Under President Barack Obama, U.S. Immigration and Customs Enforcement (ICE) began an initiative to enforce immigration law through employers. In 2009, ICE began conducting enforcement actions with 500 Notices of Inspection (NOI) to employers. This involves an audit of a company’s Form I-9s and related immigration policies and documentation. The numbers of NOIs issued to employers continue to increase; in 2012, ICE issued NOIs to 3,004 employers and collected more than $12 million in administrative fines. A NOI can create an administrative headache for retailers during the holiday season, when many in the industry are focused on their essential revenue period and tend to ramp up their hiring of seasonal employees. The size and composition of the retail workforce makes the industry a tempting target for ICE actions. Therefore, the industry should take a particularly careful look at its immigration compliance. To maintain a high level of compliance, employers should create immigration-risk-compliance policies to ensure a strong culture of compliance. The cost of conducting an internal audit is miniscule compared to the financial sanction. An internal audit and remediation of an entire company’s Form I-9s and immigration policies can cost as little as a few thousand dollars, depending on the size and complexity of the audit. Should ICE sanction an employer for failure to have strong immigration compliance, the cost of sanctions for deficiencies can be more than $1,000 per Form I-9. This has resulted in fines exceeding $1,000,000 in many cases, even where there is no demonstration of bad faith. Therefore, employers should consider the size of their workforce to estimate the potential sanction in deciding whether an immigration compliance review is worth the cost. The financial sanction by ICE may be paltry compared to the practical effects of an investigation. In addition to the potential financial sanction by ICE, retail employers face the complexity of retaining a workforce when ICE issues a NOI at a fulfillment facility, rather than at a retail location, as often is the case. Any stoppage of work or loss of employees could have dramatic effects on the company’s ability to supply its retail outlets or fulfill customer orders. It is easy to lose attorney-client privilege. When a client communicates with its attorney for the purpose of securing legal advice, the communication generally is protected under the attorney-client privilege. In conducting an internal audit, information can arise that should be protected by the privilege. In developing an immigration-compliance program and conducting an internal audit, not all communication with corporate counsel may be protected by the privilege, particularly when the communications are allowed to extend beyond the employer’s essential “control group.” Companies should approach immigration audits like other investigations, considering protection under the attorney-client privilege. Government agencies share Form I-9 data. ICE shares information gained through I-9 audits with other government agencies pursuant to a memorandum of understanding (MOU). It will share information with such organizations as the Department of Labor (DOL), the Justice Department’s Office of Special Counsel for Immigration-Related Unfair Employment Practices (OSC), the Equal Employment Opportunity Commission (EEOC) and the Office of the General Counsel of the National Labor Relations Board. They will even refer matters to each other and coordinate investigations, where appropriate. INSIDE: Winter 2013 Bewareof ICE: ImmigrationCompliance over the HolidaySeason FederalAppealsCourt Upholds NLRB’s ‘Micro-Unit’Rule MaleSuccessor’sAlleged GreaterAbilityto Negotiate overSalary Nota Defenseto EqualPayActClaim OffensiveConductbyRetailer’s RepeatCustomer MaySupport Claim forSexual Harassment 2 3 3 [ 1 ] Continued on next pageA U.S. appeals court in Cincinnati has upheld the National Labor Relations Board’s decision in Specialty Healthcare and Rehabilitation Center, 357 NLRB No. 83 (2011), allowing unions to organize in small units of employees, where their likelihood of success is heightened. Kindred Nursing Centers East f/k/a Specialty Healthcare and Rehabilitation Center of Mobile v. NLRB, Nos. 12-1027/12-1174 (6th Cir. Aug. 15, 2013). The Board’s win is seen as giving encouragement to unions attempting to gain footholds in industries and businesses where inroads for organized labor have been difficult in the past, including retailers. In Specialty Healthcare, the Board agreed with a petitioning union to conduct an election in a unit comprised solely of that nursing home’s Certified Nursing Assistants (CNAs). Prior to this case, the Labor Board almost always determined the composition of a bargaining unit using a “communityof-interest” standard that resulted in the inclusion of other positions, such as dietary aides and housekeepers, that reflected the working interrelationship of these employees in the facilities’ operations. Such “service and maintenance units” became the norm. In the 2011 decision, however, the Board adopted a new standard that would apply across all industries. From then on, the NLRB would approve virtually any unit the union requested (assuming it had some rational basis), unless the employer could show that the jobs sought to be excluded had an “extraordinary community of interest” with those covered by the request. This is a very high threshold, although the criterion has yet to be fully defined. Why was this important? Because unions can more readily win elections if they can “cherry pick” the job classifications allowed to vote. Employers objected strenuously to the Board’s ruling. The Board’s new standard, they said, could easily result in a company having many unions and collective bargaining agreements at a single location, making peaceful labor relations uncertain and smooth operations much more difficult. The term “micro-units” gained currency. The employer in Specialty Healthcare sought judicial review in the U.S. Court of Appeals for the Sixth Circuit. Numerous employers and business organizations appeared as friends of the court (Jackson Lewis represented some of them) and filed briefs. In its opinion, however, the Court rejected every argument pressed by the employer and its supporters, finding: • The NLRB’s “clarification” of the community-ofinterest standard was not arbitrary, unreasonable, or an abuse of discretion. • The Board did not abuse its discretion by adopting a general rule through adjudication instead of rulemaking — the Board is not precluded from announcing new principles in an adjudicative proceeding. • The new standard is not a “material change in the law” — it has been used by the Board before, but in an exceedingly small number of cases. The Court also said the Board may overrule its precedents, provided that it explains why, which it did in this case. • The National Labor Relations Act specifically prohibits the NLRB from determining unit composition based on the extent to which the union is successful in organizing. Although this new standard may sound perilously close to just that, the Court assures us it is not, because the Board does not simply rely on the union’s requested unit, but on its application of this new separate standard (albeit one that appears insurmountable to many employers). The employer may seek review before the U.S. Supreme Court. However, review is discretionary and most requests are rejected. An appeal is more likely to be heard by the Supreme Court if there are differing results among the circuit courts. At present, there is no conflict. [ 2 ] Engaging in an internal audit is easy. Failure to review and remediate Form I-9s is fraught with risk for employers. Jackson Lewis typically sees a fail rate of approximately 50 percent of employers’ I-9s it has reviewed. ICE often will give employers substantial credit for engaging in an internal audit and remediating I-9s before a NOI is issued. We have helped hundreds of employers respond to NOIs, engage in preventive audits to remediate I-9s and develop strong immigration compliance cultures. Retailers should consider how immigration compliance could be escalated as a priority in 2014. By addressing compliance, retailers can mitigate damage prior to the receipt of a NOI, minimize potential workforce disruptions, and alleviate concerns of immigration compliance leading to multi-agency investigations. FederalAppealsCourt Upholds NLRB’s ‘Micro-Unit’Rule[ 3 ] A pay disparity between a female employee and her male successor was not justified, as a matter of law, by a company’s claim that he was better able to negotiate over salary, a federal court has held. Dreves v. Hudson Group (HG) Retail, LLC, No. 2:11-cv-4 (D. Vt. June 12, 2013). The plaintiff, a general manager of Hudson Group stores at Burlington International Airport, alleged the employer violated the federal Equal Pay Act when it terminated her and paid a higher salary to her male successor. According to the employer, the higher salary was justified because: • after its initial offer, the male successor negotiated a higher salary; • the male successor had more than six years of management experience with the employer; • the cost of living in Burlington, Vermont, was greater than the male successor’s previous location; and • the male successor needed to be induced to move his family to the area. The plaintiff moved for summary judgment on her claims, which the court granted. The court held that, when a plaintiff has established a prima facie case of an Equal Pay Act violation, a defendant’s “factor-other-than-sex” defense cannot be grounded on the male successor’s alleged ability to negotiate a higher salary. A defense also may not be based on a company’s alleged need to induce the successor to agree to employment, unless the employer can show the inducement is based on a valid business purpose, the court said. For example, the employer can offer an inducement to a potential employee who has better qualifications or greater experience than the claimant. The court concluded the employer in this case lacked a valid defense as it did not show that the inducement to the male successor based on his family circumstances was related to any unique characteristic of his position, his qualifications, experience or abilities, or any exigent circumstances associated with the employer’s operations. This case highlights the difficulties retailers can face in attracting talent or making a decision regarding compensation of salaried employees. Companies must base compensation decisions, including initial offers, starting salaries and raises, on valid business purposes to avoid potential liability under federal equal pay requirements. MaleSuccessor’sAlleged GreaterAbilityto Negotiate overSalary Nota DefensetoEqualPayActClaim Continued on next page A retail customer’s offensive acts directed toward a number of female employees may support a claim of sexual harassment by the employees against the retailer, a federal court has ruled. EEOC v. Fred Meyer Stores, Inc., No. 3:11-cv-00832 (D. Or. June 17, 2013). The Equal Employment Opportunity Commission alleged that a Fred Meyer store located in Oak Grove, Oregon, allegedly tolerated offensive conduct by a repeat customer, thereby subjecting female employees to a sexually hostile work environment because of their sex. The employees claimed they were sexually harassed by the customer on multiple occasions and the store failed to adequately address the problem, despite its knowledge of the alleged conduct. The employer moved for summary judgment, contending the alleged conduct was not sufficiently severe or pervasive to be actionable harassment. The court denied the motion. The court held the alleged conduct was sufficient to support a finding of harassment for three reasons. First, it found that many of the employees complained to the store’s management about the alleged conduct, indicating they found the conduct subjectively offensive. Second, much of the alleged conduct was very offensive, including alleged touching of employees’ breasts, the court said. Third, the employees testified they were aware of offensive conduct directed to each other, which, the court said, contributed to an atmosphere of fear. The case highlights how important it is for managers and employers to take employee complaints regarding inappropriate customer OffensiveConductbyRetailer’sRepeatCustomer MaySupportClaim forSexual Harassment[ 4 ] The articles in this Update are designed to give general and timely information on the subjects covered. They are not intended as advice or assistance with respect to individual problems. This Update is provided with the understanding that the publisher, editor or authors are not engaged in rendering legal or other professional services. Readers should consult competent counsel or other professional services of their own choosing as to how the matters discussed relate to their own affairs or to resolve specific problems or questions. This Update may be considered attorney advertising in some states. Furthermore, prior results do not guarantee a similar outcome. © 2013 Jackson Lewis P.C. Editorial Board: Mark S. Askanas Dylan B. Carp 50 California Street 9th Floor San Francisco, CA 94111 415-394-9400 Sign Up for Online Workplace Law News Looking for help staying on top of workplace law developments? Register for free e-mail delivery of Preventive Strategies Online Workplace Law News to have our legal updates sent to your inbox monthly. Read what our professionals are saying about labor, employment, benefits, and immigration issues and developments. Go to www.jacksonlewis.com, click on “sign-up” at the top or the bottom of the homepage, and complete the electronic form. (Your information is confidential and will not be shared with a third party.) JacksonLewisBlogs Workplace laws, regulations, trends, and strategies change and evolve every day. Our blogs — written by Jackson Lewis attorneys and focusing on key issues and industries — can help you stay informed about these developments, almost as quickly as they happen. Our blogs, including the Retail Employment Law Blog, can be access at http://www.jacksonlewis.com/blogs.php Mail regarding your subscription should be sent to email@example.com or Jackson Lewis P.C. 666 Third Avenue New York, NY 10017 Attn: Client Services. Please include the title of this publication. behavior seriously, particularly where the customer’s problematic behavior constitutes a pattern of conduct. Companies must take action to protect employees from these customers, including taking steps such as banning the customer from the store. Without taking such decisive steps, inappropriate customer behavior may support a claim of sexual harassment by the employees against the retailer.