Is Your Contract Protecting You Against the Coronavirus?

In the last few days, I have been receiving a number of calls from clients whose businesses are being affected by the Coronavirus (COVID-19).  Whether you believe this is all unnecessary panic, or simply an exaggerated event, the economic impact now being felt by clients, their customers, their contractors, their suppliers--their businesses--is having significant economic consequences.  The main questions being posed are: who bears the costs of these economic impacts and are there possible defenses or ways to recover the costs if a party to a contract cannot perform its contractual obligations? 

The answers to these questions have largely centered around the force majeure provisions of various business contracts. The concept of “force majeure” is that a party’s performance of its contractual obligations may be excused where performance is prevented or frustrated due to an unusual event that is beyond the contracting parties’ control--sometimes referred to as an "Act of God."  This concept is seen in a variety of contracts: business contracts, insurance contracts, sales contracts and commercial leases, to name a few.

Often this clause is last thing the parties negotiate, or even pay attention to, because the chances of it becoming an important contract term are remote (depending on the type of business or industry).  And yet, here we are, with a kind of Act of God in the form of a pandemic virus.  And now that this has become a contractual issue for many businesses, it is time to evaluate and determine if a party can rely on it to not perform or to excuse performance of a contractual obligation. 

Like all contract provisions, the clause needs to be looked at carefully.  Hopefully, it was well-drafted. 

So, what to do if this clause is looking like it's your only way out of a difficult (and hopefully temporary) situation?

• Evaluate your contracts to determine the applicability of a force majeure clause to the current COVID-19 situation.
• Identify any actual or potential consequences arising from the situation both within your company and your supply chain.
• If you do identify consequences, assess and determine what it will take to respond and whether and to what extent there are actions that you can take to address or mitigate the situation.
• Be sure to track the consequences of the pandemic on your business and your efforts to address them.  (This may serve you well when you later need to rely on the clause as a defense to nonperformance).
• Determine if you have any notice or reporting requirements as these may be prerequisites or pre-conditions to your ability to assert defenses or seek relief.
• Review your insurance policies to assess any applicable coverage for losses resulting from the Coronavirus, including supply chain disruption and business interruption. 
• If you are encountering a consequence that you think may constitute a force majeure event, contact your attorney to make sure you act in a way that minimizes your potential liability.

The Bottom Line:  The COVID-19 situation will continue to change daily.  It is a good time to review your contracts for this little-paid-attention-to clause called force majeure.  It may save your business.  

Employers Beware: New York Has Passed Some Sweeping Changes to its Discrimination and Harassment Laws

On August 12, 2019, Governor Cuomo signed into law a bill that makes changes to New York's discrimination and harassment laws. These changes follow his signing of two other bills on July 10, 2019 that concern equal pay and salary history.  The changes go into effect beginning October 2019 and at various points over the next year.

Summed up, and in general terms, here are some of the changes:

Pay Equity: Equal wages must be provided for employees performing the same or "substantially similar" work under "similar working conditions."

Salary History: Employers are prohibited from soliciting information from an applicant or an employee regarding wage or salary history.

Burden of Proof for Harassment Claims: Employees no longer need to establish that harassing conduct was "severe or pervasive" to prove that harassment has occurred in the workplace; rather, they can now establish a lesser standard by showing that they were merely subjected to "inferior terms, conditions, or privileges of employment." This change is applicable to all claims of harassment - not just sexual harassment.  

Interestingly, and little discussed so far, is a change in the way discrimination is viewed.  Whether or not discrimination has occurred will be viewed through the eyes of the "reasonable victim" of discrimination as opposed to the "reasonable person," which is the current legal standard.  This means that if the victim of alleged discrimination feels that he or she has been discriminated against, this is sufficient, regardless of whether, objectively, a reasonable person may not see the conduct as discriminatory. 

Faragher-Ellerth Defense: Under existing law, once an employee establishes his or her initial burden of showing that he or she was harassed in the workplace, the employer often had a defense, known as the Faragher-Ellerth defense, if the employee did not complain about the harassment to the employer. However, under the new framework, the fact that an employee did not complain is no longer a defense for an employer.

Non-Employees in the Workplace: Similar to last year's change that protected non-employees in the workplace from sexual harassment, non-employees in the workplace are now protected from all forms of unlawful discrimination.

Non-Disclosure Agreements: Until now, it was not uncommon for employers to require their employees to resolve all workplace disputes in confidential binding arbitration, not court. It was also common for workplace discrimination and harassment claims to settle, and in a settlement agreement a provision was included prohibiting employees from disclosing the facts regarding the settlement. Now, similar to last year's change regarding the settlement of sexual harassment complaints and the limitation on the use of mandatory arbitration agreements, NDAs are prohibited for all forms of unlawful discrimination and harassment unless confidentiality is the employee's preference.

Damages and Attorneys' Fees: Punitive damages are now available in cases of unlawful employment discrimination, and attorneys' fees can be awarded to a prevailing employee. While the provision of attorneys' fees now aligns New York state law with federal law, the provision for uncapped punitive damages now provides for greater remedies than presently permitted under federal law.


The Bottom Line: The new laws are a continuation of certain changes to laws that took effect last year. Together these changes have resulted in a significant alteration of discrimination and harassment law in New York State.  The changes will arguably make it easier for employees to plead and prove sexual harassment and other harassment claims, and will also incentivize employees with the potential for increased damage awards. You can also expect that the revised legal standards, coupled with the expansion of actionable harassment claims beyond just sexual harassment, will result in an increase in litigation.

Moreover, previously, state law was interpreted consistently with federal law. However, that will likely no longer be the case. In those cases in which an employee brings claims under federal, state and city law, a court may now need to apply three different legal standards, which will further complicate the litigation of these types of cases.

Employers should ensure that their harassment and discrimination prevention training complies with the new legal standards, and that their procedures for preventing harassment and discrimination are consistent with current best practices. Employers should also review their form employment, confidentiality, arbitration, separation, settlement and other agreements in light of the new laws concerning arbitration and non-disclosure provisions.

New York City Releases New Guidance on Discrimination Based on Hair

In February 2019, the New York City Commission on Human Rights released a legal enforcement guidance about race discrimination on the basis of hair.

According to the Commission, the New York City Human Rights Law (NYCHRL) “protects the rights of New Yorkers to maintain natural hair or hairstyles that are closely associated with their racial, ethnic, or cultural identities. For Black people, this includes the right to maintain natural hair, treated or untreated hairstyles such as locs, cornrows, twists, braids, Bantu knots, fades, Afros, and/or the right to keep hair in an uncut or untrimmed state.” The phrase “Black people” includes those who identify as:

• African;

• African American;

• Afro-Caribbean;

• Afro-Latin-x/a/o; or

• Otherwise having African or Black ancestry.

According to the guidance, hair-based discrimination implicates many areas of the NYCHRL, including prohibitions against race, religion, disability, age, or gender-based discrimination. The Commission’s guidance seeks to highlight the protections available under the NYCHRL for people who maintain particular hairstyles as part of a racial or ethnic identity, or as part of a cultural practice, regardless of the changing nature of these characteristics.

Covered entities with policies prohibiting hairstyles associated with a particular racial, ethnic, or cultural group would, with few exceptions, violate the NYCHRL’s protections against race and related forms of discrimination. Additionally, although the guidance focuses on Black communities, these protections broadly extend to other impacted groups including, but not limited to, those who identify as Latin-x/a/o, Indo-Caribbean, or Native American, and also face barriers in maintaining “natural hair” or specific cultural hairstyles.

Employer Record Keeping: What to Keep

I am often asked by clients: "What personnel and employment documents should we keep on file and for how long?" So, here is my basic response:

Rather than deciding what to keep and what to throw out, create a document-retention policy. This means you only retain the documents that are required to be retained by law, because of business necessity, or because it might just be useful--what I call the "you never know" category. The last two categories are specific to each business; the first, however, should follow the law and here is what the law requires:

• For at least 2 years, keep basic employment and earning records like timecards, wage-rate tables, shipping and billing records, and records of additions to or deductions from wages.
• For at least 3 years, keep payroll records, certificates, agreements, notices, collective bargaining agreements, employment contracts, and sales and purchase records.
• Basic payroll data.
• Dates FMLA leave is taken, including hours of leave for times of less than a full day.
• Copies of written notices given to employees as required by the FMLA.
• Documents describing benefits, policies and practices regarding paid and unpaid leave.
• Premium payment records for employee benefits.
• Records of disputes over the designation of leave as FMLA.
• Records relating to medical certifications, recertifications or medical histories created for FMLA purposes, kept in separate files from the usual personnel files.

I-9 Forms
Under the Immigration Reform and Control Act, you must keep copies of an employee's I-9 (Employee Eligibility Verification Form) for 3 years after the date of hire. If the employee works longer than three years, hold on to the form for at least another year after he or she leaves.

FLSA
Under the Fair Labor Standards Act you must:

Equal Pay Act
In addition to the payroll records that the FLSA requires, you must also keep, for at least 2 years, any records that show why you may pay different wages to employees of different sexes, such as wage rates, job evaluations, seniority and merit systems, and collective bargaining agreements.

Discrimination
The Equal Employment Opportunity Commission highly recommends that employers keep all employment records for at least 1 year from the employee's date of termination. The federal Age Discrimination in Employment Act requires that you retain payroll records for 3 years. In addition, an employer must keep files of benefit plans and seniority and merit systems while they are in effect and for at least 1 year after they end.

FMLA
If your company is covered by the Family and Medical Leave Act (FMLA), it must retain the following records for 3 years:

OSHA
Under the Occupational Safety and Health Act, employers must keep records of job-related injuries and illnesses for 5 years. But some records, like those covering toxic substance exposure, must be kept for 30 years.

ERISA
For benefit plans under the Employee Retirement Income Security Act, an employer must retain summary descriptions and annual reports for 6 years.

New Developments in Employment Law this Spring....

The New York City Freelance Isn't Free Act, which was signed into law in November 2016,  takes effect on May 15, 2017. Under the Act, the following protections for freelance workers or independent contractors are established and enhanced--specifically, the right to:

(a)  a written contract;
(b)  timely and full payment; and
(c)  protection from retaliation

The Act establishes penalties for violations of these rights, including statutory damages, double damages, injunctive relief, and attorney’s fees.


Also, on May 4, 2017, Mayor Bill de Blasio signed a bill prohibiting New York City employers from inquiring about a prospective employee’s salary history during all stages of the employment process. If an employer is already aware of a prospective employee’s salary history, then it is prohibited from relying on that information in the determination of salary.

This law will become effective October 31, 2017.

NY Amends Salary Threshold to Maintain Overtime Exemptions for White Collar Employees

The New York Department of Labor has adopted proposed changes to increase the salary threshold for “white collar” executive and administrative employees to qualify as exempt. Accordingly, employers are required to pay the following minimum salaries as of their respective dates to maintain the executive and administrative overtime exemption under New York law:

Large employers (those with 11 or more employees) in New York City:

$825 per week effective December 31, 2016.
$975 per week effective December 31, 2017.
$1,125 per week effective December 31, 2018.

Small employers (those with 10 or fewer employees) in New York City:

$787.50 per week effective December 31, 2016.
$900 per week effective December 31, 2017.
$1,012.50 per week effective December 31, 2018.
$1,125 per week effective December 31, 2019.

Employers in Long Island and Westchester:

$750 per week effective December 31, 2016.
$825 per week effective December 31, 2017.
$900 per week effective December 31, 2018.
$975 per week effective December 31, 2019.
$1,050 per week effective December 31, 2020.
$1,125 per week effective December 31, 2021.

Employers in the remainder of New York State (outside of New York City, Long Island, and Westchester):

$727.50 per week effective December 31, 2016.
$780 per week effective December 31, 2017.
$832 per week effective December 31, 2018.
$885 per week effective December 31, 2019.
$937.50 per week effective December 31, 2020.

NYC Says There Are No Longer Just Males and Females

In May of this year, the New York  City Commission on Human Rights announced a list of 31 new genders that are protected by New York City's anti-discrimination laws.  The list includes the terms "androgynous," "gender bender," "gender gifted," "third sex," "genderqueer," "gender fluid" and "pangender."  And the list is by no means intended to be "exhaustive."  I suppose they couldn't think of any other gender types at the moment.

This all comes within the scope of New York City Human Rights Law passed in 2005 known as the 2005 Civil Rights Restoration Act.  Apparently, the law needed updating, or at least further clarification, because such gender terms and different gender concepts were not within the contemplation of the legislators back in 2005, and so now the City wants to make clear who is protected.

The NYC Human Rights Law also requires employers and covered entities to use an individual’s preferred name, pronoun and title (for example, Ms./Mrs.), regardless of the individual’s sex assigned at birth, anatomy, gender, medical history, appearance, or the sex indicated on the individual’s identification.

Be careful employers:  the penalties for violating the law are harsh:  $125,000 for each violation or $250,000 if the discriminatory conduct is considered willful.

The times, they are a changin'....

Time Off for Bad Weather

With the recent wintry weather that New York has experienced this year, many businesses closed their stores, locations or offices either because of bad weather or in anticipation of bad weather.  The Mayor's and the Governor's decisions to close the transportation system in anticipation of a blizzard that never materialized also did not help matters!

The situation has prompted a number of questions concerning how employees' pay should be treated when a business closes because of weather conditions.

Here are the rules of thumb:

(1) For employees who are exempt from minimum wage and overtime laws, they do not have to be compensated if they do not show up for work because of bad weather if the business remains open; if an employer closes the business due to bad weather, the employee's full salary must be paid for the pay period even if he or she may not have worked the full period.  However, in the case where the business is open, but the employee does not appear for work, if the company has a paid time off policy, then the employee can ask to be paid for the day if he or she has accrued time.

(2) In the case of non-exempt employees, that is, employees that are subject to minimum wage and overtime laws, if the company closes, they are not entitled to be paid, but the company can allow the employee to apply any accrued paid time off if the company has such a policy.

An interesting situation arises with employees that can telecommute.  If an exempt employee works remotely from home on a bad weather day, no deduction can be made if the employee is "absent" from work.  However, because of the difficulty of monitoring whether an employee is actually working at home, non-exempt employees should always be prohibited from working from home.

Paying employees for work when they are not actually in the office or the place of employment is a difficult issue for many business owners.  The rules are complicated enough, so as businesses become more affected by global weather changes, it is a good idea to have a set of rules and policies in place for exempt and non-exempt workers, and to make them known to employees so they are not surprised by any deductions from wages.

Who Your Employees Associate With May Be Grounds for a Discrimination Suit

Can being married to a Jewish spouse subject your business to a discrimination suit based on religion? Yes, says the state appellate court in the Second Department of New York.

In a recent decision by that court in Jeffrey Chiara v. Town of New Castle, decided on January 14,2015, an appellate panel of judges opined that the plaintiff husband, who was not Jewish, but married a Jewish woman, was found to be discriminated against by virtue of his marriage to his wife.  Coworkers of Mr. Chiara apparently made derogatory comments about the Jewish religion. When he informed his coworkers that his wife was Jewish, the derogatory anti-Semitic remarks and comments continued--for several years.

In 2006, the Town of New Castle brought disciplinary charges against Mr. Chiara for misconduct and insubordination, and his employment was eventually terminated.  He thereafter filed a lawsuit alleging discrimination and hostile work environment based on religion--his wife's!

After losing his case at the trial court level, he argued to the appellate court that he was a member of a "protected class" by virtue of his marriage to a Jewish woman.  His employer argued that no law in New York supports a claim of discrimination based on the religion of a spouse.

The Appellate Division, Second Department, disagreed and held that just as Title VII of the federal law, the New York State Human Rights Law protects employees based on their association with other individuals, including their spouses.

As the first decision of its kind in New York, employers should be very mindful that New York law has now been interpreted broadly enough (at least by this one court) to extend protections to employees even if they are not covered by Title VII of the federal law.  It should also serve as a warning to employers that employees may be deemed to be discriminated against based on who they associate with,even if they are not within a protected class.

"Leering" Does Not Create a Hostile Work Environment

The Second Circuit Court of Appeals recently ruled in Lewis v. City of Norwalk (2d Cir. 2014) that a supervisor's occasional "leering" and "licking of his lips" at a subordinate employee was insufficiently severe and too sporadic to create a hostile work environment.

The subordinate complained that beginning in 2006, his supervisor, who was openly gay, "leered" at him and "made gestures with his tongue."  Although it began in 2006 and went on for years thereafter, it became merely sporadic over time.

Eventually, the employee was up for a performance review and his review reflected unacceptable work performance.  He was offered to resign with a severance package, or the employer would fire him.  He refused to resign--so he was fired.  The employee then commenced suit for sexual harassment against his supervisor and former employer.  His claims, however, were dismissed by the federal district court and, on appeal to the Second Circuit, he lost again, the Court holding that the supervisor's conduct was insufficiently severe and too sporadic to constitute sexual harassment.

This case is a reminder that in New York what constitutes conduct that is sufficiently "severe" in the context of a claim of sexual harassment must reach a very high threshold.