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With the explosive press coverage of high-profilesexual harassers, employers should brace for a flood ofnew claims and an activist EEOC that will scrutinizesex-based charges with new vigor. Even though there isa well developed body of federal law that sets forth arigorous legal standard for unlawful sexual harassment,obtaining summary dismissals of such claims willbecome more difficult and juries, at least in the nearfuture, could be quite punitive if an employer is foundto have “looked the other way” when obvious problemsof sexual or gender abuse are occurring in the work-place. The steep costs businesses already incur as aresult of workplace harassment – legal expenses, adversepublicity, declining workforce morale, decreased pro-ductivity, employee turnover, compromised recruit-ment, etc. – will only worsen in today’s climate.

The sensational and deeply troubling nature of thestories concerning high visibility figures in Hollywoodand the political, media, and entertainment arenas havecreated an unfortunate perception that corporate Amer-ica has been neglecting its responsibility to address themoral and legal problem of sexual abuse in the work-place. While that is true within some pockets of corpo-rate America, it is not the case everywhere – at least notin the heartland of America where many employershave worked diligently for decades to eradicate sexualharassment in their workplaces. And many corporationshave made significant progress in their concentratedefforts to curtail this type of conduct. With that said,problems remain and employers need to be vigilant ifthey are to make further headway toward eradicatingthis problem. Employers also need to critically re-exam-

ine which of their prior prevention efforts have beensuccessful, which have not (and why), and be willing tochange course if past history and recent research suggesta different approach would be more effective.

Recognizing the need for a fresh look at the broadissue of harassment (not limited to sex-based claims),the EEOC authorized a Select Task Force to solicit thecontributions and insights of “sociologists, industrial-organization psychologists, investigators, trainers,

Winter 2018

• New Tax Law Discourages Non-Disclosure of Sexual Harassment Settlements . . . . . . . . . 2

• EEOC’s 2017 Statistics . . . . . . . . . . . . . . . . . . . 4• Two Conflicted Issues Resolved For Employers 5• Will Mandatory Arbitration Of

Sexual Harassment Claims Be Outlawed? . . . . 5• Federal Appeals Courts Rule For

LGBT Protections Under Title VII . . . . . . . . . . . 6• Don’t Forget The Plant Closing Act . . . . . . . . . . 7• Impact On Employers Of Legalizing Marijuana . 9• Anti-Poaching Agreements May

Be Criminally Prosecuted . . . . . . . . . . . . . . . . 11• U.S. Department Of Labor Keeps

Rolling Back Obama-Era Regulations . . . . . . 12• Is Smaller, Gentler OFCCP On Horizon? . . . . 13• Arbitration Rollout Must Say That Continued

Employment Accepts Arbitration . . . . . . . . . . . 14• NLRB In Hiatus . . . . . . . . . . . . . . . . . . . . . . . . 15

Inside This Edition

EEOC Task Force Report

New Initiatives For Workplace Harassment Prevention

Winter 2018

PAGE 2 KIENBAUM OPPERWALL HARDY & PELTON, P.L.C.

New Initiatives For Workplace Harassment Prevention from page 1

lawyers, employees, advocates, and anyone else who hadsomething useful to convey to us.” The 16-membertask force spent from April 2015 to June 2016 in searchof answers to the following question:

“With legal liability long-ago established, with repu-tational harm from harassment well-known, with anentire cottage industry of workplace compliance andtraining adopted and encouraged for 30 years, why doesso much harassment persist and take place in many ofour workplaces? And, most important of all, what canbe done to prevent it? After 30 years, is there somethingwe’ve been missing?”

The Report of the Co-Chairs of the EEOC’s SelectTask Force on the Study of Harassment in the Work-place, which reflects the input of a wide range of stake-holders (e.g., the EEOC, the employer community, thecivil rights community, other governmental agencies,and academic researchers), offers many observationsand recommendations to employers about how they canimprove their prevention efforts. A number of thoseideas are discussed in this article, along with additional

observations on new approaches to this persistent andseemingly unsolvable problem.

The Task Force report emphasizes a fundamentalprinciple that should guide a business’s preventionefforts: Creating a workplace culture that values civilityand respect among employees, at all levels, and will domore to cultivate a harassment-free workplace thansimply taking a compliance approach by educatingemployees as to what conduct is unlawful, or warningthem of negative consequences if they engage in politi-cally incorrect behaviors. If employees understand thata premium is placed on civility, and that being rudeand mean-spirited toward one’s fellow employee willnot be tolerated, troubling conduct that commonlydevelops into harassing behavior is far less likely tooccur.

While not a new insight, the Task Force report rein-forces the point that harassment prevention efforts willbe more successful if the employer’s workforce believesthat the highest level of management is sincerely com-mitted to ensuring a workplace devoted to civil treat-

Tax Law Discourages Non-Disclosure of Sexual Harassment Settlements

The new Tax Cuts and Jobs Act, enacted on December 22, 2017, amends the tax code regarding deductibil-ity of business expenses in a manner intended to limit the use of non-disclosure agreements in settlements ofsexual harassment claims. The tax code now provides that no deduction is allowed for any settlement paymentor attorney fees “related to sexual harassment or sexual abuse if such settlement or payment is subject to anon-disclosure agreement.” This will be a significant financial disincentive for some employers.

The change leaves many unanswered questions including: how it will apply to cases with multiple claimsincluding sexual harassment; or to settlements where there are no sexual harassment allegations but a broadgeneral release is used covering all claims including sexual harassment; or to payments under separationagreements where there have been no allegations of sexual harassment. If a case includes sexual harassmentand other claims, it would seem prudent to allocate the settlement dollars (and attorney fees) among theclaims, so some portion would be deductible.

It is also unclear whether a sexual harassment claimant will still be allowed a miscellaneous deduction forthe claimant’s own attorney fees.

Guidance from the IRS will hopefully be forthcoming to answer these questions.Sonja L. Lengnick

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ment and free of harassment. This requires that upperlevel management be visible and vocal in defining whatconduct is, and is not, acceptable; commit the financialresources and time to training and enforcement;empower and reward those whose job it is to ensurecompliance; and then hold them responsible if they failto do their job. Anti-harassment policies must also beregularly communicated and consistently adhered to.For the process to have integrity, employees mustbelieve that the anti-harassment policy is more thanwords on the page.

Reporting procedures continue to be an area inwhich many employers fall short. The report empha-sizes that employers should offer reporting procedureswith “a range of methods, multiple points-of-contact,and geographic and organizational diversity where pos-sible, for an employee to report harassment.” Employersneed to communicate frequently with employees abouthow to register harassment complaints, and reassurethem that anyone who is a victim of harassment andreports problems of inappropriate workplace conduct isprotected from retaliation.

Since the old axiom “actions speak louder thanwords” is particularly apropos here, the Task Forceappropriately reminds the employer community thatmanagement’s credibility requires that it act promptlyin response to complaints and with a “meaningful,appropriate and proportional” response. That, ofcourse, means that the high ranking and highly valuedemployees are held to the same standards as the rankand file. It is also key that an employer not rush tojudgment when a complaint is lodged (an adequateand fair investigation is always essential), or make anexample out of wrongdoers by being too heavy-handedwith discipline. Employees must have faith in the fair-ness and integrity of the system for the policy to beeffective.

A significant focus of the Task Force report is ontraining – which clearly needs to be re-tooled sincemuch of what has been done in the past has notworked. Ideally, training should be live (not online),

interactive, and conducted by an experienced profes-sional. Its effectiveness will be enhanced if it is cus-tomized for its audience (i.e., a specific workplace andcohort of employees), and the report correctly notesthat middle-managers and first-line supervisors, whentrained correctly, “can be an employer’s most valuableresource in preventing and stopping harassment.” Italso recommends new models for training, including“Bystander Intervention Training” (give co-workerstools to intervene when they witness harassment) and“Workplace Civility Training” (promoting respect andcivility in the workplace for all employees irrespective oftheir protected characteristics).

The EEOC announced that it will launch two newtraining programs for employers: “Leading for Respect”(for supervisors) and “Respect in the Workplace” (for allemployees). These programs address all forms of work-place harassment, not just sex-based. According to theEEOC, the “training program focuses on respect,acceptable workplace conduct, and the types of behav-iors that contribute to a respectful and inclusive, andtherefore ultimately more profitable, workplace. Theprogram is customizable for different types of work-places and includes a section for reviewing employers’own harassment prevention policies and procedures.”The EEOC Training Institute will conduct the train-ings. Information about the training program is avail-able on the EEOC Training website.

Another suggestion of the Task Force report is thatemployers should focus extra attention on workplacesthat are more at risk for harassment than others. Exam-ples include: traditionally male-dominated workplaceswhere women are perceived as taking men’s jobs or notconforming to workplace norms; workplaces with highvalue employees such as highly paid rainmakers whomay conclude that their exalted status means the rulesdo not apply to them; workplaces with significant powerdisparities – i.e., one small group has total control overthe work life of a large segment of the employee popula-tion; workplaces where client satisfaction is paramountand employees feel compelled to tolerate customers’ abu-

Winter 2018 Kienbaum Opperwall Hardy & Pelton, P.L.C.


Winter 2018



sive behaviors; isolated or decentralized workplaceswhere there is limited oversight by senior managementor human resources, and employees have limited contactwith corporate offices; and workplaces that tolerate alco-hol consumption during working hours.

A closing suggestion, endorsed by the report, is foremployers to conduct climate surveys and engage inperiodic testing of their systems. Considering how thegood faith efforts of many employers have missed themark over the past several decades, this extra step makesinfinite sense.

Elizabeth Hardy

EEOC’s 2017 Statistics:Reduced Backlog, MoreFocus On RetaliationAnd Systemic Claims

In January 2018, the Equal Employment Opportu-nity Commission released its annual Performance andAccountability Report for fiscal year 2017, which high-lighted its key accomplishments and identified thenumber and types of charges received by the EEOC.

In fiscal year 2017, the EEOC received 84,254charges, which reflects a drop in filings from 2016(91,503). Of particular significance is the number ofretaliation claims: 41,097 of the 84,254 charges includ-ed retaliation claims. In addition, 28,528 chargesincluded race discrimination claims; 26,838 chargesincluded disability discrimination claims; 25,605charges included sex discrimination claims; and 6,696charges included sexual harassment claims.

Michigan accounted for 2,489 of those charges, andwith few exceptions, its distribution of claims largelymirrored the national trends. The largest numbers of

Michigan charges involved retaliation claims (986), fol-lowed by disability discrimination (831), race discrimi-nation (779), and sex discrimination (664).

The EEOC touted several key achievements for fis-cal year 2017, including obtaining substantial relief foralleged victims of discrimination while at the same timedramatically reducing its backlog of pending charges.The EEOC reduced its pending charges by 16.2%,which is its lowest pending inventory in over ten years.The EEOC resolved 99,109 charges in 2017, andsecured approximately $484 million for alleged victimsof discrimination. The EEOC filed 184 lawsuits in2017, more than doubling the lawsuits from previousyears (e.g., 86 in 2016). Of those lawsuits, 124 werefiled on behalf of individuals, 30 were brought onbehalf of multiple aggrieved individuals, and 30involved “systemic” claims (i.e., alleging “pattern orpractice, policy or class cases where the alleged discrimi-nation has a broad impact on the industry, occupationor geographic area”).

The EEOC acknowledged that addressing systemicdiscrimination in employment has long been an impor-tant part of its work, and in 2017 it sought to increasethe number of systemic cases on its active litigationdocket. The EEOC reported beating its goal with24.8% of its 2017 cases (60 out of 242) involving sys-temic claims. The EEOC also resolved 329 systemicinvestigations, for which it obtained over $38.4 millionin remedies; and 22 systemic lawsuits, four of whichincluded at least 100 alleged victims of discriminationand two of which included over 1,000 alleged victims.

What trends can be predicted for 2018? Recentevents and media coverage of high profile complainantsand accused wrongdoers suggest that we may see a spikein sexual harassment and unequal pay claims in 2018.Employers should also be mindful of the EEOC’srecent focus on retaliation and systemic charges – all ofwhich underscores the importance of immediate andthorough investigations into employee complaints.

Shannon V. Loverich

Two Conflicted Issues Resolved For Employers

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Just as we were preparing for publication, the U.S.Supreme Court issued two decisions (with no dis-senters) that reversed decisions of the U.S. Court ofAppeals for the Sixth Circuit and the Ninth Circuit.(Michigan is in the Sixth Circuit; the Ninth Circuitcovers several western states including California.)

Yard-Man Inference Is Now Really Dead. In2015, in a case entitled M&G Polymers USA v. Tackett,the Supreme Court instructed that lower courts werenot to use retiree-favorable inferences when interpret-ing collectively bargained contract provisions govern-ing retiree health insurance benefits. The Sixth Circuithad adopted such an inference in 1983 in UAW v.Yard-Man Inc. and applied it in many cases over thefollowing 30 years to conclude that retiree healthinsurance benefits were “vested” and unalterable. Butnotwithstanding what many thought was a total rejec-tion of the Yard-Man inference in Tackett, some SixthCircuit judges continued to apply aspects of Yard-Manwhen interpreting labor contracts.

One of those post-Tackett cases was CNH Industri-al v. Reese, in which the Sixth Circuit panel affirmed(by a 2-1 vote) a trial court decision that medical ben-efits were vested for the retirees’ lifetimes, even thoughthe collective bargaining agreement was silent on thispoint, and a clause limiting the duration of the con-tract supported the opposite conclusion. From thatruling, the CNH Industrial case proceeded to the U.S.Supreme Court, which in a short per curiam decisionreversed the Sixth Circuit panel with an opinion thatessentially said: We told you once in Tackett and nowwe’re telling you again — the Yard-Man inference isreally dead.

This ruling should help clear up ambiguities in therules governing the vesting of collectively bargainedretiree medical benefits, which have for decades per-plexed and presented huge potential liabilities foremployers doing business in the Sixth Circuit.

Dodd-Frank Whistleblower Protections Limited.In 2010, Congress enacted the Dodd-Frank Wall Street

Will Mandatory Arbitration of Sexual Harassment Claims Be Outlawed?

On February 13, 2018, the attorneys general of all 50 states, the District of Columbia, and the five U.S. ter-ritories sent a letter to Congress in support of ending the application of mandatory arbitration policies toclaims of sexual harassment. A bipartisan bill with the same objective had been introduced in December bySenators Gillibrand (D-NY) and Graham (R-SC). Federal legislation is likely necessary to achieve the desiredoutcome because attempts by individual states to exempt a specific category of claims from mandatory arbi-tration could well be preempted by the Federal Arbitration Act.

While the state legal officers’ letter arguably implies some reservations about the general concept of“mandatory” arbitration, it focuses on two reasons why such arbitration agreements are uniquely problematicfor sexual harassment claims. First, many arbitrators lack the sensitivity and legal sophistication necessary toensure that victims of alleged harassment “are accorded both procedural and substantive due process.” Sec-ond, many arbitration agreements prohibit disclosure of both the existence and the outcome of arbitration pro-ceedings, creating what the letter called a “veil of secrecy” and “culture of silence.” That culture, the lettercontends, is contrary to public policy because it prevents victims of harassment from learning of (and perhapsmaking evidentiary use of) the similar experiences of others, and makes victims feel isolated while allowingrepeat offenders to remain in the workplace.

Noel D. Massie

KIENBAUM OPPERWALL HARDY & PELTON, P.L.C.

Winter 2018

Reform and Consumer Protection Act that had severalprovisions addressing “whistleblower” protection. Oneprovision defined a whistleblower as someone who pro-vided information to the Securities and Exchange Com-mission in a particular manner that could lead to amonetary award following a successful SEC enforce-ment action. The Dodd-Frank Act also protectedwhistleblowers from “retaliation” for disclosing informa-tion in a manner that is required or protected under theSarbanes-Oxley Act of 2002.

Several decisions of the U.S. Courts of Appeals tookconflicting views of whether whistleblower protectioncovered only those who reported concerns to the SEC,or whether protection extended to a whistleblower whomerely reported concerns within a corporation’s internalhierarchy.

The U.S. Supreme Court has now resolved this con-flict in Somers v. Digital Realty Trust. After carefullyreviewing the provisions of the Dodd-Frank Act dealingwith whistleblowers, the Supreme Court ruled that onlycomplaints made to the SEC itself are protected by thatAct’s retaliation provision.

Although the Supreme Court’s ruling limits protec-tions of whistleblowers under the Dodd-Frank Act,employers should not assume that strictly internalwhistleblowing would not be addressable under Sar-banes-Oxley or possibly state statutes or legal theories(such as alleged violation of “public policy”) that mightprovide a wider form of whistleblower protection.

William B. Forrest III

Federal Appeals CourtsRule For LGBT Protec-tions Under Title VII

Two recent rulings from the U.S. Courts of Appeals

for the Second and Sixth Circuits have dramaticallystrengthened the trend in employment law that bothsexual orientation and gender identity are protectedclasses under Title VII.

Second Circuit. The Second Circuit ruled on Feb-ruary 26, 2018, in Zarda v. Altitude Express, Inc., thatsexual orientation is a protected class. In two old Sec-ond Circuit decisions from 2000 and 2005, that courthad held that sexual orientation discrimination was nota recoverable legal theory under Title VII. In the recentZarda case, the same court convened a special en bancpanel of all active judges and completely reversedcourse, holding that sexual orientation discrimination isinherently sex-based discrimination prohibited by TitleVII. The court overturned its earlier rulings on theissue. The court based its new ruling on the “persuasiveforce” of new decisions and the “changing legal land-scape.”

Zarda was a gay man who worked as a sky-divinginstructor. As part of his job, he had to be in closephysical proximity with clients. His co-workers routine-ly referenced his sexual orientation and made jokesaround clients, telling female clients not to be con-cerned since he was gay. A female client’s boyfriendcomplained that Zarda had touched a client inappropri-ately, and Zarda was fired. Zarda brought suit in 2010alleging the termination of his employment was due tohis sexual orientation.

The trial court dismissed his claims and he appealedto the Second Circuit. The three-judge panel upheldthe rejection of his legal theory, but only because it wasbound to do so under the court’s prior precedents. Thecourt then convened en banc to revisit its prior rulingson the issue in light of new developments.

In its en banc decision, the Second Circuit joinedseveral of its sister Circuits, and the EEOC, findingthat “an employee’s sex is necessarily a motivating factorin discrimination based on sexual orientation.” Accord-ing to the court: “[A] woman who is subject to adverseemployment action because she is attracted to womenwould have been treated differently if she had been a

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Federal Appeals Courts Rule For LGBT Protections Under Title VII from page 6

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man who was attracted to women.” Therefore, thecourt concluded, “sexual orientation is a function of sexand, by extension, sexual orientation discrimination is asubset of sex discrimination.”

Sixth Circuit. On March 7, 2018, a three-judgepanel of the Sixth Circuit held that gender identity is aprotected class under Title VII. In Stephens v. R.G. &G.R. Harris Funeral Homes, Inc., the Sixth Circuit panelfound that a transgender woman could maintain a law-suit for sex discrimination. Stephens had been a funeraldirector who was “assigned male at birth” and gave heremployer notice that she planned on presenting as andtransitioning to a woman. The owner of the funeralhome testified that he fired Stephens because she wasno longer going to present as a man and “wanted todress as a woman.”

The court reasoned that “[d]iscrimination on thebasis of transgender and transitioning status is necessar-ily discrimination on the basis of sex” and violates TitleVII. According to the court, “it is analytically impossi-ble to fire an employee based on that employee’s statusas a transgender person without being motivated, atleast in part, by the employee’s sex.” This is because“[g]ender is not being treated as ‘irrelevant to employ-ment decisions’ if an employee’s attempt to change hisor her sex leads to an adverse employment decision.”The court concluded that “[t]here is no way to disag-gregate discrimination on the basis of gender non-con-formity, and we see no reason to try.”

The Sixth Circuit additionally found that the funer-al home could not raise a freedom of religion defense toa Title VII transgender sex discrimination case. Theowner of the funeral home testified that he sincerelybelieved the Bible teaches that a person’s sex is animmutable God-given gift, and that he would be violat-ing God’s commands if he were to permit one of thefuneral home’s directors to deny their sex while actingas a representative of the organization. The court reject-ed this defense, holding that complying with Title VIIis not a substantial burden on religious beliefs, and thatthe eradication of discrimination is a compelling gov-

ernment interest that outweighs whatever burden exists.The court affirmed the principle that transgender indi-viduals are protected by federal sex discrimination lawsand that religious beliefs did not give the employer theright to discriminate against them.

This Sixth Circuit decision is binding on Michiganemployers.

The U.S. Supreme Court may at some point chooseto offer its opinion on one or more of these issues,thereby expanding these protections to the entire coun-try. But until it does so, employers should be aware thatthe trend in this area of the law is to find that sexualorientation discrimination and gender identity discrimi-nation are subsets of sex discrimination prohibited byTitle VII (and similar laws in some states). Employersshould review their anti-discrimination and anti-harass-ment policies for compliance with legal developmentsin states where they have employees, and seek counselwhen situations like these arise in their workforce.

Ryan D. Bohannon

Don’t Forget About ThePlant Closing Act

Economic times are good by most measures, includ-ing historic low unemployment levels. But employersshould not lose sight of the federal Worker Adjustmentand Retraining Notification Act, sometimes referred toas the WARN Act or the Plant Closing Act. In 2017,federal appellate courts issued several important deci-sions interpreting WARN Act obligations.

WARN requires employers under certain circum-stances to provide 60 days’ advance written notice toemployees who will suffer an employment loss as aresult of a covered plant closing or mass layoff. A plantclosing of 50 or more employees or a mass layoffinvolving 50 or more employees and at least one-third


of the employees at a single site of employment triggersWARN obligations. Penalties for failing to provideproper notice to the employees, their union representa-tives, and the state and local units of governmentinclude back pay and benefits for the period of the vio-lation. There are narrow exceptions to the noticerequirement for faltering companies actively seekingcapital, where the employer can establish a reasonablebelief that advance notice would preclude its ability toobtain such capital or busi-ness, and when unforeseeablebusiness circumstances occur.

Purchase of a Business.Under the statute, WARNnotice obligations fall on theseller of an ongoing businessup to the date of the sale andon the purchaser of the busi-ness after the date of the sale.In Day v. Celadon TruckingServices, Inc., the parties to thesale of a business attempted tocontractually provide that theseller was responsible forWARN notices resulting fromthe sale of the business. Twocommercial trucking companies entered into an assetpurchase agreement that required the purchaser todeliver to the seller a list of the seller’s employees towhom the purchaser intended to offer employment.However, for a period of 14 days immediately followingthe closing of the sale, the seller agreed to employ allemployees not being offered employment by the pur-chaser, and the seller would be responsible for sendingthem any required WARN notices. Despite the contrac-tual obligation on the seller to provide WARN noticesto those non-hired employees, the U.S. Court ofAppeals for the Eighth Circuit found that the transac-tion had all the traditional earmarks of a sale of anongoing business (not just assets) and that under thestatute the purchaser had obligations to provide WARN

notices to employees who were not hired by the pur-chaser after the date of the sale.

Single or Joint Employer. The U.S. Court ofAppeals for the Sixth Circuit, in McKinney v. CarltonManor Nursing & Rehabilitation Center, Inc., addressedthe question whether a management consulting firmwas a single or joint employer under the WARN Act.Carlton Manor was under regulatory oversight by theOhio Department of Health, which provided deadlines

to resolve certain deficiencies.Carlton hired a consultingfirm to assist in resolvingthese deficiencies. Carlton’splan was ultimately rejectedby the Ohio Department ofHealth, and the nursing homesoon thereafter closed. Carl-ton Manor gave notice to itsemployees of the closure ofthe business, but not the full60 days required by WARN.The employees sued CarltonManor and the consultingfirm and obtained a defaultjudgment against CarltonManor. But Carlton Manor

had no assets, so the aggrieved employees attempted tohold the consulting firm responsible for the WARNviolation. The Sixth Circuit rejected the employees’argument that the consulting firm was liable either as a“single employer” or a “separate but joint employer”with Carlton Manor. The court held that none of thefactors that make two entities a “single employer” –common ownership, sharing of directors and officers,the same personnel policies, or that the employees ofthe two businesses were all on the same payroll – werepresent. The WARN regulations provide factors fordetermining “joint employer” status, but these factors— that the consulting firm hired and fired Carlton’semployees or otherwise controlled their terms ofemployment — were also not present.

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WARN Claims in Bankruptcy. The U.S. SupremeCourt in Czyzewski v. Jevic Holding Corp. recentlyreversed lower court findings that the BankruptcyCourt’s conclusion that WARN plaintiffs could notrecover was improper under the Bankruptcy Code’s dis-tribution scheme. Under a complicated set of facts, theBankruptcy Court and U.S. Court of Appeals for theThird Circuit had held that WARN creditors (i.e., for-mer employees), despite having a clear priority underthe bankruptcy rules, did not have this priority underthe circumstances and that unsecured creditors having alower priority would be allowed to recover. TheSupreme Court’s decision makes very clear that dis-tressed employers subject to WARN litigation who arein bankruptcy may not pay the claims of general unse-cured creditors absent the consent of the higher-priorityWARN creditors.

Unforeseen Business Circumstances. In Varela v.AE Liquidation, Inc., the U.S. Court of Appeals for theThird Circuit joined five other Circuits, including theSixth Circuit, in determining that the unforeseen busi-ness circumstances exception excuses WARN noticewhere an event outside the employer’s control thatwould normally trigger notice requirements is “possiblebut not probable to occur.” In Varela, the employerreceived assurances that operating funds from a Russianbank would be available. Employees were temporarilyfurloughed as the employer awaited the funding, butWARN notice was not given because the employerexpected to retain the employees. The Russian fundingdeal ultimately fell through, and employees were onlythen notified that their layoffs would be permanent.The court held that “the WARN Act is triggered whena mass layoff becomes probable — that is, when theobjective facts reflect that the layoff was more likelythan not.” The court determined that this standardstrikes a balance between the protections for employeesunder WARN without imposing a burden on strugglingemployers to notify employees of every possible layoffscenario. Based on this “probable” standard, the ThirdCircuit held that the employer had met its burden of

demonstrating that the funding failure was not “proba-ble” prior to the employer’s decision to lay off theemployees. Be aware, however, that even where theunforeseen business circumstances exception applies,WARN notice still must be given as soon as possible.

Eric J. Pelton

The Impact on Employersof Legalizing Marijuana

Michigan voters will likely have the opportunity tovote to legalize recreational use of marijuana on thestatewide ballot in November 2018. If passed, theMichigan Regulation and Taxation of Marihuana Actwould allow adults 21 years of age and older to possessup to 2.5 ounces (71 grams) of marijuana and grow upto twelve marijuana plants in their residence for recre-ational use. Michigan could become the tenth state, inaddition to Washington D.C., to legalize the recreation-al use of marijuana. Pressure for states to legalize mari-juana for recreational use comes with popular supportfor the drug reaching new highs in 2017, with morethan 64% of Americans favoring legalization. One pollin Michigan shows that 56.6% of 600 voters surveyedsupport the proposal while 36.7% oppose it.

Even if the Michigan proposal to legalize marijuanapassed, it would remain designated as a Schedule I sub-stance and its possession criminalized under the federalControlled Substances Act. Despite current laws pro-hibiting possession of marijuana, its use in Michiganhas been steadily increasing since Michigan votersapproved the use of medical marijuana in 2008. Thenumber of people with medical marijuana cards hasincreased 76% since 2012 with “severe and chronicpain” being the most common reason for obtaining acard. In 2014-2015, 15% of Michiganders used mari-juana at least once in the prior year, making Michigan


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Winter 2018

Impact On Employers Of Legalizing Marijuana from page 9

the thirteenth highest ranking state for marijuana use.Legalization of recreational marijuana would make usemore widespread.

With a greater percentage of the population usingmarijuana and legalization of recreational marijuana onthe horizon, employers are faced with genuine chal-lenges to maintain productivity, ensure workplace safe-ty, and adequately fill positions with quality employeeswhile still protecting employees’ rights.

Employers who wish to maintain a drug free work-place will be able to continue todo so under the proposal. Theywill not have any obligation toaccommodate the use of mari-juana in the workplace or ontheir property. Furthermore,employers will not be prohibitedfrom “disciplining an employeefor violation of a workplacedrug policy or for working whileunder the influence ofmari[j]uana [or] from refusingto hire, discharging, disciplin-ing, or otherwise taking anadverse employment action against a person withrespect to hire, tenure, terms, conditions, or privilegesof employment because of that person’s violation of aworkplace drug policy or because that person was work-ing while under the influence of mari[j]uana.”

A workplace drug policy can take many forms,including a zero tolerance policy. Employers who receivefederal grants or are federal contractors are covered bythe Drug Free Workplace Act, which requires them tomaintain a drug free workplace, but does not requirealcohol or drug testing. Even employers that are notrequired to comply with the Drug Free Workplace Actcan take solace in the fact that marijuana is illegal underfederal law, especially considering Attorney General JeffSessions’ January 4, 2018 memorandum to end theObama Department of Justice’s guidance on the prose-cution of marijuana possession cases – known as the

Cole Memo – that had allowed medical and recreationaluse of marijuana to spread at an unprecedented rate.

Even though Michigan does not have any limits onprivate workplace drug testing, prudent employersshould consistently apply a policy to avoid claims ofdisparate treatment toward protected groups. Employerswho choose to have a drug policy prohibiting only theuse of marijuana in the workplace and being under theinfluence of marijuana at work, may have difficultyproving that an employee’s impaired performance is

because of marijuana. Thecannabinoid most widely tested iscarboxy THC, an inactivemetabolite that only indicatesprior marijuana use. Testing forTHC, tetrahydrocannabinol, thepsychoactive ingredient in mari-juana is a better indicator ofrecent use, but that requires ablood test. However, THC is notthe same as alcohol, as it ismetabolized differently, meaningthat the amount of time it staysin a person’s body is greatly influ-

enced by factors such as gender, body fat percentage,frequency of use, method of ingestion and type ofcannabis product consumed. Studies show that a heavymarijuana user could have even more than a 5-nanogram level of blood THC (the legal threshold inColorado for driving under the influence of marijuana)for several days after last use. On the other hand, peo-ple who did not regularly use marijuana could ingestmarijuana and have no evidence of it in their blood.

Surveys show that employers in states where recre-ational use of marijuana is legal are gradually removingmarijuana from pre-employment drug screening panels.Given the more widespread use of marijuana, combinedwith the fact that THC metabolites can remain in aperson’s body for a month, pre-employment marijuanascreens could result in a labor shortage in certain jobclassifications because a high percentage of candidates

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Impact On Employers Of Legalizing Marijuana from page 10

will fail the test. When determining whether to pre-screen for marijuana, employers should consider thenature of the job and whether it is dangerous, involvesoperating heavy machinery, or involves the safety orcaretaking of others.

Employers should also consider how their policywould affect an employee who returns from FMLAleave to a zero tolerance workplace and has lawfullyused medical marijuana as part of treatment for a seri-ous medical condition while on leave. If such anemployee tests positive for marijuana and is dischargedpursuant to a zero tolerance policy, the employer couldface a claim that the termination was in retaliation forthe employee’s use of FMLA. So long as marijuana isillegal under federal law, though, such a claim willprobably not be successful.

The increased use of marijuana and the inevitabilityof the legalization of marijuana give rise to new ques-tions for employers. While the science for determiningmarijuana intoxication and employment case law striveto catch up, employers must decide what policies arebest for their unique workplaces to mitigate risks fromworkplace accidents, performance issues, labor short-ages, and employment lawsuits.

Sarah L. Nirenberg

Anti-Poaching AgreementsBetween Employers MayBe Criminally Prosecuted

On January 19, 2018, the Assistant Attorney Gener-al for the Antitrust Division of the Department of Jus-tice, Makan Delrahim, announced that the Departmentof Justice “has a handful of criminal cases in the works,”signaling that criminal charges are to be expected.

Anti-poaching agreements recently received atten-

tion as a result of the practice of certain Silicon Valleycompanies to agree among themselves not to poach theothers’ talent. Up to this point, the Department of Jus-tice had enforced this type of conduct – which it hadalways viewed as a violation of the antitrust laws –through civil lawsuits seeking damages and injunctiverelief to forbid the practice prospectively. This newannouncement warns employers that this practice willnow be met with criminal charges, and that in civil set-tlements in which the employers have not adhered totheir agreements with the Department of Justice, crimi-nal charges may be filed.

Assistant Attorney General Delrahim also referencedwage-fixing agreements as drawing criminal chargesnow. In such agreements two employers might seek toachieve the equivalent of a non-poaching agreementthrough wage and benefits parity, which discouragesemployees from switching employment.

This caution covers all entities that compete foremployees, including non-profits, universities, and oth-ers who typically do not consider themselves impactedby the antitrust laws.

Thomas G. Kienbaum

U.S. Department ofLabor Keeps RollingBack Obama-Era Regulations

Since our last issue, the U.S. Department of Labor(DOL) under the Trump Administration has movedforward with several changes or proposed changes tointerpretations of the Fair Labor Standards Act (FLSA).

Unpaid Interns. Likely the most significant recentdevelopment in the ever-evolving world of wage and

hour law is a modification to the definition of internsat for-profit companies, a change which presumablywill result in more individuals qualifying as genuineinterns. In 2010 the DOL had issued a fact sheet set-ting forth six rigid requirements that must be met foran individual to be considered an intern rather than anemployee. The test was very difficult to meet – somewould say impossible – as the employer could notderive any immediate advantage from the activities ofthe intern. There was much ensuing litigation, includ-ing numerous class actions, regardingwhether individuals were properly treatedas unpaid interns, resulting in severalU.S. Courts of Appeals ruling that theDOL’s 2010 test was invalid.

In 2015, in Glatt v. Fox SearchlightPictures, Inc., the U.S. Court of Appealsfor the Second Circuit rejected the DOL’srigid six-factor test in a case involvingunpaid interns who worked on the filmBlack Swan and in Fox’s corporate offices.The Second Circuit instructed that courtsshould look at the relationship as a wholeand determine which party was the “pri-mary beneficiary” of the relationship. Itidentified seven non-exclusive factors forcourts to consider in this analysis.Notably, the court did not include theDOL’s prior requirement that theemployer derive no immediate advantagefrom the activities of the intern. Other courts followedthe Second Circuit, most recently the Ninth Circuit inBenjamin v. B & H Educ., Inc. on December 19, 2017.

On January 5, 2018, citing Glatt and Benjamin, theDOL issued an updated “Fact Sheet #71: InternshipPrograms Under the Fair Labor Standards Act,” adopt-ing the non-exclusive seven-factor “primary beneficiary”analysis set forth in Glatt, stating that no one factor isdeterminative. The seven factors are:

1. The extent to which the intern and the employerclearly understand that there is no expectation of com-

pensation. Any promise of compensation, express orimplied, suggests that the intern is an employee—andvice versa.

2. The extent to which the internship providestraining that would be similar to that which would begiven in an educational environment, including theclinical and other hands-on training provided by educa-tional institutions.

3. The extent to which the internship is tied to theintern’s formal education program by integrated course-

work or the receipt of academic credit.4. The extent to which the internship

accommodates the intern’s academic com-mitments by corresponding to the acade-mic calendar.

5. The extent to which the intern-ship’s duration is limited to the period inwhich the internship provides the internwith beneficial learning.

6. The extent to which the intern’swork complements, rather than displaces,the work of paid employees while provid-ing significant educational benefits to theintern.

7. The extent to which the intern andthe employer understand that the intern-ship is conducted without entitlement toa paid job at the conclusion of the intern-ship.

Although it should be easier foremployers to engage interns under the new standard,employers still must be cautious in ensuring that this“primary beneficiary” test is met for all individuals clas-sified as unpaid interns.

Tip-Pooling. The DOL also has issued a proposedrule to rescind a position it began taking in 2011 regard-ing tip-pooling. The FLSA permits employers to utilizetips received by employees as a credit against part of theemployer’s minimum wage obligations if certain condi-tions are met, including that employees retain all tips,with the qualifier that tips could be pooled among cus-


Winter 2018

Rolling Back Obama-Era Regulations from page 11

tomarily and regularly tipped employees. In 2011, theDOL amended the FLSA regulations to state that thetip-pooling requirements apply to all employees receiv-ing tips, even if the employer pays the employee at orabove the minimum wage and does not take a tip credit.

Restaurants and other employers filed numerouslawsuits questioning the DOL’s authority to apply thetip-pooling rules to employees who were not receiving atip credit toward the minimum wage, resulting in asplit among the federal appellate circuits on this issue.On December 4, 2017, the DOL issued a Notice ofProposed Rule Making that would rescind the chal-lenged provision of the 2011 regulation requiring tippool compliance for employees whose wages are notsubject to a tip credit. Under the DOL’s new proposal,tipped employees who are paid full minimum wagecould be required to share their tips with back-of-the-house staff designated by the employer as a tip-poolparticipant. If adopted, this proposed change may helprestaurants attract back-of-the-house staff, but it willnot be popular with regularly tipped employees who arepaid minimum wage.

White Collar Exemptions. The DOL is planningto issue a new regulation regarding the white collarexemptions to replace the enjoined Obama-era revamp.The Obama administration’s overtime regulation, whichwas set to go into effect on December 1, 2016, wouldhave raised the minimum salary necessary for anemployee to be exempt to $913 per week. This wouldhave doubled the prior minimum required salary, but itwould have made no changes to the duties tests, whichleft many employers guessing about an employee’s cor-rect classification. That regulation was enjoined by aTexas federal court in November 2016, shortly before itwas to go into effect, and the court later ruled itinvalid. That ruling is on appeal, but the DOL hasrequested the appeal be placed on hold while it re-eval-uates the regulation.

As we reported in our last issue, Summer 2017, theDOL issued a Request For Information (RFI) regardinga new proposed regulation, inviting responses to eleven

questions. In its Fall 2017 regulatory agenda, the DOLstated that it expects to issue a Notice of Proposed Rule-making on this topic in October 2018, giving it a yearafter the responses to the RFI were due to formulate anew proposed regulation. It is likely any new regulationthat results from that process would not be effective forquite some time, possibly not until 2020.

Sonja L. Lengnick

Is Smaller, GentlerOFCCP On Horizon?

The Office of Federal Contract Compliance Pro-grams (OFCCP) under the leadership of recentlyappointed Director Ondray Harris appears headedtoward both downsizing and a major attitude adjust-ment. Evidence of both can be found in the OFCCP’sinput to the fiscal year 2019 budget proposed by theTrump Administration, and a series of OFCCP-hostedstakeholder meetings in January 2018.

According to the proposed FY 2019 budget for theU.S. Department of Labor (DOL), which housesOFCCP, the OFCCP’s estimated obligations for FY 2019total $9.1 million, down 12.3% from current spendinglevels. This translates to a 14.2% reduction in headcount,to an historic low of 450 employees — in contrast to therecent high of 788 employees in FY 2010. Some of theforecasted reduction has already come from two rounds ofbuyout offers during the final months of 2017 plus attri-tion and an ongoing unofficial hiring freeze.

Both the FY 2019 budget proposal and the recentstakeholder meetings signal a welcome shift in agencyattitude. The January 2018 stakeholder meetings, led byOFCCP Director Harris, Senior Advisor Craig Leen,and Director of Policy Debra Carr, invited a number offederal contractors, representatives of civil rights groups,and representatives of several membership organizations



Rolling Back Obama-Era Regulations from page 12

to three separate sessions. In meeting with federal con-tractors, Director Harris shared his goals for a new andimproved OFCCP. The agency’s primary goal is to focuson developing apprenticeship programs as a means to filla defined skills gap nationwide and to develop betterparity in the workforce. Other primary goals includeincentivizing employers to voluntarily comply withagency regulations; increasing outreach for individualswith disabilities; and increasing agency transparencythrough compliance assistance. The OFCCP recognizesthat 98% of contractors undergoing audits are found tobe in full compliance, and so the agency going forwardis planning an “innocent until proven guilty” approachrather than the opposite —a refreshing change!

The FY 2019 budget proposal identifies technicalassistance for federal contractors as one of two main pri-orities. Along with increased emphasis on systemic dis-crimination (the other budget priority), OFCCP plans toimplement technical assistance through several initiativeswhich include improving training for compliance offi-cers; developing regional contractor training programs;reconstituting Reagan-era recognition programs; andreorganizing (and probably closing) many of OFCCP’sdistrict and area offices. It is anticipated that several“skilled regional centers,” staffed by experienced and spe-cialized compliance officers, will more efficiently replacemany of the 50-plus local offices.

Harris quietly started his role as OFCCP’s new Direc-tor on December 10, 2017, squelching speculation theOFCCP would be merged into the EEOC. Harris hadjoined the DOL in June 2017 as a senior advisor. He is aformer management-side employment and labor lawyer inprivate practice, and also a former Department of Justiceappointee, all of which should position him well for lead-ing change at OFCCP.

Seemingly in keeping with its kinder and gentlerapproach, OFCCP mailed its Corporate SchedulingAnnouncement Letters to contractors on February 1,2018, using the following guidelines:

l Setting no more than ten establishmentsof a single contractor on the audit schedul-

ing list and no more than four establish-ments per contractor in the same district;l Intending to set no establishment on theaudit scheduling list that had closed anaudit within the last five years.

Unfortunately, some anomalies in these self-imposedcaps appear to have slipped through. OFCCP begansending the actual audit scheduling letters on a rollingbasis beginning March 9 and continuing through Sep-tember 30, 2018 or longer.

Julia Turner Baumhart

Arbitration Rollout MustSay That ContinuedEmployment AcceptsArbitration

A recent decision from the U.S. District Court inMichigan clarifies that an employer may treat an arbi-tration policy it has unilaterally announced as contrac-tually binding only if the policy expressly informsrecipients that continuing employment will signifyacceptance of arbitration.

In Cerjanec v. FCA US, LLC (2017), current andformer employees of Fiat Chrysler Automobiles (FCA)alleged that FCA’s revamped employee evaluation policyhad a disparate impact on employees aged 55 and older.Three of the four named plaintiffs had worked forChrysler, FCA’s predecessor, over 20 years earlier, whenthe company had implemented an Employment Dis-pute Resolution Process (EDRP) requiring non-unionemployees to arbitrate most employment-related dis-putes. Employees were notified of the EDRP by amailed letter and information brochure, the contents ofwhich turned out to be pivotal.

Is Smaller, Gentler OFCCP On Horizon? from page 13


Winter 2018

Arbitration is, of course, a matter of contract. Aparty cannot be required to submit to arbitration anydispute which it has not agreed to submit. When a dis-pute over arbitrability is brought to court, the courtmust decide whether a valid agreement to arbitrateexists between the parties and whether the matter atissue falls within its scope.

FCA argued in Cerjanec that employees who contin-ued to work for Chrysler after receiving notice of theEDRP’s implementation in 1995 had thereby enteredinto binding agreements to arbitrate. U.S. DistrictJudge Laurie Michelson disagreed. She found thatrecent appellate court decisions that had so concludedhad also made clear that “continued employment canmanifest assent [only] when the employee knows thatcontinued employment manifests assent.”

Judge Michelson rejected FCA’s argument that theEDRP brochure advising employees that “IT APPLIESTO YOU” and that the EDRP “will govern all futurelegal disputes between you and Chrysler” adequatelyput employees on notice that continued employmentwould constitute assent. In her view, an express state-ment was required that continued employment wouldconstitute acceptance. Because FCA could not provethat, the court held that no valid agreement to arbitratehad been formed, and the employees’ lawsuit wasallowed to go forward.

The traditional foolproof way for an employer to besure its arbitration policy will be enforceable is toobtain each employee’s (or applicant’s) signed acknowl-edgement — or an electronic equivalent — that theemployee has received, reviewed, and understood thebinding effect of the policy. If the size of the workforceor logistical issues make obtaining individual expres-sions of assent impracticable, the policy or an accompa-nying memo should contain a clear and preferablybolded notice that an employee’s continuing employ-ment will mean that he or she assents to having dis-putes resolved exclusively through arbitration.

Noel D. Massie

NLRB In HiatusAs we sent this issue for publication, the National

Labor Relations Board was again in an hiatus betweenbeing a 3-2 Republican majority “Trump Board” for afew weeks last December and going back to a 2-2 dead-locked Board after one of the Republican members(Phillip Miscimarra) reached the end of his term. Areplacement Republican (John Ring) has been nominat-ed but not yet confirmed by the Senate — which couldhappen at any time. During the Republican majoritylast December, several notable things happened:

1. The new Republican General Counsel (PeterRobb) issued a wide-ranging Memorandum to Region-al Offices on December 1 identifying 15 broad cate-gories of cases he would like to present to the TrumpBoard (when fully constituted) that would reverse deci-sions of the Obama Board — decisions that hadchanged or expanded rules in a fashion that favoredunions and employees at the expense of employers. Healso rescinded several of his predecessor’s policy memo-randa. With 15 broad categories to overturn, this couldtake some time.

2. On December 11, the Republican Board issueda decision in UPMC clarifying an administrative lawjudge’s authority to accept a settlement of a case with-out the concurrence of the Regional Office or thecharging party, so long as it met a “reasonableness”standard — something that should make employer-proposed settlements much easier.

3. On December 12, the Board issued a “RequestFor Information” seeking comment from the laborcommunity on the 2014 “quickie election rule” — i.e.,whether it should be retained, modified, or rescinded.

4. On December 14 and 15, the Board issued fourmajor substantive decisions, reversing Obama Boardexpansions — all on the eve of Miscimarra’s departure:

l The Boeing Company reversed the standard forassessing whether facially neutral employer-promulgatedwork rules interfered with employees’ Section 7 rightsto engage in protected activity. General workplace civil-



Acceptance Of Arbitration from page 14

Winter 2018


© 2018 Kienbaum Opperwall Hardy & Pelton, P.L.C. Insight is published periodically to offer timely perspectives on legal issues in the employment and labor field.The information contained in this newsletter is not legal advice. If you wish to discuss a matter that is similar in nature to a case or development covered in thisnewsletter, or if you wish to be added to our mailing list, please contact us at our Birmingham office.

280 North Old Woodward Avenue, Suite 400, Birmingham, Michigan 48009Phone (248) 645-0000 • Fax (248) 645-1385

www.kohp.com

Representing management nationally in all aspects of labor and employment law, including preventive counseling, employment litigation, non-compete and other business covenant claims, alternative dispute resolution,

and traditional labor relations matters

NLRB In Hiatus from page 15

ity rules — which the Obama Board had made a habitof attacking — should be upheld under this standard.

l PCC Structurals overruled Specialty Healthcare(2011) which had made union organizing much sim-pler based on a new “micro-unit” concept. Returning tothe prior test for appropriate units will make it harderfor unions to carve out artificially small work groups.

l In Raytheon Network Centric Systems, the Boardoverruled E.I. duPont deNemours (2016) which hadconstricted an employer’s right to make periodicchanges (e.g., annual adjustments to healthcare costsand benefits) without bargaining to agreement with aunion representing affected employees.

l Hy-Brand Industrial Contractors reversed theObama Board’s dramatic and controversial expansion ofthe “joint employer” concept in Browning-Ferris Indus-tries (2015), and restored the Board’s decades-longadherence to a “direct and immediate control” test thatlooked at the actual exercise of control over the terms of acontractor’s employees’ employment. Under Browning-Ferris, the mere theoretical right of “indirect control”sufficed even though never exercised. The Obama Gen-eral Counsel had proceeded after Browning-Ferris toprosecute McDonald’s USA LLC along with its fran-

chisees for unfair labor practices allegedly committed bythe franchisees. Shortly after the Hy-Brand decision wasreleased, the new General Counsel suspended the pro-ceeding against McDonald’s and its franchisees, and alsorequested that the U.S. Court of Appeals for the D.C.Circuit return the Browning-Ferris appeal to the Boardfor further review under the new Hy-Brand standard.

Then something remarkable happened. On February9, 2018, the NLRB’s Inspector General issued an ethicsopinion that Board Member William Emanuel shouldnot have participated in the Hy-Brand case because hisformer law firm had represented one of the employersin the Browning-Ferris case and the deliberations lead-ing to the Hy-Brand decision were essentially a continu-ation of the Browning-Ferris case. Based on thatopinion, on February 26 the Board disqualified Mem-ber Emanuel and declared the Hy-Brand decision nulland void. That reinstated — at least for a time — thecontroversial Browning-Ferris “joint employer” test. TheBoard recently asked the D.C. Circuit to reinstate theappeal in the Browning-Ferris case. The McDonald’scase has just settled. Who knows what will happen next.

Theodore R. Opperwall

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