold dishes, portioning desserts, and brewing coffee.  
  • Provide guests with information about local areas, including giving directions.  
  • Garnish and decorate dishes in preparation for serving.
It should be noted that this list is generally more expansive than what courts interpreting the regulations and the FOH have determined fall within the umbrella of tasks directly related to service or incidental to service.

Where does this Leave Restaurant Employers

At present, the law is in a transition mode.  The DOL has indicated that the old guidance is superseded, has provided a preliminary view of what the new guidance will be, and has assured employers that more detailed guidance will be forthcoming.  Moreover, given that the FOH and the Opinion Letter have not gone through the formal legislative or rulemaking process, neither are afforded the weight of law without judicial approval.  Numerous courts, most the recently the J. Alexander’s Court, have endorsed the previous version of the FOH as being a reasonable interpretation of federal regulations that still exist today.  On that basis, these courts has deferred to the DOL’s interpretation contained in the old FOH.  This Opinion Letter and the DOL’s new interpretation of the regulations that will be set forth in an updated FOH will undoubtedly be challenged in Court

One issue that is ripe for dispute is: what is a reasonable amount of time to have servers perform tasks immediately before and after direct-service tasks?  We would advise employers that, until the DOL or the courts further clarify this point, they continue to abide by the 20% Rule and restrict time worked before or after serving guests to less than 20% of the workweek.  For more than 30 years, the 20% Rule was the standard and considered reasonable by the DOL and/or the courts.  The issuance of an Opinion Letter does not immediately change what courts will consider to be reasonable.  Thus, even if shorter or longer times performing tasks before serving customers may be considered “reasonable,” abiding by the 20% Rule will likely give employers an additional defense to such claims.

The above provides just a brief summary of only federal law on this point, which will undoubtedly continue to evolve.  New Hampshire restaurants must keep in mind that they must also comply with the state’s minimum wage statutes and regulations, including the rules concerning the tip credit.   While the industry is hoping to work with the New Hampshire DOL to establish specific guidelines, following Federal statutes, regulations and guidance concerning the application of the tip credit would to be good practice from a risk management perspective.

Massachusetts Non-Compete Law Clarifies Scope of Restrictions but Leaves Some Answers to the Courts

posted Sep 9, 2018, 7:44 AM by Adam Chandler

After numerous legislative false starts over the past decade, Massachusetts has finally enacted legislation defining the boundaries of enforceable noncompetition agreements in the employment context.  The new law takes effect on October 1, 2018 and is codified at M.G.L. c. 149, § 24L.  While it sets several clear and understandable limitations on such agreements, it also raises significant questions that will eventually need to be answered by the courts.  Chief among these questions are, what consideration is necessary to support a restriction on competition and what is termination “for cause: sufficient to enforce such restrictions.

Minimum Requirements for Enforceability

The bulk of the new statute is dedicated to setting forth “minimum standards” that noncompetition agreements must satisfy to be “valid and enforceable.”  Many of these minimum standards can be viewed as either a codification of existing caselaw or reasonable industry practices.  These include: (1) the requirement that the agreement be supported by a legitimate business interest of the employer (including trade secrets, confidential information, or goodwill); (2) limiting the restricted period to a maximum of 12 months in most situations; (3) limiting the geographic scope and stating that being limited to areas in which the employee provided services or had a material presence in the last two years of employment is presumptively reasonable; (4) limiting the scope of proscribed activities and stating that a prohibition limited to those types of services provided by the employee over the past two years is presumptively reasonable; and (5) requiring that the agreement be consistent with public policy.

While the above do not substantially change the law in Massachusetts, they do provide some certainty when employers and employees weigh the enforceability of noncompetition agreements.

The following provisions, however, add some new wrinkles to the state of the law in Massachusetts, and employers should be wary of the application of these standards to their agreements.  These include:
  • The agreement must be supported by a “garden leave clause” or some other mutually agreed-upon consideration stated in the agreement.  A “garden leave clause” under this section means that the employee must be paid during the restricted period at least 50% of his or her highest base salary over the last two years.  The inclusion of the phrase “or some other mutually agreed-upon consideration” is fertile ground for litigation, as it is unclear what courts will consider sufficient consideration to support such a restriction.
  • If the employee has unlawfully taken property belonging to the employer, the duration of the restricted period may be extended to up to two years.  Because misappropriation of trade secrets claims often accompany noncompetition claims, employers would be wise to include such an extension in their noncompetition agreements.
  • The agreement must be signed by both the employer and the employee and expressly advise the employee that he or she has the right to consult with counsel prior to signing.
  • If the agreement is entered into at the commencement of employment, it must be provided to the employee by the earlier of the formal offer or 10 business days before the commencement of employment. 
  • If the agreement is entered into during employment, it must be supported by fair and reasonable consideration independent from the continuation of employment and it must be presented at least 10 business days prior to its effective date.
What is a Noncompetition Agreement?

While the statute defines a noncompetition agreement in an unsurprising way, what is more interesting is what is excluded from the definition, and thereby not subject to the restrictions set forth in the statute.  These include:
  • Non-solicitation of employee clauses;
  • Non-solicitation of customers, clients or vendors clauses;
  • Noncompetition agreements ancillary to the sale of a business;
  • Noncompetition agreements outside of the employment relationship;
  • Forfeiture agreements that impose adverse financial consequences on former employees but are not based on competitive activities;
  • Nondisclosure or confidentiality agreements;
  • Invention assignment agreements;
  • Garden leave clauses;
  • Noncompetition agreements as part of a severance agreement, as long as the employee is given seven days to rescind acceptance;
  • Agreements by which an employee agrees to not reapply for employment with the employer.
Who is Covered?

The new law has a broad reach, applying to both employees and independent contractors. On the flip side, the statute also excludes specific types of employees against whom noncompetition agreement will be unenforceable.  These include: (1) nonexempt (hourly) employees under the FLSA; (2) undergraduate and graduate students who are interns or short-term employees; (3) employees under the age of 18; and (4) employees who have been terminated without cause or laid off.

The big takeaway from these limitations on the types of employees who are covered is that, in most cases, employers will only be able to enforce noncompetition agreements against exempt (salaried) employees who either quit or are terminated for cause.  In many cases, this will add another disputed issue that the court will need to decide before enforcing a noncompetition agreement.


Despite setting forth detailed “minimum standards” for enforceability, the statute expressly allows courts to “blue pencil” contracts that do not comply with these minimum standards.  That means that a court will be able to reform contractual provisions that offend the statute so that they are valid and enforceable if the court finds a basis upon which to do so.  The statute, however, bars the enforcement of choice of law provisions that would avoid the requirements of the statute by applying another state’s law, if the employee has lived and/or worked in Massachusetts for at least 30 days prior to the termination of employment.

Supreme Court Punts on Deciding between Religious and Gay Rights

posted Jul 2, 2018, 3:54 PM by Allison Ayer   [ updated Jul 2, 2018, 3:55 PM ]

In Masterpiece Cakeshop, Ltd. et al., v. Colorado Civil Rights Commission, the United States Supreme Court recently ruled 7-2 in favor of a Colorado baker who refused to bake a wedding cake for a same-sex couple because he claimed it would violate his religious beliefs against gay marriage.  Importantly, the Court’s ruling did NOT decide whether the baker acted within the bounds of the law when he refused to bake the cake on the basis of his religion.  Instead, the Court made a narrow ruling in the baker’s favor because the Civil Rights Commission which originally heard the case failed to decide it with neutrality.  As a result, the specific question of whether public accommodations can refuse to provide a service to a same-sex couple on the basis of religious views remains an open one. 

The Facts

Jack Phillips is a baker who owned and operated Masterpiece Cakeshop, Ltd., a bakery located in a suburb of Denver, Colorado.  Phillips is a devout Christian who believes that God intended marriage to be only between one man and one woman. 

In 2012, two men in a same-sex relationship entered Phillips’ bakery and told Phillips that they were interested in ordering a cake for their wedding.  Phillips purportedly informed the couple that while he would make a birthday cake or sell cookies to them, he could not bake a cake for their wedding because it was against his religious beliefs.  To Phillips, baking a wedding cake for a same-sex marriage involved creating something for an event that goes directly against his reviews about the teachings of the Bible, and therefore would be equivalent to a personal endorsement of and participation in the celebration of a same-sex relationship which is contrary to his deeply held religious beliefs. 

The same-sex couple filed a discrimination claim against Phillips in the Colorado Civil Rights Commission alleging that Phillips violated the state’s law that prohibits places of public accommodation, like restaurants, hotels, and bakeries, from discriminating against an individual or group because of sexual orientation.  The complaint alleged that the couple had been denied “full and equal service” at the bakery because of their sexual orientation.  The Commission’s investigation revealed that Phillips had refused to sell custom wedding cakes to about 6 other same-sex couples.  The Commission found in the couple’s favor, rejecting Phillips argument that his refusal was not sexual orientation discrimination, but rather a constitutionally protected form of expression of his opposition to same-sex marriage on the basis of his sincerely held religious views. 

The Supreme Court Decision

               In a decision issued by Justice Kennedy, the Supreme Court ruled 7-2 to overturn the Commission’s finding. 

As a preliminary matter, the Court acknowledged the competing rights at issue in these types of cases.   The Court pointed out that gay persons and gay couples cannot be treated as social outcasts or inferior in dignity and worth, and that the Constitution clearly protects their civil rights, but the Court also stated that religious and philosophical objections to gay marriage can constitute Constitutionally protected forms of expression.  The Court also asserted that there were limits to the application of these religious beliefs in the public accommodation context.  The Court clearly stated that “while those religious and philosophical objections are protected, it is a general rule that such objections do not allow business owners and other actors in the economy and in society to deny protected persons equal access to goods and services under a neutral and generally applicable public accommodations laws.”  The Court explained that while a member of the religious clergy could not be compelled to perform a same-sex marriage, if public accommodations who provide goods and services for weddings or marriages were permitted to refuse service to a same-sex couple, it could result in “a community-wide stigma inconsistent with the history and dynamic of civil rights laws that ensure equal access to goods, services and public accommodations.” 

After laying out these general legal principles invoked in these cases of conflicting civil rights, the Court found in favor of the baker on the narrow basis that the state Commission failed to decide the case with the required neutrality towards Phillips’s religious views.  In fact, worse than simply failing to demonstrate neutrality toward Phillips’s religious views, the Supreme Court found that the Colorado Commission demonstrated actual hostility toward Phillips’s religious beliefs and ruled in favor of the baker on this basis.

For example, the Court found troubling that a Commissioner declared during a hearing that people had misused freedom of religion to justify such atrocities as the holocaust and slavery.  To the Supreme Court, this comment cast doubt on the fairness and impartiality of the Commission and evidenced a hostility against the baker’s religious views. 

The Court also found it troubling that the Commission made inconsistent rulings in other related cases.  On at least three other occasion, when the Colorado Civil Rights Commission considered cases where bakers refused to create cakes expressing disapproval of same-sex marriage on religious ground, the Commission found in favor of the bakers (i.e. it found that the bakers could refuse to bake a cake critical of same sex marriage). 

For these reasons, the Court concluded that the Commission’s consideration of Phillips’ case was not tolerant or respectful of his religious beliefs as required by the Constitution, and it therefore reversed the Commission’s decision.    

The Takeaway

               The Court’s decision leaves open how the Supreme Court would decide a similar case that was handled at the Commission level with the required neutrality toward religion.  With that said, the reasoning of the court in Masterpiece provides some insight about where the Court might draw the line on these types of cases. 

The Court seemed to distinguish between a general refusal to make or serve the baked products available for sale to the public to gay or lesbian individuals or same-sex couples and a refusal to bake a wedding cake for a same-sex marriage.  The former would present a “strong case” of a denial of goods and services that goes beyond the protected rights of a baker to decline service for religious reasons, according to the Court, while the latter offered a closer question of permissible, constitutionally protected religious expression.  These statements may indicate that the Supreme Court would not uphold a public accommodation generally denying access to its goods and services to a gay or lesbian individual or same sex couple, but that it would allow a public accommodation to refuse to provide a specific service for a same-sex marriage to the extent based on sincerely held religious beliefs. 


Of course, with the retirement of Justice Kennedy, who often decided with the more liberal members of the court on social matters like gay rights (he wrote the decision on gay marriage), the Supreme Court is probably much more likely to allow public accommodations to deny service to members on the public if such denial is based on religious views.  With that said, in the absence of a specific ruling by the Supreme Court in that regard, restaurants and other public accommodations must be very careful in denying service to anyone based on personal characteristics like sexual orientation.     

Gorsuch-Led Court Upholds Class Action Waivers

posted May 31, 2018, 3:44 PM by Allison Ayer

After several months of deliberation, the Supreme Court ruled in a 5-4 decision authored by Justice Gorsuch that employment agreements can lawfully include provisions that require employees to arbitrate claims on an individual basis rather than through a class or collective actions.  This is a significant victory for employers who may be the targets of costly wage and hour litigation that could otherwise be expanded to include hundreds, if not thousands, of their employees.

In, Epic Systems v. Lewis, a group of employees sued their employers alleging that they had failed to pay proper wages in violation of the FLSA.  The FLSA expressly permits wage claims to be filed as collective actions, and so these employees chose to file their wage claims on behalf of large groups of employees aggrieved by the employers’ alleged wage practices, rather than individually.  The employers, on the other hand, sought to force the employees to arbitrate the FLSA claims on an individual basis pursuant to the terms of the class action waivers in the arbitration provisions of their employment contracts.  The employees challenged the employers, arguing that the class action waiver violated the Federal Arbitration Act  and/or the National Labor Relations Act.  The Supreme Court rejected the employees’ arguments and ruled that arbitration agreements that require an employee to arbitrate claims on an individual basis rather than as a collective or class are lawful and enforceable. 

Employers who already have arbitration agreements including class action waivers in place should be confident in their ability to enforce those agreements, barring any contractual defenses such as lack of consideration, fraud, or duress.  Now that the Supreme Court has definitively answered the question of whether such provisions are enforceable, employers should strongly consider putting such agreements in place if they have not already done so.

The Court’s decision may not necessarily end the debate over class action waivers.  Ruth Bader Ginsburg prepared a scathing dissent claiming that the decision hurt “vulnerable workers” requiring them to “go it alone” in seeking “redress for common experienced wage loss.”  To the extent Democrats retake Congress, there is always the possibility that they could amend the laws to include language prohibiting class action waivers.  So, keep watching!   

Massachusetts Act Protecting Pregnancy Takes Effect April 1, 2018

posted Mar 28, 2018, 2:21 PM by Adam Chandler   [ updated Mar 28, 2018, 2:27 PM ]

The Massachusetts Pregnant Workers Fairness Act (the “Act”) goes into effect on April 1, 2018.  The Act amends M.G.L. ch. 151B, §4 Massachusetts anti-discrimination statute to expressly prohibit discrimination on the basis of pregnancy or pregnancy-related conditions.    

According to the Act, employers are generally prohibited from treating employers or job applicants less favorably than others on the basis of a pregnancy or pregnancy-related condition, such as for example lactation or breastfeeding. 

With this general prohibition in mind, the Act provides more specifically as follows: 

Employers cannot discriminate or retaliate.
  • Employers cannot deny an employment opportunity or take an adverse employment action against an employee because of a pregnancy or because the employee requests or uses a reasonable accommodation for a pregnancy-related condition.
  • Employers cannot refuse to hire a person because of a pregnancy or a condition related to the person’s pregnancy, including for example lactation, if the applicant is capable of performing the essential job functions with or without a reasonable accommodation.
Employer must provide reasonable accommodations.
  • Employers must engage in a timely and good faith interactive process (i.e. they must communicate with the employee in good faith to determine an effective, reasonable accommodation to enable the employee to perform the essential job functions.
  • Employers must grant requests for reasonable accommodations for an employee’s pregnancy or pregnancy-related condition, including but not limited to lactation, morning sickness, or the need to express breast milk.
  • Reasonable accommodations may include, but are not limited to:
    • Frequent or longer paid or unpaid breaks
    • Time off to attend to pregnancy complications or recover from childbirth
    • Acquire or modifying equipment or seating
    • Temporary transfer to a less strenuous or hazardous position;
    • Job restructuring
    • Light duty
    • Private space for expressing breast milk
    • Assistance with manual labor
    • Modified work schedule
  • Employers may require documentation about the need for an accommodation from an appropriate health care provider except the employer SHALL NOT ask for documentation for accommodations for 1) more frequent restroom, food or water breaks, 2) seating, 3) limits on lifting more than 20 pounds, or 4) private non-bathroom space for expressing breast milk. 
Employers must provide on-site space to express milk.
  • Employers must provide an employee a private, non-bathroom space to express breast milk or to breastfeed.  
  • Such space may include but is not limited to a private room or office.  
  • In addition, the space must be free from instruction by other employees, visitors and the public (i.e. it must have a lock) and the space must allow employees to comfortably express breast milk or breastfeed, by for example, having sufficient electrical outlets for breast pumps, tables or other surfaces to hold breast pumps or other needed items, and provide adequate seating.  
  • The space must also be convenient enough for the employees that traveling to and from the space does not materially impact an employee’s break time.    
Employers cannot force a person to accept leave or an accommodation.
  • Under the Act, Employers cannot require an employee affected by pregnancy or a condition thereof, to accept a particular accommodation if the accommodation is not necessary to enable the employee to perform the essential job functions.
  • Employers also cannot require an employee to take leave if another reasonable accommodation may be provided for the pregnancy or relate condition.
Employers do need not grant an accommodation if it causes undue hardship.
  • Under the Act, an employer need not grant a request for accommodate only when it would impose an undue hardship on the employer.   
  • An undue hardship is defined as “an action requiring significant difficulty or expense.” The employer has the burden to prove an undue hardship prevented the accommodation based on all of the facts and circumstances including 1) the nature and cost of the accommodation, 2) the overall financial resources of the employer, 3) the overall size in terms of number of employees, and number, the and location of facilities, of the employer, 4) the effect on expenses and resources or the accommodation on the employer’s enterprise or business.
Employers must provide Notice of Employees’ Rights Under the Act.
  • The Act also requires that employers provide written notice to employees by April 1, 2018 of the right to be free from discrimination due to pregnancy or a condition related to pregnancy, including the right to reasonable accommodations associated with pregnancy or a related condition.  Such notice can be made in a handbook pamphlet, or other means.  
  • Employers must also provide written notice of employees’ rights under the Act any new employee(s) prior to or at the start of their employment.
  • Employers must provide written notice of their rights under the Act to any employee who notifies the employer of a pregnancy or pregnancy-related condition within 10 days after such notification.
Given the fast-approaching April 1 effective date of the Act, employers are well-advised to develop and provide notice under the Act as more fully discussed above, and to review their written policies, handbooks, and practices to ensure that they are complying with the Act.  For more information, employers can refer to the guidance and Q&A’s discussing the requirements of the Act issued by the Massachusetts Commission Against Discrimination, or contact legal counsel.

Another Federal Court Expands Title VII Protection to Transgender Individuals

posted Mar 28, 2018, 2:01 PM by Adam Chandler

In Equal Employment Opportunity Commission v. R.G. & G.R. Harris Funeral Homes, the Sixth Circuit recently held that a transgender individual has a cognizable claim of gender identity discrimination under Title VII, and furthermore that the employer’s religious objections to transgender individuals working at his business did not override the employee’s rights to be free from discrimination, therefore preventing the employer from terminating the transgender employee. 

The Facts

Aimee Stephens was born biologically male.  Stephens worked as a funeral director at R.G. & G.R. Harris Funeral Homes, Inc. (“the Funeral Home”) for some period of time while she was lived and presented as a man. 

The Funeral Home was a closely held for-profit corporation in Michigan.  The Funeral Home, is not affiliated with any specific church; it does not claim to have a religious purpose in its articles of incorporation; it is open every day, including Christian holidays; and it serves clients of all faiths.  However, Thomas Rost was the principal owner and operator of the Funeral Home.  Rost identifies as Christian and practiced Christianity for over sixty-five (65) years.  He testified in the case that he was called by God to serve the grieving, and the Funeral Home’s website contains a mission statement quoting scripture and stating that the Funeral Home’s “highest priority is to honor God in all that we do as a company.”  Rost hires employees belonging to any faith or no faith at all and testified that he “does not endorse or consider himself to endorse his employees’ beliefs or non-employment-related activities.”

Stephens told Rost about her plans to her plans to transition from a man to a woman and represent herself and dress as a woman while at work.  Stephens told Rost about her struggles with gender identity, and she stated her intention to sex reassignment surgery.  Stephens explained further that as a precursor for surgery, she had to live full-time as a woman for one year, including while at work at the Funeral Home.  After Rost received this letter, Rost terminated Stephens’s employment. 

Rost testified that he fired Stephens because “he was no longer going to represent himself as a man. He wanted to dress as a woman.” He claimed that he “sincerely believe[s] that the Bible teaches that a person’s sex is an immutable God-given gift,” and that he would be “violating God’s commands if [he] were to permit one of [the Funeral Home’s] funeral directors to deny their sex while acting as a representative of [the] organization” or if he were to “permit one of [the Funeral Home’s] male funeral directors to wear the uniform for female funeral directors while at work.”

The Sixth Circuit Appeals Court Rules Title VII Protects Against Gender Identity Discrimination and the Owner’s Religious Beliefs Did Not Protect him from Liability

               The Equal Employment Opportunity Commission (“EEOC”) took on the case for Stephens and sued the Funeral Home in Federal District Court in Michigan. The District Court initially found in favor of the Funeral Home, ruling that transgender status is not a protected trait under Title VII.  The Court alsoconcluded that the Religious Freedom Restoration Act precluded the EEOC from enforcing Title VII against the Funeral Home, because doing so would substantially burden Rost and the Funeral Home’s religious exercise. EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., 201 F. Supp. 3d 837, 840 (E.D. Mich. 2016). 

On appeal, the Sixth Circuit reversed and ruled in favor of the EEOC and the transgender employee.  The Sixth Circuit found that Stephens was fired because of her failure to conform to sex stereotypes, in violation of Title VII, and that she could pursue a claim under that theory.  The Court went even further, however, finding that Stephens also could pursue a sperate and distinct theory of liability against her employer that she was discriminated against on the basis of her transgender and transitioning status.  In so ruling, the Sixth Circuit concluded that discrimination on the basis of gender identity was prohibited by Title VII. 

The court stated “Discrimination on the basis of transgender and transitioning status is necessarily discrimination on the basis of sex” protected by Title VII.  The Court reasoned that “it is analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex” which is expressly covered and prohibited by Title VII.  Furthermore, “discrimination against transgender persons necessarily implicates Title VII’s proscriptions against sex stereotyping.”  

On appeal, the Sixth Circuit also rejected that Rost’s religious objections to employing a transgender individual who intended to present at work as a different sex than she was biologically born trumped the employee’s rights against discrimination.  The Court reasoned that the “ministerial exception” to Title VII, which “preclude[s] application of [employment discrimination laws such as Title VII] to a religious institution and its ministers” did not apply because the Funeral Home was not a religious institution and the employee was not a ministerial employee.”

The Court also rejected Rost’s argument under the Religious Freedom Restoration Act.  The Religious Freedom Restoration Act only applies to the government enforcement of a religiously neutral law against an individual if that law substantially burdens the individual’s religious exercise.  This defense was available in this particular case because the EEOC, and not Stephens individually, filed the claim against the employer. 

The Funeral Home said employing Stephens substantially burdened it in two ways: 1) a transgender funeral director could create distractions for the deceased’s loved ones and thereby hinder their healing process and the Funeral Home’s ministry, and 2) forcing Rost to violate his faith and allow Stephens to dress as a woman at work would pressure Rost to leave the funeral industry and end his ministry to grieving people.  The Sixth Circuit found that neither burden was substantial.  The alleged distraction caused to customers was premised on their presumed biases.  As for the claim that the employer would be forced to act in contradiction of his faith to employ Stephens, the Court said that the employer did have to take some action like purchase Stephens female-specific clothing; all Rost had to do was permit Stephens to wear attire that reflects a conception of gender at odds with Rost’s religious beliefs.  This is not a substantial burden, according to the Court. 

Finally, the Sixth Circuit found that even if Rost had established a substantial burden, he would have to employ Stephens nonetheless because the EEOC had a compelling interesting in enforcing elimination of workplace discrimination on the basis of sex, and there was no less restrictive means of achieving this interest other than to find liability in this employer for discrimination.   For all of these reasons, Sixth Circuit granted judgment to the EEOC.

The Lessons

This case emphasizes once again that if they wish to avoid liability for discrimination, employers should seriously consider taking steps to avoid discriminating against a person based on any personal characteristic, including sexual orientation or gender identity. 

This latest decision by the Sixth Circuit is consistent with decisions of other Federal Circuit courts, including the Second Circuit in Zarda v. Altitude Express, Inc. and the Seventh Circuit in Hively v. Ivy Tech Community College of Indiana, who each have recently ruled that Title VII’s prohibition against sex discrimination does in fact cover discrimination on the basis of sexual orientation and gender identity.  Employers operating in states within these circuits should avoid discriminating on the basis of gender identity or sexual orientation. 

Even in states outside these circuits, employers should be extremely careful about taking adverse employment actions against transgender and gay employees.  First, the clear trend of federal courts is to recognize that Title VII does in fact prohibit discrimination on the basis of gender identity and sexual orientation. 

Second, such discrimination may also be prohibited by state law in the employer’s jurisdiction.  Several states, including Massachusetts and New Hampshire, have laws expressly prohibiting discrimination on the basis of sexual orientation.   Massachusetts state law also prohibits discrimination on the basis of gender identity.  Employers in these states and any other with laws expressly prohibiting discrimination on the basis of sexual orientation or transgender status must avoid discriminating because of an employee’s sexual preference or gender identity, and should change their policies to say so.

Finally, R.G. & G.R. Harris Funeral Home also reflects that the alleged beliefs of an employer may well be insufficient to provide a basis to avoid employing a diverse workforce in terms of sexual orientation and gender identity.  Only when the employer is legitimately a religious institution will an employer’s religious views potentially override the employee’s rights to be free from discrimination.  

Even Obscure Religious Beliefs Must be Accommodated if Sincerely Held

posted Mar 1, 2018, 3:51 PM by Allison Ayer

This week, the Supreme Court of the United States (SCOTUS) declined to review several employment cases petitioned to the Court.  One of those cases, EEOC v. Consol Energy, Inc., 860 F.3d 131 (4th Cir. 2017), sought review of a religious accommodation case where the employer refused to accommodate an employee who objected to using a biometric time tracking system because he believed it marked him as a supporter of the Antichrist.  This case provides an interesting insight into the state of the law protecting religious practice in the workplace, and is worth a read. 

The Case:        

The facts of the case make for good reading.  The employee was a devout evangelical Christian who had worked for the employer for nearly forty years.  He had no record whatsoever of poor performance or any other workplace incident.  But that changed when he refused to use the employer’s required tracking system. 

Relying on specific excerpts of scripture and a letter from his pastor, the employee told his employer that he could not use the company’s time tracking system because he believed that if he placed his hand on the biometric scanner to punch in and out, he might receive the “Mark of the Beast”, branding him a follower of the Antichrist and condemning him to everlasting punishment.  As an alternative, the employee offered to check in with his supervisor upon arrival or departure, or punch in and out on a time clock as he had done in the past.  The employer refused to allow this, instead insisting that the employee use the biometric scanner.  The employee decided to retire given what he believed was a risk of eternal damnation.  The EEOC sued on the employee’s behalf, and prevailed at trial.  The employee was awarded over $500,000 in back pay, front pay, lost benefits and compensatory damages.   

The Appeal: 

On appeal to the Fourth Circuit, the employer argued that the employee could show no conflict between his religious belief and the use of the hand scanner in essence because the employee was wrong about the religious teaching.  According to the employer, scripture provides that the “Mark of the Beast” can be made only on the right hand and involves an actual physical mark, and the scanner did not make any physical mark and could be used with the left or right hand, according to the manufacturer.  The employer therefore reasoned that the employee could use the biometric system without being at risk of branding himself a follower of the Antichrist.  The employer also noted that the employee’s own pastor did not share the employee’s religious beliefs objecting to use of the scanner.  

Employers Must Accommodate Sincerely Held Religious Beliefs, not “Correct” religious beliefs, unless such might pose an undue burden:

The Fourth Circuit rejected this argument, reasoning that it reflected only the employer’s view that its employee’s religious beliefs were mistaken, which view is completely irrelevant in deciding whether to make a religious accommodation.  The Court said it is not for the employer or the court to question the correctness or even the plausibility of the employee’s beliefs.  “[The employee’s] religious beliefs are protected . . . whether or not [the employee’s] pastor – or [the employer], or the manufacturer of [employer’s] scanning system – thinks that [the employee], in seeking to protect his religious conscience, has drawn the line in the right place.”  So long as there is sufficient evidence that the employee’s beliefs are sincerely held (which there was in this case), and that those beliefs conflict with an employment requirement, the employer must try to accommodate the employee unless it can demonstrate an undue hardship.

Constructive Discharge Does Not Require Evil Intent:

The Fourth Circuit Court also rejected the employer’s argument that the employee failed to make the required showing that the employer purposely refused the religious accommodation with the premediated goal of forcing his retirement.  The Court noted that in a 2016 decision, Green v. Brennan, 136 S. Ct. 1769 (2016), SCOTUS decided that there is no such “deliberateness” element to a constructive discharge claim.  SCOTUS stated:  

The whole point of allowing an employee to claim ‘constructive’ discharge is that in circumstances of discrimination so intolerable that a reasonable person would resign, we treat the employee’s resignation as though the employer actually fired him. We do not also require an employee to come forward with proof—proof that would often be difficult to allege plausibly—that not only was the discrimination so bad that he had to quit, but also that his quitting was his employer’s plan all along.

Applying this standard, the Court also found that the employer’s refusal to offer a religious accommodation rendered the working environment so intolerable as to force the employee to retire.  The Court stated:

[An employer] refus[ing] to accommodate [a] religious objection, requiring him to use a scanner system that [employee] sincerely believed would render him a follower of the Antichrist, “tormented with fire and brimstone”…. goes well beyond the kind of run-of-the-mill “dissatisfaction with work assignments, [] feeling of being unfairly criticized, or difficult or unpleasant working conditions” that we have viewed as falling short of objective intolerability.    

Inconsistent Accommodation for Others Was Key:

Importantly, there also was evidence presented at trial that the employer was willing to accommodate other employees for non-religious reasons.  The employer allowed employees with hand injuries to punch in and out using a key pad alternative to the scanner, but it did not offer this option for the employee who objected on religious grounds.  The employer also sent an email internally simultaneously authorizing the keypad accommodation for the employees with physical injuries and denying that accommodation to employee.  The email stated “[L]et’s make our religious objector use his left hand.” There was also evidence that this alternative system provided no additional cost or burden to the employer.  While the appeals court did not delve into these facts in any detail, it is difficult to imagine that they did not affect its decision to uphold the trial.  These facts reflect a difference in treatment that can be explained most clearly on religion.   

The Take Aways: 

SCOTUS’s refusal to review this case indicates that the law concerning religious accommodations is well-settled in certain areas, and the case should guide an employer’s conduct in the workplace when faced with these requests in the following respects:

Be Receptive!  Do NOT substitute your judgment for the judgment of the employee when it comes to religious accommodations.  If the employee expresses a sincerely held belief that religion prevents him/her from following a policy or practice, the employer must respect that view, whether or not it holds the same beliefs or finds that the employee misunderstands religious doctrine.

Be Proactive! Engage in an interactive process with your employee to try to find a way to accommodate an employee’s sincerely held religious belief, even if you think they are unreasonable, mistaken, or unfounded.  Given the intensity with which religious beliefs are held, if the employer quits because you refused a religious accommodation, it will likely be enough for the employee to establish that the workplace was so intolerable that he/she was forced to quit.  You will not be required to provide accommodations that would impose an undue burden upon you, but you typically will not know whether such a burden exists until you have fully engaged in a genuine interactive process.  

Be Consistent! Always treat employees the same, regardless of religion.  If an employer can accommodate an employee for a non-religious reason, this is strong evidence that it can provide the same accommodation when an employee objects on religious grounds.   

Be Careful! Watch what you state in an email, especially with regards to sensitive matters like requests for religious accommodations.  It can and will be used as evidence in any future discrimination case.  


NLRB Returns to the Obama-Era Test of Joint Employment

posted Feb 28, 2018, 3:34 PM by Allison Ayer   [ updated Feb 28, 2018, 3:46 PM ]

At the end of 2017, as part of its effort to end certain Obama-era rules, the new Republican majority National Labor Relations Board overturned the joint employer standard established under Obama.  According to the NLRB’s decision in Hy-Brand Indus. Contractors, Ltd. and Brandt Construction Co., in order to find a “joint employer relationship,” two entities must share actual control (verses a mere reservation of a right to control) the essential terms and conditions of employment (e.g. hiring, firing, supervision, compensation, etc). and that control must be “direct and immediate” verses merely indirect. 


This week, the NLRB vacated its decision in Hy-Brand, after the inspector general issued a report condemning a member of the NLRB for improperly participating in the case.  This means that the 2015 test established in the Browning-Ferris Industries of California, Inc. d/b/a BFINewby Island Recyclery decision, once again governs whether two entities constitute joint employers.   


Under the Browning-Ferris test, two or more entities are joint employers of a single workforce if (1) they are both employers within the meaning of the common law;  and (2) they share or codetermine those matters governing the essential terms and conditions of employment. In evaluating whether an employer possesses sufficient control over employees to qualify as a joint employer, the considers, among other factors, whether an employer has exercised control over terms and conditions of employment indirectly through an intermediary, or whether it has reserved the authority to do so. 


The reversion back to this more relaxed standard means that employers who employ workers through temporary agencies, or who utilize franchises or subcontractors to conduct business, are more likely to be viewed by the NLRB as a joint employer – that is until it changes its mind again!

Federal Court Says Sexual Orientation Protected by Title VII

posted Feb 28, 2018, 8:16 AM by Allison Ayer   [ updated Mar 5, 2018, 6:46 AM by Adam Chandler ]

This week, in a case called Zarda v. Altitude Express, the Second Circuit held 10-3 that discrimination on the basis of sexual orientation is prohibited under Title VII. 

The Case

In this case, the plaintiff, a gay man who worked as a sky driving instructor at Altitude Express, was fired by his employer after he told a female client about his sexual orientation.  He, like other sky diving instructors, often performed tandem sky dive jumps, which involved being strapped hip‐to‐hip and/or shoulder‐to‐shoulder with clients.  During the incident that formed the basis for his termination, Zarda said that the he disclosed his sexual orientation to a female client to dissuade any discomfort the woman might have about having to be strapped to him during the tandem jump.  The client, on the other hand, alleged that Zarda inappropriately touched her and disclosed his sexual orientation to excuse his behavior.  When her boyfriend complained to Altitude Express about Zarda’s alleged behavior and his reference to his sexual orientation, Zarda’s boss fired him.  Notably, there was evidence that Zarda’s co‐ workers routinely referenced sexual orientation or made sexual jokes around clients. 

Zarda filed suit against Altitude Express, under New York state law and Title VII.  Zarda lost his state claim at trial.  The lower court dismissed the sexual orientation claim at summary judgment, reasoning that a sexual orientation claim was not “legally invalid” under Title VII.  On appeal, the Second Circuit reversed. 

According to the Second Circuit Zarda’s sexual orientation claim is valid under Title VII for three critical reasons:

1. It is covered by the Title VII’s statutory language prohibiting discrimination “because of sex.” The Court stated:

Because one cannot fully define a person’s sexual orientation without identifying his or her sex, sexual orientation is a function of sex. Indeed sexual orientation is doubly delineated by sex because it is a function of both a person’s sex and the sex of those to whom he or she is attracted. Logically, because sexual orientation is a function of sex and sex is a protected characteristic under Title VII, it follows that sexual orientation is also protected.

2. Title VII’s prohibition against sex discrimination bars employers from taking adverse action against employers who fail to conform to gender stereotypes, which discrimination on the basis of which sexual orientation is the “ultimate case”; and

3. Title VII prohibits “associational discrimination.” An employer commits race discrimination in violation of Title VII if it takes adverse action against an employee in an interracial marriage. Similarly, “[i]f a male employee married to a man is terminated because his employer disapproves of same-sex marriage…the employee has suffered associational discrimination based on his own sex.”

The Consensus

This decision makes the Second Circuit among the several federal courts, along with the Equal Employment Opportunity Commission, who have opined that sexual orientation is prohibited by Title VII notwithstanding that the statute does not specifically include sexual orientation among the list of protected classes.  But this position is not unanimous.  The Eleventh Circuit, for example, ruled just last year that sexual orientation discrimination is not prohibited by Title VII.  

The Take Away

Importantly, the Zarda case underscores that employers should seriously consider taking steps to avoid discriminating against a person based on any personal characteristic, including sexual orientation or even gender identity, if it wishes to avoid liability. 

First, while discrimination on the basis of sexual orientation might not be protected by federal law in an employer’s protected jurisdiction, it might nonetheless be prohibited by state law.  Several states, including Massachusetts and New Hampshire, have laws expressly prohibiting discrimination on the basis of sexual orientation.  Massachusetts state law also prohibits discrimination on the basis of gender identity. 

Second, employment discrimination in the context of sexual identity issues is an evolving area of the law.  As mentioned above, there is disagreement within the Federal Government whether homosexual and/or transgender individuals are protected against employment discrimination under existing federal statutes.  This lack of certainty could well lead to liability if an employer relies on one particular legal decision in this changing area of the law.  
the Zarda case makes clear that it is the Federal Courts and not the Department of Justice, who will be the final arbiter of the meaning of federal law, including Title VII.  In reaching its decision, the Second Circuit rejected the view of Trump administration, whose DOJ filed an unsolicited amicus brief arguing that homosexuals are not protected against employment discrimination under federal law.  In this same way, a federal court may well reject the DOJ’s earlier opinion letter that Title VII does not prohibit transgender discrimination, and an employer who relied on the DOJ’s view therefore may not be protected from liability if it gets sued under Title VII on such basis.   

Trump's NLRB Reverses Course on Obama-Era Rules

posted Feb 22, 2018, 10:05 AM by Adam Chandler

In the final weeks of 2017, the National Labor Board Relations Board, packed with Trump appointees, put an end to two important Obama-era labor rules.   

Joint Employer Test Clarified for Businesses

In Hy-Brand Indus. Contractors, Ltd. and Brandt Construction Co., the now Republican-majority NLRB overturned the joint employer standard established under Obama, and returned to the prior standard that governed for decades before.  The current standard requires that two entities must share actual control over (verses a mere reservation of the right to control) the essential terms and conditions of employment (e.g. hiring, firing, supervision, pay, etc.) in order for the NLRB to find a “joint employer” relationship.  The NLRB also noted that the control must be “direct and immediate” verses indirect.  Finally, the NLRB will analyze joint employment both in form, i.e. the contract between the entities, as well as in substance, i.e. the actual practice of the employers. 

Most experts believe that this standard for determining joint employment is more objective and provides greater clarity than the Obama-era standard.  Most believe the new rule benefits employers by allowing them to more accurately assess whether they may be responsible for the conduct of a separate entity with whom they contract and whose employees have overlapping responsibilities to both entities.  This is especially true for employers whose business model involves the use of franchises, subcontractors, or even temp agencies.    
Employer Policies Legitimately Restricting Employee Speech More Likely Enforceable

In Boeing Co. and Society of Professional Engineering Employees in Aerospace IFPTE Local 2001, the NLRB ordered that it would give greater consideration and deference to employers’ explanations of facially-neutral employment policies in determining whether such policies interfere with, restrain, or coerce employees in the exercise of their right to engage in union organizing or other concerted activity protected by the NLRA.  This decision ends the Lutheran Heritage Village-Livonia standard where facially-neutral employment policies could be found to violate the NLRA if employees would reasonably construe the policy's language to prohibit concerted activity.  

Under this Obama-era rule, even well-intentioned and important employment policies like those prohibiting harassing or defamatory statements on social media sites, abusive or profane language in the workplace, disparaging the employer online, or establishing standards of confidentiality in sexual harassment investigations could be viewed as violating the NLRA.  Under the current rule, such policies presumably would not be found to violate employee rights to engage in concerted activities to the extent the NLRB will give greater weight to the employer’s stated reason for having the policy.  Employers should feel much more comfortable establishing facially-neutral employment policies that are legitimately intended to protect important employer interests while also balancing the rights of employees to collectively bargain or join together as a group to advance their interests as employees as is their right under the NLRA.

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