Retail & Hospitality Newsletter

Fair Workweek Legislation – What Large Retail and Food Service Employers Should Expect

by Brian Kane and Courtney Brennan

The retail, hospitality, and food service industries are among the nation’s largest employers of hourly employees. Over the past few years, there has been a push for new legislation affecting these industries, including policies regarding paid-time off and sick leave, increased hourly wages, and predictive employee scheduling, or “fair workweek” legislation. Predictive scheduling is the latest push to increase protections and benefits for part-time employees, mandating large companies give employees at least two weeks’ notice for scheduling, and to pay employees when schedules change.

Many part-time employees are juggling numerous responsibilities, including children and families, education, and other employment commitments. A part-time schedule can lead to uncertainties. For example, employees often do not know how much income they will make from one week to the next, especially when their shifts are changed or canceled. These inconsistent hourly jobs make it hard for employees to plan for other obligations, such as childcare or education.

In July 2015, San Francisco was the first city to enact fair workweek legislation, requiring two weeks’ notice for schedules; Washington D.C. followed, with a 21-day requirement. Cities such as San Jose, Chicago, Seattle, and New York City also enacted similar legislation later that year. This summer, Philadelphia joined the growing number of local governments to introduce fair workweek legislation. Many more will most likely move forward with similar laws.

What does this mean for employers?

Most of the legislation only targets large employers,  those with 500 or more employees. Alternatively, some legislation, including the Hours and Scheduling Stability Act of 2015 in Washington D.C., applies only to retail and fast-food employers with 20 or more franchise establishments nationwide. It is also important to note the common requirements among these laws which include:

  • two weeks’ notice for scheduling
  • pay for employees when shifts are canceled, and
  • increased pay for schedule changes less than a week in advance

Fair workweek legislation also requires employers to make extra shifts available to existing employees instead of hiring new employees at lower pay rates, and to keep scheduling records for up to three years.

Employers in the retail and hospitality industry can stay ahead of this rapidly changing legal landscape by making internal policy changes to their scheduling procedures before the legislation is enacted. While it may appear that many of the legislative changes are designed for the employee’s benefit only, it is possible for employers to benefit from this legislation as well. More predictive scheduling can improve employer-employee dialogue regarding availability and time off, enable better management of overtime and mandatory meal breaks, , and help facilitate a more effective record-keeping system. Fair workweek scheduling can be a positive change for both employers and employees alike.

Free to Enforce: Opportunity behind Class Action Waivers in the Hospitality Industry

by Taylor Wantz

On Oct. 2, 2017, the U.S. Supreme Court heard arguments in the Epic case concerning class waivers in employment contracts. The question before the Supreme Court was whether waivers in arbitration agreements were enforceable. The Court addresses how far businesses may go to require employees to sign away their right to pursue class actions, resulting in a decision that is favorable to employers in the Retail and Hospitality industry.

Here is what you need to know.

This May, the U.S. Supreme Court ruled in Epic Systems Corp. v. Lewis that businesses, that require workers to sign a waiver relinquishing their ability to pursue class actions, are not violating the National Labor Relations Act. 138 S.Ct. 1612 (2018). The consolidated action included three cases, involving employees of Epic Systems, Corp., Murphy Oil USA Inc., and Ernst & Young, LLP, respectively. The employees at these companies signed arbitration agreements as a condition of their employment, binding them to one-on-one arbitration for all disputes, the results of which would be final. Id.

The plaintiffs argued their employers were violating the Fair Labor Standards Act by denying them overtime pay.  Specifically, they maintained that the mandatory waivers violated their right to engage in “concerted activities” under Section 7 of the National Labor Relations Act (NLRA). 29 U.S.C.A. § 157. Each employer replied with a motion to dismiss and compel arbitration.

Beginning with the passage of the Federal Arbitration Act (FAA) in 1925, courts have fully enforced arbitration agreements, absent some unlawful purpose. 9 U.S.C.A. § 2.  Through the years, courts have adhered to this strict interpretation as evidenced by the Court’s ruling in Epic Systems. Federal courts have long enforced arbitration agreements according to their terms – including terms providing for individualized proceedings. 138 S.Ct. at 1619.

In Epic Systems, the Court considered whether the language of the NLRA displaced the FAA.  Justice Gorsuch, writing for the majority, maintained that,

This Court has never read a right to class actions into the NLRA – and for three quarters of a century neither did the NLRB… Far from conflicting, the Arbitration Act and the NLRA have long enjoyed separate spheres of influence and neither permits this Court to declare the parties’ agreements unlawful. Id.

The Court considered the silence of Section 7 of the NLRA regarding class or collective action procedures as dispositive that Congress did not intend for Section 7 to supersede the Arbitration Act.

The takeaway: businesses are not violating the NLRA by requiring employees to waive their ability to pursue class actions through an arbitration agreement. Id. at 1618.

While some characterize this ruling as a way to insulate employers, the Court made clear that agencies are not entitled to an all-assuming deference when interpreting how the NLRA should be read in concert with other federal statutes.

This decision provides employers—no matter the size of the company— with the uninhibited freedom to modify their arbitration agreements in a manner that best serves company interests under the scope of Epic Systems. The Economic Policy Institute conducted a study finding that over 55 percent of workers are subject to mandatory arbitration, and approximately 30 percent of the employers who mandate arbitration include class waivers in their policies.[1] For those who have not already included a class waiver in their arbitration agreement, we are likely to see a significant increase nationwide.  

The Retail and Hospitality industry, due to its labor-centric nature, will surely feel the impact of the decision.  High-dollar class actions pose a continuous concern for hotels, and for any large employer, the ability to guard against class and collective actions is refreshing.

Employers may find further support from the 2018 amendments to the Federal Class Action Rule 23. In the past, there have been cases in which class actions were viewed as a vehicle to drive up costs and force settlement, despite a weak underlying claim. Effective December 1, 2018, however, amendments to Rule 23 will require counsel to “front-load” information at the preliminary approval stage of class actions. This new requirement will help reduce costs, and force counsel to present more information than previously required,— protecting employers from weak claims advancing in the class certifying process.

No matter what, it is clear that if the agreement falls under the purview of the Federal Arbitration Act, the Supreme Court’s Epic Systems decision will affect the outcome, and now is the right time for employers to evaluate and strengthen their mandatory arbitration agreements.

[1]See Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration, Economic Policy Institute, (Apr. 6, 2018) https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/.

Drop the Weed

by Kerven Moon 

The legalization of marijuana for medical use is raising a number of questions for employers. For example, can an employer administer a drug test and deny or terminate employment for use of marijuana outside of the workplace in a state where it has been legalized? The crux of that question centers on whether marijuana use is a recognized protected activity. To date, the federal government has not recognized recreational marijuana use as a protected activity. Furthermore, the federal government still classifies marijuana as a Schedule I Controlled Substance, the highest category, and continues to criminalize marijuana use and possession, despite individual state’ legalizing marijuana.     
The reasons an employer drug tests its employees are persuasive. There is a legitimate interest in having a drug-free work force, as it fosters a more productive work environment, improves reliability, helps ensure competency, and minimizes impairment. Moreover, a drug-free workforce promotes a healthier environment.

While the benefits of drug testing seem evident, drawbacks also exist, specifically related to an individual’s privacy. Employers face fewer challenges to pre-employment drug testing if done consistently and fairly, as compared to monitoring off-duty drug use of current employees. In states where marijuana is legalized and use is not deemed criminal individuals fear disclosure will result in adverse employment actions. This can lead to the stigmatization and labeling of an employee who has tested positive for drug use.

Several states, in which marijuana is legal, have addressed whether off-duty marijuana use can result in termination. For example, the Colorado Supreme Court held that, even though medical marijuana was legal under state law, it was still illegal under federal law, and therefore, not protected as a “lawful” activity.[1] Thus, the Colorado Supreme Court ruled against an employee who was fired after testing positive for medical marijuana use. [2] Similarly, courts have not yet prevented employers from conducting random drug tests, despite the legality of marijuana. In California, employers are not required to accommodate off-duty marijuana use, and are permitted to drug screen employees and applicants for marijuana to maintain a drug-free workplace.[3]

As Pennsylvania’s law regarding marijuana evolves, more direction will be provided to employers as they navigate this new landscape. Currently, Pennsylvania only protects medical marijuana patients from discrimination based upon their status[4] The law prevents an employer from making an adverse employment action as a result of such status.[5] However, the law insures that an employer can take action for drug use on the job or drug use that negatively affects an employee’s ability to perform his or her job duties.[6]

Employers should expect many changes as medical marijuana use becomes more widely accepted. For now, employers can maintain a drug-free workplace and conduct random drug testing to ensure that  essential job functions are performed safely and well. This does not appear likely to change anytime soon. Bottom line, while marijuana might be legal in some states, for now employers can maintain the enforcement of a drug-free workplace within their organizations.

[1]   Coats v. Dish Network, 350 P.3d 849, 853 (Colo. 2015)

[2]   Id.

[3]   See Generally Ross v. RagingWire Telecommunications, Inc., 174 P.3d 200 (Cal. 2008)

[4]   35 Pa.Cons. Stat. §10231.2103 (2016). 

[5]  Id.   

[6]  Id.

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