Employers Should be foreWARNed: Amendments to NJ’s Mini-WARN Act Impose Heightened Obligations on Employers Conducting Layoffs.

Worker Adjustment and Retraining Notification Act January 30, 2023 Leave a comment

On April 10, 2023, the New Jersey’s Millville Dallas Airmotive Plant Job Loss Notification Amendments (NJ’s Mini-WARN Act), finally will go into effect.  The amendments, initially set to go into effect nearly three years ago, were delayed due to the pandemic and still face legal challenges.  Nonetheless, if they do go into effect, they materially add to employers’ obligations in the event of a covered layoff.

By way of background, the Worker Adjustment and Retraining Notification (WARN) Act is a federal law requiring employers with 100 or more employees to provide at least 60 days’ notice to employees, their representatives, and the state, in the event of a covered plant closing or mass layoff.  NJ Mini-WARN is New Jersey’s version of the federal law and applies more broadly and imposes greater liability.

The amendments include significant changes to the employers’ obligations, namely employers now will have to:

(1) provide employees with 90 days’ notice, not 60 days, and

(2) will have to provide covered employees with severance pay equal to one week of pay for each full year of employment. 

For a long-tenured employee, the severance can be substantial.  Prior to these amendments, employers could be liable to pay severance IF they did not give sufficient notice to employees as required under the law.  However, these amendments mandate severance even when an employer provides the required notice.  These amendments make NJ Mini-WARN one of the most employee-friendly laws of its kind in the country.

In addition to mandatory severance and an expanded notice period, the amendments to NJ’s Mini-WARN also, among other things:

  • Lower the threshold for covered layoffs.  Previously, NJ’s Mini-WARN only applied to employers with 100 or more full-time employees.  The new amendments lower this threshold to 50 or more full-time employees.  Now, employers with 50 or more full-time employees will be required to provide notice to employees in the event of a plant closing or mass layoff.
  • Expand the types of layoffs subject to the law.  The amendments use a broader definition of “mass layoff” so that it applies in the event of a layoff of at least 25 full-time employees.  Formerly, the law only applied if the termination amounted to at least 500 full-time employees or at least 50 full-time employees if they constitute at least 33% of the employer’s full-time workforce.
  • Increase the penalties for non-compliance from up to $500/day per employee to up to $1,000/day per employee. 
  • Require employers provide notice to a number of different state agencies.

These burdens are onerous on businesses, but are meant to prevent greater harm.  The WARN Act and the NJ Mini-WARN Act allow the government to help mitigate the wide-ranging impacts of layoffs.  For instance, plant or site closings and mass layoffs can result in cascading effects on residential and commercial real estate values; and can harm local small businesses that depend on the workers’ patronage, such as dry cleaners and restaurants; and vendors.  With notice, the government can try to recruit substitute employers by enticing them with a ready-trained and available workforce, re-train workers where appropriate, and take other measures to minimize fallout. 

Although the WARN Act and the NJ Mini-WARN Act do not apply to all layoffs and there are significant exceptions, the liability imposed by these amendments make it all the more important for employers to consider and weigh their liability under these laws whenever they close a site or have a significant layoff.  The labor and employment lawyers at Flaster Greenberg can help employers assess these risks and guide them through compliance.

Please contact Adam E. Gersh, Labor & Employment Shareholder at Flaster Greenberg, or any member of our firm’s Labor & Employment Group to learn how this law applies to you and your business.

Is the government banning my non-competition agreements?

Non-Compete Agreements January 13, 2023 Leave a comment

Employers, make no mistake, the federal government and state governments are targeting employee non-competition agreements, also called non-competes. Broadly, legislatures and government agencies are concerned employers are using such agreements as standard practice in many industries and impairing employees’ ability to change positions and earn more.  

At the federal level, the Federal Trade Commission (“FTC”) recently introduced a controversial Proposed Rule that will effectively ban most employee non-competes and, separate from the Proposed Rule, took enforcement action to challenge employers’ use of non-competes for certain lower level employees. At the state level, legislators and regulators are also taking aim at limiting or banning non-compete agreements.

What is a Non-Compete?

A non-compete is a type of restrictive covenant that typically prevents employees from working for a competitor in a defined geographic area for a defined period of time after their employment ends. Often, non-competes are used in conjunction with other types of restrictive covenants that limit employees’ post-employment activities, such as restrictions on solicitation of clients, solicitation of other employees, and use of confidential information. 

Non-competes and other types of restrictive covenants are properly used, where enforceable, to protect legitimate interests of employers, but must be narrowly tailored so as not to place an unreasonable burden on the employee. Many states have specific conditions that must be met for a restrictive covenant to be enforceable. Non-compete agreements can be abused if the terms are overly broad and especially when applied to employees who are not in position to hurt an employer by working for a competitor. The enforceability of non-competes is currently a matter of state law and varies widely by state.

What is the FTC’s Proposed Rule?

The FTC’s Proposed Rule seeks to block most employee non-competes and related restrictive covenants that are so restrictive they are functionally non-competes. There is no doubt that the FTC’s Proposed Rule will be met with significant opposition from industry and, even if it were adopted, it will face significant challenges as to whether the FTC even has authority to adopt such a rule that impairs existing contracts and supersedes state laws. Nonetheless, employers should expect the FTC will try to take some action to curtail the use of non-competes. At a minimum, employers should expect the FTC to try to prevent them from imposing the kinds of non-competes that are likely to be unenforceable under most state laws as they exist now, for example, requiring low-level workers to sign non-competes when there is no damage to the business if they leave to work for a competitor.

The FTC’s Proposed Rule is not immediately effective and is currently at a stage seeking public comment. Any such rules is at least eight months away from taking effect and likely longer.

Businesses should note that the FTC’s Proposed Rule and many other efforts to curtail non-competes do not apply to restrictive covenants in connection with some sale of businesses. 

What can we learn from the FTC’s recent enforcement efforts?

The FTC is targeting employers that are imposing restrictive covenants that burden employees in a way the FTC asserts is unreasonable based on the position and role of the employees. In short, the FTC is taking action against employers it alleges require employees to sign non-competes even when the employers do not have a protectable interest. The FTC asserts these over-reaching agreements chill competition and are not enforceable. 

When evaluating this issue, employers should ask themselves if allowing a former employee in a given position to work for a competitor harms the employer in a unique way that the employer would not otherwise be harmed if the former employee quit to travel the world and the competitor hired some other equally talented employee. In the “travel the world” hypothetical, the business would be harmed for sure because it lost talent and its competitor has capacity, but that is not a protectible interest in and of itself. 

The employer should be able to articulate how an employee going to work for a competitor would be uniquely damaging to the company because of the employee’s former affiliation with the company (e.g., a sale person whose relationships were built with company support and whose relationships will walk out the door with the employee). 

What is happening at the state level?

In addition to the FTC, many states are looking to adopt measures to reform the use of non-competes. This looks very different in different states. For example, California already bars most non-competes (and non-solicitations) and Illinois, Nevada, Oregon, Oklahoma, Maine, Maryland, Massachusetts, New Hampshire, Rhode Island, Virginia, the District of Columbia, and Washington state have all enacted noncompete restrictions in recent years. In New Jersey, a bill to limit the use of non-competes is working its way through the legislature, which, if enacted, would, among other things, require pay for employees during a period of restriction and prohibit use of non-competes for broad categories of employees. 

Ultimately, if the FTC’s Proposed Rule does not proceed, employers will continue to face a patchwork of state laws with which they must comply based on the states in which they have employees.

Savvy Employer Takeaway:  

Employers should carefully tailor the use of non-competes and other restrictive covenants, where they are enforceable, to ensure their agreements are protecting legitimate interests. Employers should be very cautious before imposing such restrictions on lower wage workers. Finally, employers should look for other ways to protect their interests, including limiting access to confidential information and designing compensation models that incentivize retention. 

Flaster Greenberg is on top of this developing issue. Stay tuned for a follow up post next week addressing additional questions, and of course, contact Flaster Greenberg for more information or if you need clarification for your business.

FFCRA Opt-In Expanded Under American Rescue Plan Act of 2021

COVID-19, Families First Coronavirus Response Act (FFCRA), The American Rescue Plan Act of 2021 (ARP) March 30, 2021 Leave a comment

With the passage of The American Rescue Plan Act of 2021 (ARP), employers with fewer than 500 employees now have the option of continuing pandemic-related paid leave for eligible employees and seeking reimbursement for the paid leave expenses through payroll tax credits. 

As a reminder, the Families First Coronavirus Response Act (FFCRA), passed in 2020, required employers with fewer than 500 employees to provide certain paid leave benefits in response to the pandemic. FFRCA provided paid leave to eligible employees who could not work due to, among other things, (i) COVID symptoms, quarantine due to COVID exposure or a positive test result, and diagnosis; (ii) caring for a qualifying family member who contracted COVID or needed COVID-related care; and (iii) parents of children whose place of care was closed due to COVID precautions.  It also authorized corresponding payroll tax credits employers could use to offset the costs of the paid leave. For more on the FFCRA, including the duration of leave, caps on pay, and the mechanics of applying for payroll tax credits please click here to be taken to our COVID-19 Resource Page for more information, including alerts and recorded webinars on the subject.

The mandate for FFCRA leave expired on December 31, 2020, but Congress, through the 2021 Consolidated Appropriations Act, extended those payroll tax credits for covered employers who voluntarily extended FFCRA benefits to eligible employees through March 31, 2021. Now, the ARP has further extended these payroll tax credits for covered employers who voluntarily offer FFCRA leave to eligible employees and it also expanded the scope of coverage under the FFCRA. The payroll tax credits are now available for employer-paid qualifying FFCRA leave through September 30, 2021. In addition, key provisions of ARP expand the payroll tax credits for employers with fewer than 500 employees who provide FFCRA paid leave to also include:

  • Employees getting vaccines;
  • Employees recovering from any injury, disability, illness, or condition related to such immunization;
  • Employees seeking or awaiting the results of a COVID-19 test when the employee has been exposed to COVID-19 or the employer requested the test;
  • Employees who previously exhausted FFCRA leave and have another qualifying reason for leave (these employees are eligible for up to an additional ten day of leave beginning April 1, 2021); and
  • Employees using emergency family leave for any reason set forth the FFCRA (not just because a child’s school or place of care was closed).

Employers should note, the ARP also increases the amount of emergency family leave pay for which an employer may claim a tax credit from $10,000 to $12,000 per employee. While paid leave remains optional, employers who opt to offer it should apply it consistently throughout the organization. To ensure it is applied fairly, the ARP also introduced new non-discrimination requirements. These new non-discrimination rules bar employers from receiving tax credit if they offer leave in a way that favors highly compensated employees, full-time employees, or employees with greater tenure. 

Employers who are considering opting in to offering FFCRA leave should consult with counsel to understand employee eligibility, caps on the duration and pay rates, and the mechanics of claiming the payroll tax credit. Optional paid leave that does not meet the requirements of FFCRA leave will not be eligible for the ARP’s expanded tax credit.  Additionally, to be eligible for a payroll tax credit, the paid leave must be in addition to leave already available to employees under employer benefit plans, e.g., vacation, sick time, or other paid time off. 

For more information on how the FFCRA applies to your organization, or for any other questions related to the FFCRA and ARP, please contact Adam E. Gersh, shareholder in Flaster Greenberg’s Labor & Employment Practice, or Stephen M. Greenberg, shareholder in Flaster Greenberg’s Tax Practice, for more information. Alternatively, you may contact any member of Flaster Greenberg’s Employment or Tax Practices. 

THE YEAR THAT (SORT OF) WASN’T: Five Lessons Employers Learned During the COVID-19 Pandemic and What They Mean for the Future

Coronavirus, COVID-19, Employer's Guide - COVID-19 March 15, 2021 Leave a comment

As a labor and employment lawyer, over the past year, I had both a front row view of the ways the COVID-19 pandemic shaped workplaces in a broad array of industries and the privilege of working with employers to tackle truly unprecedented issues.  With the milestone anniversary of the pandemic at hand, it is time to reflect on some of the lessons we can learn from this transformational experience.

Lesson 1: The Value of the Mission-Driven Employee

A common thread that ran through many of the often unique challenges businesses faced this past year is that the value individual employees contribute to an organization is both inestimable and not necessarily tied to salary grade.  Some of the lowest paid employees risked their wellbeing to remain on the frontlines, and their dedication and hard work opened employers’ eyes to the value these employees provide.  We have seen that dedicated employees can often find creative ways to solve problems.  We have also seen other employees struggle in this new environment for innumerable reasons, including more limited supervision, fewer support resources when working from home, limited adaptability and flexibility of the employee, and the challenges of balancing work and parenting responsibilities (which are more pronounced when children are attending school from home).

The one thing that has been universal is that mission-driven employees find a way to succeed, while employees who view work as a job often come up short.  From entry level to the c-suite, this dichotomy in attitude reinforces that employees who buy into the mission of the organization find ways to accomplish that mission.  Going forward, employers can learn from this equation and use it in all phases of employee relations, including recruitment, promotion, employee benefits and incentives, and workforce management to identify and develop employees who are mission-driven.  At the same time, employers can foster dedication and loyalty by treating employees fairly, showing them appreciation and respect, and fostering unity behind the organization’s mission. 

An interrelated factor is the importance of mental health.  We saw once valuable employees so overwhelmed by fear and anxiety that they became unable to focus on their jobs. This sobering experience gives employers a new perspective on and appreciation for the importance of paying attention to their employees’ mental health as much as their physical health. Employers who formerly recognized the need to provide their employees with health insurance benefits but who disclaimed responsibility for tending to their employees’ mental health have awakened to the truth that mental health issues can be one of the most serious drains on employee productivity and company morale.

Lesson 2: The Office is not the Only Place Employees can Work

While the steady rise of technological advances already made it possible for employees to work from home efficiently, many employers have been resistant to allowing work remote, fearing loss in productivity and dilution of corporate cohesion and culture.  When the pandemic forced many office workers to work from home on a prolonged basis, employers learned their fears were, in many instances, overstated.  Dedicated and loyal employees (see Lesson 1) have worked as efficiently, if not more efficiently, outside of the office, finding new and creative ways to get the job done. 

An important takeaway from the new prevalence of remote work is that, even within the same position, employers have witnessed varying degrees of success from employee to employee working remotely.  Although some employees cannot concentrate at home, others can focus much better without the distraction of co-workers and the fatigue of commuting.  Employers should take note of this fact and look for ways to allow employees to work in the environment where they are most productive and successful.  Employers who are overly rigid about where workers perform their jobs risk impairing productivity, morale, dedication, and, ultimately, retention and recruitment.

Lesson 3: Reports of the Death of the Office are Premature

Although employees are working productively outside of the office, on-site work still holds an important place in successful businesses.  From training new employees to setting a corporate culture, working in an office creates important synergies within an organization.  When employees are together, their ideas cross-pollinate, producing better ideas. Employees can work better as a team, and motivate and inspire one another when they interact with each other face-to-face in an office setting.  Remote work has taken a toll on these beneficial activities that we have not replaced despite all the technology at our fingertips. Although a Zoom call can be a valuable tool and is often a necessity in today’s forced remote work arrangements, it is sometimes a poor substitute for a face-to-face meeting and is seldom as effective in building teamwork and creating and enhancing a business’s culture as a live social event.

Successful businesses will look for a balance between isolated workplaces where some employees thrive and the cohesion that comes from working in an office.  Organizations suffer without collaboration and, when their employees work only in silos, they seldom develop the unity of mission that leads to success.  In addition, employees often find job satisfaction and inspiration in their interactions with their colleagues. It is usually easier to walk next door to ask your colleague a question or chat with her about an issue than to make a phone call or exchange emails or text messages. What’s more, the results of the face-to-face meeting are usually more productive, not to mention, more satisfying than the remote conversation. Each organization will have to strike the right balance of office and remote work, but we have learned that technology alone is not a substitute for in-person interactions.

Lesson 4: Travel is Less Essential than we Thought

Although there is no substitute for meeting in person with a customer, there is also no doubt that corporate travel is a significant expense and disrupter of productivity.  Corporate travel can be invaluable in promoting in-person interactions that help build key relationships both within and outside the organization, but all too often in the past it was done without even thinking about whether there was a cheaper, less time-consuming, but just as effective alternative.  The era of corporate travel is far from dead, but the pandemic taught us that it is not as vital as we once thought.  We can use technology to train, gather information, work collaboratively, and develop relationships.  Again, technology is not a substitute for in-person interactions, but we now know there are viable alternatives to planes, trains, and automobiles that may help increase employee efficiency and boost employee morale. 

Additionally, for certain positions, finding talented employees who are willing to travel extensively can be a real challenge.  Employers who can find ways to minimize the personal sacrifices employees make to travel will find themselves rewarded with loyal employees who are satisfied with their jobs.   

Lesson 5: Adapt or Die

Perhaps one of the most important lessons from the pandemic is that employers must be prepared to adapt.  Those who are unable or unwilling to do so will suffer the adverse consequences. Employees who have found a new work-life balance working remotely will not want to give it up, just as clients who have grown comfortable with video meetings will not want to pay for travel that does not provide sufficient value.  We are in a transitional period and employees are becoming more assertive and clear-headed about what they do and do not want out of their employment.  That trend started when the millennial generation entered the workforce, but it has become more pronounced across all generations due to the pandemic.

Employers looking to recruit and retain top talent will need to meet the expectations of these employees or risk losing them to competitors who offer more flexibility.

Questions? Let me know.

WHAT ARE YOU SMOKING? New Jersey’s New Cannabis Law Also Changes the Rules for Employers

Medical Marijuana Act, Medical marijuana in the workplace, Tips for Employers March 9, 2021 Leave a comment

As New Jersey enters a new era of legalized cannabis, employers face a whole new crop of questions about responding to employee cannabis use.  The newly passed New Jersey Cannabis Regulatory, Enforcement Assistance, and Marketplace Modernization Act (“NJCREAMMA”) changes the landscape for employers both in concrete ways and in ways that are still evolving.  On its face, NJCREAMMA allows employers to discipline employees for use of cannabis during work but prohibits them from taking adverse action against employee use outside of work. Although that principal seems straightforward, it is not. For an employer, determining when an employee consumed cannabis or whether they are actually impaired is quite challenging. The NJCREAMMA recognizes a positive cannabis test does not necessarily mean an employee is impaired at work and, therefore, limits employers’ ability to rely on tests alone. Until the science catches up to the law, employers do not yet have access to a reliable, objective measure to test for impairment at work, which makes it impossible to conclude an employee is impaired due to cannabis use based on testing alone.

What’s new?

As you may know, before the passage of this new 2021 law, the New Jersey Courts already ruled employers could not discriminate against employees lawfully enrolled in the State’s medical cannabis program and had to make reasonable accommodations for them. In practice, this body of case law, with limited exception, meant employers should not fire or refuse to hire someone who tested positive for cannabis if they had a medical use card.  Employers remained free to take adverse employment action against employees who showed signs of impairment and employees who tested positive but were not enrolled in the State’s medical cannabis program.

With the passage of NJCREAMMA, the scope of employee protections have materially expanded. Now, with limited exception, New Jersey employers may not take any adverse employment action (including refusing to hire a candidate) solely because the employee tests positive for cannabis. Employers can and should still prohibit impairment in the workplace. However, even when an employee is suspected of impairment, employers cannot act based on a positive test alone. Instead, NJCREAMMA requires that the employer also conduct a physical evaluation to determine whether an employee is impaired before it takes action based on a positive test. This physical evaluation must be performed by someone certified as a Workplace Impairment Recognition Expert. Although the State-created Cannabis Regulatory Commission is tasked with implementing guidelines for Workplace Impairment Recognition Expert training, it has not yet developed this training or guidelines. Until it does, this part of NJCREAMMA is not considered “operative” even though the law is deemed effective immediately. 

Aspects of NJCREAMMA’s employee protections, which do not have specific exemptions for safety related positions and require Workplace Impairment Recognition Expert training, are controversial and certain business groups are pushing for employee protections to be scaled back in the “clean up” bills that are expected to be introduced to try to refine NJCREAMMA. Due in part to the well-publicized political wrangling that preceded the Legislature’s final adoption of NJCREAMMA, employers should expect to see efforts to clarify the law as it applies to employers and to authorize common-sense controls on impairment in the workplace.

Employers are still permitted to conduct suspicion-based, pre-employment, random, and/or post-accident drug testing, but a positive test for cannabis alone is not enough to take action. Now, employers also must have evidence of impairment during work hours to take action. 

NJCREAMMA does allow employers to implement more strict rules for drug use when it is necessary to maintain a federal contract. 

NJCREAMMA does not restrict an employer from maintaining and enforcing drug-free workplace policies, but, again, when it comes to cannabis, employers must show use and/or impairment at work, as opposed to off-duty use. 

Savvy Employers’ Takeaways:

Practically, when it comes to cannabis, employers can focus on performance issues without attributing the source of the performance issue to cannabis impairment. Behaviors that might suggest drug use, such as sleeping on the job, carelessness, and lack of attention are properly the subject of discipline whether or not the employee is impaired by cannabis use or for another reason. NJCREAMMA, in its current form, makes it harder for employers to rely on testing as evidence of impairment, but does not restrict an employer from taking action based on observable impairment or performance issues. Although it may seem like new territory, employers have historically managed employee productivity issues, whether they arise from unknown causes or from use of legal substances, such as hangovers from alcohol abuse and performance deficits from use of prescription medications. Employers do not need drug tests to manage these issues but, instead, focus on the business disruption and observable performance issues. For now, employers would be wise to do the same when it comes to cannabis. 

Questions? Let me know.

Guest Blog: Potential Taxation Without Representation – The Implications of State Taxation on Teleworking

COVID-19, Employer's Guide - COVID-19 February 9, 2021 Leave a comment

Beginning in March 2020, millions of Americans were forced to work from home as a result of the COVID-19 pandemic.  While the absence of a commute and the option of wearing sweatpants rather than slacks during meetings were initially welcome changes to the workday, it did not seem likely that we would still be “Zooming” to work from our kitchen tables in 2021. With the pandemic still surging, many Americans have not returned to the office and will have to reckon with possible tax implications stemming from their forced exile.  

Physically commuting from home in one state to work in another, such as from New Jersey to Philadelphia or New York City, is not new. Likewise, the tax implications for employees who commute are not surprising. Generally, the employee is taxed in both her home state (residence-based tax) and the state where she works through what is often referred to as a commuter tax (source-based tax), with the home state giving a credit or other accommodation to mitigate the duplicate tax cost.

Telecommuting, however, is not commuting. Employees who telecommute work from their home states.  Thus, it would be reasonable for those employees to expect to only be taxed in their home state because they’re not physically crossing state lines, right? Not so fast! If Pennsylvania, New York or Delaware are involved, both employees and employers might find surprising tax results from telecommuting, even when they are simply complying with mandatory work–from-home orders.  For employees of employers in these states this means that dutifully working from home across state lines in accordance with the law, they may still be subject to tax in a state they have not set foot in for nearly a year as if they were physically commuting. In turn, this may create an unintended connection between the employer and the state where the employee lives, thereby subjecting the employer to taxation there. This conundrum also underscores the internecine struggle between the states over tax dollars derived from wages earned while telecommuting.

Employees: While most employees in the country are not currently impacted by this kind of law, a problem arises for employees of employers located in Pennsylvania, Delaware and New York because they have enacted the “convenience of the employer” rules. If an employee works remotely because her employer requires it, perhaps because that is where a customer is located, the employer’s state would not tax the employee on the income earned from that work. However, if the employee works outside of the employer’s state for any other reason, the employer’s state can tax that employee’s income regardless of where it was actually earned. The convenience of the employer rule in the current environment begs this question: is a mandatory work-from-home order a requirement or a convenience?  This is a question that has yet to be answered. Some states, such as New Jersey, have offered credits for its residents who are adversely impacted by this rule for the length of the pandemic.  

Employers: It is uncontested that states and municipalities can impose income taxes on businesses that have a physical location in the state or have employees who work in the state. These connections create tax nexus. The question that comes up when an employer has employees working from home in another state is whether telecommuting across state borders alone creates tax nexus to a state to which they were not otherwise connected. If nexus is created for the employer with the employee’s home state, the employer is subject to that state’s taxes. However, the universal nature of the COVID-19 pandemic has motivated some states to address this issue, at least in the short-term. New Jersey’s Division of Taxation has stated that nexus for corporate tax and sales and use tax purposes will not be imposed on out-of-state employers during the pandemic through telecommuting employees. Likewise, Pennsylvania’s Department of Revenue indicated it will not impose Corporate Net Income Tax nexus or Sales and Use Tax nexus on non-Pennsylvania businesses based solely on employees working from home in the state. The state of New York, on the other hand, has declined to issue guidance on this topic, meaning that non-New York employers of New York residents may find themselves unexpectedly exposed to New York State (and potentially City) tax.

WHAT’S COMING:

States without the convenience of the employer rule might become envious as out-of-state employees continue working from home even after the conclusion of the pandemic and the tax dollars associated with their wages remain home with them. Perhaps a harbinger of things to come, one state, Massachusetts, reacted to this tax conundrum created by the pandemic by enacting a temporary “convenience of the employer” policy. This new rule states that employees who work for Massachusetts-based employers and are working remotely outside the state because of a work-from-home order in a neighboring state are still required to pay income tax in Massachusetts. This arrangement is slated to remain in place until ninety days after the governor of Massachusetts ends the state of the emergency created by the pandemic.

Although this measure is temporary, Massachusetts has experienced backlash from other states and numerous tax organizations. In October 2020, New Hampshire petitioned the United States Supreme Court for relief, requesting that it strike down this law as an unconstitutional tax on its citizens who telecommute.  The lawsuit also raises questions as to whether such convenience of the employer rules violate the Dormant Commerce Clause, which bars states from unduly burdening interstate commerce, even in the absence of federal legislation regulating the activity.  This lawsuit has attracted a lot of attention in the tax community, with over a dozen amicus briefs filed in the matter, including those from Connecticut, Hawaii, Iowa, and New Jersey, as well as public policy groups such as the National Taxpayer Union, the Tax Foundation, the Cato Institute, and Americans for Tax Reform. The states joining New Hampshire did so because many of their citizens are directly impacted by “convenience of the employer” rules subjecting them to taxation in a state to which they have no physical connection and thereby draining tax revenue from the residence state.  The Court has not determined whether it will hear the case, but the controversy is generating interest as other states might follow suit.

With many employees likely to continue teleworking even after COVID-19 vaccinations permit safe return to the office, it is critical to fully appreciate the impact these decisions may have on where tax is owed by telecommuters and their employers.  

ABOUT THE AUTHORS:

Kelly Barry is a member of the firm’s Business and Corporate Department and Taxation Practice Group assisting clients in a wide range of corporate matters, including those involving transactional law, tax, and trusts and estates.  She can be reached at kelly.barry@flastergreenberg.com or 856.382.3305.

David S. Neufeld has practiced law for more than 35 years, advising individuals and businesses around the globe on sophisticated federal income and estate tax planning, state tax residency planning and audits, asset protection, and insurance and investment planning. In addition, he helps business clients engaged in both inbound and outbound transactions (most notably involving China and India) as well as the individual tax issues that arise from cross-border business transactions. He can be reached at david.neufeld@flastergreenberg.com or 856.382.2257.

Can I Fire an Employee Who Stormed the Capitol?

Tips for Employers, Wrongful Termination January 13, 2021 Leave a comment

As all eyes were focused on the U.S. Capitol Building and insurgency on January 6th, back home, employers now face questions about whether they can discipline employees who participated in the siege or other off-duty conduct that contravenes the employer’s world view. The answers to these complex questions depend both on state law, the terms of employment, whether the conduct was lawful, and whether the conduct is otherwise protected. 

Broadly, non-government employees who are employed on an “at-will basis” can be terminated for any reason or for no reason, unless they are otherwise protected by law.  For example, as most employers know, employees cannot be terminated or disciplined if the employment action is discrimination against someone in a protected class and/or retaliation for engaging in protected conduct. By implication, this means “at will” employees can be disciplined or terminated for engaging in lawful off-duty conduct unless that conduct is otherwise protected. For instance, New Jersey law protects certain employees who use tobacco and cannabis off duty, but it does not protect employees who engage in the type of insurgency we saw on January 6, 2021, even if the employee acted lawfully. This means that a New Jersey employer can terminate or take action against an employee for participating in the siege on the Capitol, but cannot terminate an employee who smokes marijuana when they are not at work (provided the employee is not under the influence or otherwise impaired while on duty and the use does not impair an employer’s federal contract). Colorado, on the other hand, has a broader off-duty conduct statute that protects a range of lawful off-duty activity, meaning it is unlikely that employers in Colorado can terminate an employee who participated in the siege on the Capitol in a lawful manner. These are just two very broad examples but employers need to keep in mind that many states have a variety of off-duty conduct protections.

Employees who are employed pursuant to employment contracts, union bargaining agreements, and governmental entities may have specific rules that impose a higher standard for discipline or termination. For example, many union contracts restrict employers from disciplining employees for anything other than just cause arising from the employee’s conduct at work. n a unionized workplace it is likely an employer could not terminate or reprimand an employee who participated in the siege on the Capitol and in a lawful manner.

Employers should also keep in mind that the National Labor Relations Act protects employees who engage in protected concerted activities, whether in person or online, and employees who express support for (or opposition to) unions. These protections, among other things, offer protections to employees who desire to form or support a union. 

Savvy Employer Takeaways

In most instances, private employers can take actions against employees who engage in lawful off-duty conduct that the employer finds offensive, unless that conduct is otherwise protected by law or doing so would violate a the employee’s employment contract. Nonetheless, each situation requires an individual analysis of applicable law, the terms of employment, whether the conduct was lawful, and whether the conduct is otherwise protected. Employers must also weigh how such an action, or failure to take action, will influence the culture and productivity of their organization. 

Questions? Contact Adam E. Gersh. 

Employers’ COVID Update: To Mandate Or Not To Mandate?

Coronavirus, COVID-19 December 22, 2020 Leave a comment
Employers' COVID Update: To Mandate Or Not To Mandate?

Employers are growing accustomed to facing unprecedented decisions in every phase of this pandemic. As with many of the other situations employers have confronted over the past several months, whether to require employees to get the COVID vaccine as a condition of working on site presents novel issues that differ from mandates for the flu or other approved vaccines. 

Before we get into the specifics of the COVID vaccine, it is important to note, generally, employers are permitted to mandate employees are up to date on vaccinations in the interest of maintaining health and safety in the workplace.  Employers who opt to mandate vaccinations must also make reasonable accommodations for employees who cannot be vaccinated due to certain health conditions or deeply held religious beliefs. Mandatory vaccine programs must follow carefully coordinated protocols to comply with anti-discrimination laws and mitigate risks to employers arising from potential bias and retaliation claims. These steps include developing a system that limits pre-screening requirements to avoid conducting a medical examination, evaluating the risks of an employee’s opt-out, and determining whether alternate work assignments are available. 

In addition to these general rules, the COVID vaccine adds another layer of complication because it is not currently FDA-approved. Unlike a mandatory flu vaccination program, a COVID vaccine mandate requires an employee to receive a vaccine that is only available to the public under an Emergency Use Authorization, a less stringent standard than full FDA approval. As a result, employers who impose vaccine mandates before FDA approval open themselves up to a range of potential liabilities. In particular, employers may put themselves at risk if they terminate employees or refuse to hire candidates who raise public health concerns about the vaccine or a mandatory vaccination program, when the FDA has not approved its use. 

Additionally, current polling suggests up to 35% of the U.S. population may be unwilling to be vaccinated for COVID under the current circumstances, and certain workers are not authorized to receive it (e.g., workers under the age of the applicable Emergency Use Authorization for a specific vaccine formulation).  Those operational impediments to implementation of a mandatory vaccination program might hinder recruitment and retention efforts, and, on top of the legal risks described above, pose additional challenges for employers who want to adopt a COVID vaccine mandate.

Savvy employer takeaway:  For now, employers should, at a minimum, conduct vaccine education programs, encourage vaccination of employees, and, where possible, facilitate vaccination.  Employers who are considering implementing a vaccine mandate should do so only after careful consideration and consultation with counsel and after adopting protocols for vaccination.

The attorneys at Flaster Greenberg are following developments related to the COVID-19 Pandemic and formed a response team and to work with businesses to keep them up-to-date on developments that impact their business. If you have any questions on the information contained in this alert, please feel free to reach out to Adam Gersh, or any member of Flaster Greenberg’s Labor & Employment Practice Group. 

Supreme Court Rules Discrimination Against LGBTQ Employees Is Discrimination On The Basis Of Sex

LGBT, U.S. Equal Opportunity Employment Commission June 16, 2020 Leave a comment

In a landmark decision in Bostock v. Clayton County, the Supreme Court of the United States ruled discrimination against LGBTQ employees violates Title VII of the Civil Rights Act of 1964. The 6-3 ruling is significant in that it did not rely on technical grounds, but rather on the legal analysis that disparate treatment of employees based on sexual orientation or gender identity is, by definition, discrimination based on sex. This decision upended what had been settled law until, at least, 2010, which generally held that Title VII’s protections do not extend to discrimination based on sexual orientation or gender identity.

Starting in 2011, the U.S. Equal Employment Opportunity Commission (EEOC), which is responsible for enforcing Title VII, interpreted Title VII to prohibit discrimination against LGBTQ employees, however, many courts did not agree. Eventually, the U.S. Department of Justice under the current administration took the opposite position of the EEOC, creating conflicting interpretations within the executive branch. Indeed, as the Court noted in Bostock, U.S. Congress has repeatedly tried to amend Title VII to expressly prohibit discrimination based on sexual orientation and gender identity to resolve the conflict between these varying interpretations. There is no doubt that this decision is historic and will have the most immediate impact on employers in states where LGBTQ employees are not already protected by state laws or where state laws only provided weak protections. Title VII applies to both the private and public employers with 15 or more employees and to the federal government, employment agencies, and labor organizations.

Although the Supreme Court limited its decision to Title VII, since the decision is rooted in an analysis of the meaning of protections from discrimination “based on sex,” we can expect it will form the basis for future courts to apply greater protections under other federal and state laws outside of Title VII that prohibit sex-based discrimination but were not previously interpreted to protect against discrimination based on sexual orientation or gender identity. The message to businesses is clear: Title VII does not condone discrimination based on sexual orientation or gender identity and that is also likely true of an array of other anti-discrimination laws.

Questions? Let me know.

What Employers Can Learn From Early COVID-19 Employee Lawsuits

Coronavirus, COVID-19 April 13, 2020 Leave a comment

Business solutions, success and strategy conceptJust as businesses are beginning to face the initial wave of COVID-19 impacts, lawyers are seeing the first wave of employee lawsuits.  It is premature to even call these the tip of the iceberg, but the lessons from these early cases can prove meaningful and help businesses mitigate risk.

Ordinarily, workplace injuries and illnesses are handled through each state’s workers’ compensation system, but most states have exceptions that allow employees to bring a direct lawsuit for pain and suffering damages if certain conditions are met.  The standards to bring such claims vary state-by-state, but, generally, an employee must show the employer engaged in something more than ordinary negligent conduct (often gross negligence), such as removing a safety guard from machinery.  Certain states allow employees to bring direct claims if the injury occurred under circumstances where an employer knew or should have known with substantial certainty that the injury would occur and those circumstances deviated from standard industry practice.  These claims, especially if there are other similarly injured employees, create significant risk for businesses and may not be covered by insurance.

As it relates to injuries from COVID-19, we are seeing employees claim that they contracted the virus in their workplace because their employers failed to take necessary, industry-standard precautions under circumstances in which injury was substantially certain.  It remains to be seen whether employees will be able to show their COVID-19 complications were workplace injuries and how courts will delineate what employer lapses extend beyond ordinary negligence, but there are important lessons from these early cases that may help businesses limit risk.

In one recent example, the estate of a former Walmart employee brought an action against the retailer in Illinois state court after the employee died from COVID-19 complications.  In the suit, the estate alleges Walmart knew or should have known COVID-19 was present and active in the store, but failed to protect its workers in accordance with industry standards.  According to the employee’s estate, management knew several workers and individuals had symptoms of COVID-19, however, it did not (i) cleanse and sterilize the store in order to prevent COVID-19 infection; (ii) implement, promote and enforce social distancing guidelines promulgated by governmental entities; (iii) provide the employee and other workers with personal protective equipment such as masks, latex gloves, and other devices designed to prevent COVID-19 infection; (iv) warn the employee and other workers that various individuals were experiencing symptoms at the store and may have been infected by the coronavirus; (v) address other workers at the store who communicated to management that they were experiencing COVID-19 signs and symptoms; (vi) follow COVID-19 guidelines issued by OSHA and the CDC, including providing employees with antibacterial soaps and wipes and other cleaning agents; and (vii) implement policies and procedures to promptly identify and isolate sick people as also recommended by the CDC.

Of course, at this stage these are only allegations and we do not have the benefit of Walmart’s response, but the allegations are instructive as they are guideposts to the kind of conduct that may give rise to liability. Paying attention to them will allow employers to implement policies and procedures that will protect employees and mitigate the risk of claims that the employer’s conduct is sufficient to support a claim that seeks recovery beyond that available under through the workers’ compensation system.

Savvy employer’s takeaway: While it presents a unique challenge for employers to meet new and changing guidelines for maintaining operations, it is vital that employers stay abreast of all current federal, state, and local guidance, including guidance from the CDC and OSHA, and maintain and enforce policies consistent with that guidance. 

The attorneys at Flaster Greenberg are following developments related to the COVID-19 Pandemic and formed a response team and to work with businesses to keep them up-to-date on developments that impact their business.  For more information on what employers can do to comply with the changing law and manage risk, we invite you to contact Adam Gersh, or any member of Flaster Greenberg’s Labor and Employment Practice Group.