United States - Employment Law Review 2017

12 Mar 2018

This article summarises some of the most significant US employment law changes and decisions in 2017.

Gordon Berger, Michelle S. Harkavy, Nancy Van der Veer Holt, David S. Kim, Salvador Simao, Henry Warnock, Frederick L. (Rick) Warren, Johanna G. Zelman, Becky L. Kalas, Patrick L. Ryan

Firm:    FordHarrison LLP


Many changes in U.S. labour and employment law that took place in 2017 were the result of federal administrative agency actions, Executive Orders from President Trump or federal court decisions. Some of the most significant are discussed below.

Federal Court Permanently Halts Implementation of Revised Overtime Regulations

In August 2017, a federal court in Texas issued a decision declaring the U.S. Department of Labor’s (DOL’s) revised overtime regulations invalid and permanently preventing their implementation nationwide. The revised overtime regulations would have drastically increased the minimum salary required to be exempt from overtime pay under the federal Fair Labor Standards Act (FLSA), potentially entitling millions more employees to overtime protection. As a result of the court’s decision, at this time, the prior overtime rules remain in effect.

DOL Withdraws Joint Employment and Independent Contractor Guidance

In June 2017, the DOL rescinded Administrator’s Interpretations published by the Obama-appointed DOL, which addressed independent contractor and joint employment status under the FLSA. Administrator Interpretation No. 2015-1, withdrawn by the DOL, had broadly interpreted the FLSA to state that most workers are employees, not independent contractors. Interpretation 2016-1, withdrawn by the DOL, had broadly interpreted when separate entities, including staffing agencies, would be considered joint employers for purposes of liability under the FLSA. Although the Interpretations are not binding on courts, they are often given deference when courts address similar issues. The removal of these broad Interpretations will allow employers a better opportunity to staff and operate in ways more suitable to their business goals and objectives.

Federal Courts Split Over Whether Title VII Prohibits Discrimination Based on Sexual Orientation

In a landmark decision overruling decades of precedent, the Seventh Circuit ruled that sexual orientation discrimination violates Title VII of the 1964 Civil Rights Act prohibiting various forms of discrimination. The Seventh Circuit’s decision in Hively v. Ivy Tech Community College, 853 F.3d 339 (7th Cir. 2017) was the first of its kind. Prior to this decision, the federal appeals courts had held that sexual orientation is not a protected class. In Evans v. Ga. Reg'l Hosp., 850 F.3d 1248 (11th Circ. 2017), a split panel of the Eleventh Circuit held that it was bound by prior precedent that Title VII does not prohibit sexual orientation discrimination. The U.S. Supreme Court denied certiorari (that is, refused to examine the lower court’s decision) in Evans on 11 December 2017. The Supreme Court is likely to accept a petition to review another case involving this issue to resolve the split among the federal appeals courts. 

National Labor Relations Board (NLRB) Withdraws ‘Joint Employer’ Interpretation

In December 2017, the NLRB reversed the controversial joint employer standard created by the Obama Board in Browning-Ferris Industries of California, Inc. (BFI), restoring the traditional joint employer test that was in place for decades prior to BFI. In BFI, the Board held that a joint-employer relationship will be found if the alleged joint employers possess, exercise or simply retain the right, directly or indirectly, to control essential terms and conditions of employment, even if that control is not exercised. In Hy-Brand Industrial Contractors, Ltd., 365 NLRB No. 156 (2017), the Board reversed its decision in BFI and restored the joint-employment standard used by the Board for decades prior to BFI. Under the Hy-Brand standard, an entity is a joint employer only where it has actually exercised ‘direct and immediate’ control over the essential terms and conditions of employment of the other entity’s employees, such as hiring, discipline, termination, suspension and direction. A critical difference between the BFI and Hy-Brand standards is that ‘the Board does not rely merely on the existence of contractual provisions, but rather looks to the actual practice of the parties.

NLRB Establishes New Standard for Determining When ‘Facially Neutral’ Employer Rules Violate Labour Law

In December 2017, the NLRB overruled the standard it previously used in determining whether a ‘facially neutral’ (that is, not discriminatory on its face) rule or handbook policy violates an employee’s rights to organise, join or form a labour organisation or collectively bargain under Section 7 of the National Labor Relations Act (NLRA).  Previously, the NLRB determined that facially neutral handbook policies that employees could ‘reasonably construe’ to prohibit Section 7 activity would be deemed to violate the NLRA. The NLRB would not take into account any legitimate justifications associated with the policies, rules or handbook provisions. In The Boeing Company and Society of Professional Engineering Employees in Aerospace, the Board adopted a new standard when evaluating facially neutral policies, rules or handbook provisions (referred to generally as ‘rules’). If, when reasonably interpreted, the rule would potentially interfere with the exercise of an employee’s Section 7 rights, the NLRB will take a two-pronged approach to determine whether the rule is unlawful. The NLRB will evaluate the nature and extent of the potential impact the rule will have on NLRA rights and the legitimate justification associated with the rule. The Board emphasised that a proper balance must be struck between the asserted business justification and the potential impact on employee rights in light of the NLRA and its policy.

NLRB General Counsel Rescinds Prior General Counsel Memoranda Regarding Employer Handbooks

The NLRB General Counsel has rescinded seven prior General Counsel memoranda, including Memorandum GC 15-04. This Memorandum included very specific guidelines on employer handbooks, including rules on confidentiality, rules on employee conduct towards supervisors, co-workers, and third parties, rules on use of company logos, and rules on conflicts of interest (among others). Rescinding Memorandum GC 15-04 does not overrule the Board decisions on which many of the guidelines contained in that memo were based. Those decisions can only be reversed by Board decisions. However, it does indicate that Regional Directors will be less likely to pursue aggressively these types of issues.

President Trump Disapproves ‘Blacklisting’ Executive Order for Federal Contractors

President Trump signed a Joint Resolution (H.J. Res. 37) disapproving federal agency rules implementing the Fair Pay and Safe Workplaces Executive Order (EO 13673, also known as the ‘Blacklisting’ EO) signed by former President Obama in 2014. President Trump also issued an Executive Order on 27 March 2017, revoking the Fair Pay and Safe Workplaces EO. This means federal contractors will not be required to comply with the EO’s requirement to disclose violations of 14 different federal workplace laws and their state-law equivalents. Additionally, contractors will not be required to comply with the EO’s remuneration disclosure requirements nor will its prohibition on mandatory arbitration of certain Title VII or sexual assault or harassment claims take effect.

DOL Reinstates Opinion Letter Process

On 27 June 2017, the DOL stated it will return to the practice of permitting businesses and advocates to inquire about federal wage and hour issues. In 2010, the Department ceased issuing responses, known as Opinion Letters, to such inquiries, and replaced this process by issuing Administrative Interpretations, which contained general guidance on wage and hour issues. In comparison, Opinion Letters are written opinions by the DOL’s Wage and Hour Division, which provide an analysis of how the law would be applied to the specific situation posed by the employer or person requesting the response. The DOL’s return to the issuance of Opinion Letters provides employers with a way to seek guidance on how to meet their statutory and regulatory requirements and gives them some assurance as to whether they are in compliance. Additionally, employers who receive an Opinion Letter can assert a good faith basis defense against liability under the FLSA.