Earlier this year, we reported that Congress was considering a large number of bills that would have imposed significant new burdens on how employers deal with employees. Two such bills—one outlawing genetic discrimination in employment and the other making significant changes to the Americans with Disabilities Act— were passed and signed into law. Considering the new political landscape, it is reasonable to assume that several of the others will be reintroduced in the 111th Congress, and that many of those bills will become law next year. The following previews major changes in employment legislation (in addition to the Employee Free Choice Act discussed in a separate Alert) that employers might expect to see in 2009.  

Pay Discrimination

The House of Representatives passed the Paycheck Fairness Act (H.R. 1338) in July. Among other things, the Act would make punitive and compensatory damages available under the Equal Pay Act without requiring proof of discriminatory intent. It would also make it easier for employees to become parties to class action lawsuits under the Equal Pay Act by requiring them to “opt out” of such lawsuits, rather than “opt in.” The Senate version of the Act (S. 766) was introduced by Sen. Clinton (D-N.Y.) in March 2007 and was co-sponsored by President-Elect Obama.  

In September, a Senate subcommittee held hearings on the Fair Pay Restoration Act (S. 1843), which mirrors the Lilly Ledbetter Fair Pay Act (H.R. 2831) passed by the House of Representatives in July 2007. It is all but certain that this legislation will be reintroduced in 2009. Both bills would overturn the Supreme Cou rt’s 2007 decision in the Ledbetter case, holding that an employee must challenge an alleged discriminatory pay practice within 180 or 300 days after the employer first made the pay decision at issue, rather than treating each paycheck as a new act of discrimination. Under the legislation, therefore, an employer would be treated as having discriminated “each time wages, benefits, or other compensation is paid,” even if the alleged discriminatory pay practice reflected in the paycheck had occurred years earlier. The Senate bill had 45 co-sponsors, including former Sens. Obama and Biden.  

The Fair Pay Act of 2008 (S. 2945) was introduced by Sen. Voinovich (R-Ohio) in April, as the Republican alternative to the Ledbetter bill. This Act would amend the Civil Rights Act of 1964 (“Title VII”) and the Age Discrimination in Employment Act (“ADEA”), to provide that the time for filing a charge of discrimination starts running not as early as when the discriminatory practice first took place, nor as late as when it most recently affected the employee, but when the plaintiff first knew or should have known that he or she was affected by the practice. The bill would apply this same approach to claims of compensation discrimination under the Americans with Disabilities Act (“ADA”) and the Rehabilitation Act of 1973.

An effort to bring back the concept of “comparable worth,” the Fair Pay Act of 2007 (H.R. 2019, S. 1087) was introduced in both the House and Senate in April 2007. The Act would amend the Fair Labor Standards Act (“FLSA”) and the Equal Pay Act to prohibit “paying wages to employees ... in a job that is dominated by employees of a particular sex, race, or national origin at a rate less than the rate at which the employer pays wages to employees…in another job that is dominated by employees of the opposite sex or of a different race or national origin, respectively, for work on equivalent jobs.” Employers would be permitted to defend such differentials that were the result of seniority systems, merit systems, systems that measure earnings by quantity or quality of production, or bona fide factors that the employer demonstrates are job-related or further legitimate business interests. No action was taken on this legislation this year, but President-Elect Obama was a co-sponsor of the Senate bill.  

Sexual Orientation Discrimination

In November 2007, the House of Representatives passed the Employment Non-Discrimination Act (H.R. 3685), which would outlaw discrimination based on the real or perceived sexual orientation of an applicant or employee. The bill would permit employers to treat unmarried couples differently than married couples with respect to employee benefits, would exempt certain religious employers, outlaw quotas, and permit unintentional discrimination such as facially neutral policies or practices that have a disproportionate adverse impact based on sexual orientation. Although the bill passed the House by a margin of more than 50 votes, no action was taken in the Senate this year. Nevertheless, on his campaign website, President-Elect Obama committed to seeing a bill that prohibits sexual orientation discrimination become law in 2009.  

Civil Rights Act of 2008

Last January, Sen.Kennedy (D-Mass.) and Representative Lewis (D-Ga.) introduced the Civil Rights Act of 2008 (S. 2554, H.R. 5129), which would impose far-reaching changes on a host of employment laws. Although no major action was taken on the bills this year, President-Elect Obama co-sponsored the Senate bill. Parts of this omnibus legislation may well become law next year.  

Among other things, the Act would:  

  • Remove the caps on compensatory and punitive damages under Title VII and the ADA (which now range from $50,000 to $300,000), allowing plaintiffs to recover unlimited damages.
  • Prohibit the enforcement of agreements to arbitrate employment disputes arising under federal law, unless such an agreement is reached after a dispute arises or is part of a collective bargaining agreement. A similar prohibition was also included in the Arbitration Fairness Act (S. 1782), which is discussed below.
  • Make it a violation of the FLSA to discriminate or retaliate against an employee because he or she has asked about, discussed, or disclosed his or her own wages or the wages of any other employee, or because the employee has filed a claim or participated in an investigation, hearing, or proceeding under the FLSA.
  • Like the Paycheck Fairness Act described above, amend the FLSA and Equal Pay Act to allow plaintiffs to recover compensatory and punitive damages, in addition to back pay and liquidated damages, and make it much easier for plaintiffs to bring class actions under the Equal Pay Act, by treating such cases as subject to the “opt-out” procedures under Rule 23 of the Federal Rules of Civil Procedure rather than the “opt-in” procedures that now apply to federal overtime claims.
  • Amend the ADEA to outlaw an employment policy or practice that has a disparate impact based on age, unless the employer can prove that it is based on reasonable factors, other than age, that are job-related and consistent with business necessity. This would overturn the Supreme Court’s holding in Smith v. City of Jackson, 544 U.S. 228 (2005).
  • Treat as a prevailing party entitled to recover attorneys’ fees, a plaintiff who shows that its pursuit of a nonfrivolous claim was the catalyst for the other party to make a voluntary or unilateral change in its position in settlement that provided any significant part of the relief sought by the plaintiff.
  • Require back pay or other monetary relief to be available to a current or former employee under federal employment laws even though the employee or employer failed to comply with immigration law. This part of the Act would overturn Hoffman Plastic Compounds Inc. v. NLRB, 535 U.S. 137 (2002), which held that an undocumented alien never legally authorized to work in this country could not recover back pay under the National Labor Relations Act.
  • Amend the Equal Pay Act to allow the “bona fide factor other than sex” defense only if an employer shows that the factor was job-related and furthered legitimate business purposes.
  • Give prevailing plaintiffs the right to recover their expert witness fees whenever several laws, including the FLSA, now give them the right to recover attorneys’ fees.  

Religious Discrimination

Introduced by Rep. McCarthy (D-N.Y.) in March 2007 with bipartisan support, the Workplace Religious Freedom Act (H.R. 1431, S. 3628) would significantly expand employers’ duty to reasonably accommodate employee religious practices that conflict with work requirements. Title VII protects any employee or applicant who can, with or without reasonable accommodation, perform the essential functions of the position unless the accommodation would impose undue hardship on the employer. The proposed legislation would exclude from any job’s essential functions “practices relating to clothing, practices relating to taking time off, or other practices that may have a temporary or tangential impact on the ability to perform job functions.” Although it is relatively easy under current law for an employer to show that an accommodation of an employee’s religious practices would impose undue hardship, the Act would raise the bar much higher, requiring employers to prove that any rejected accommodation would impose a “significant difficulty or expense,” taking into account such factors as the cost of the accommodation and the overall financial resources and size of the employer. Finally, the Act would require employers to initiate a bona fide effort to provide reasonable accommodation of a religious practice known to conflict with work requirements, rather than waiting for the employee to request an accommodation. Sen. Kerry (D-Mass.) introduced the Act in the Senate in September 2008.  

Family and Medical Leave

The Family and Medical Leave Act (“FMLA”) now applies to employers with at least 50 employees. In September 2008, Rep. Maloney (D-N.Y.) introduced the Family and Medical Leave Enhancement Act (H.R. 7233), which would expand the FMLA’s leave provisions to businesses that have at least 25 employees. The Act would also allow an eligible employee to take up to four hours of leave during any 30-day period, and up to 24 hours of leave during any 12-month period, to participate in or attend activities that are sponsored by a school or community organization and that relate to a program of the school or organization that is attended by the employee’s child or grandchild. President-Elect Obama has voiced his support of such an expansion of the FMLA.  

Working Families Flexibility

The Working Families Flexibility Act (H.R. 4301, S. 2419) was introduced in both the House and the Senate in December 2007. The Act would give every employee the right to ask his or her employer for a change in the number of hours the employee is required to work, the times when the employee is required to work, or the employee’s work location. The employer would be required to meet with the employee within 14 days after receiving such a request, and to provide the employee with a written decision about the request (specifying the grounds for a rejection, if applicable) within 14 days after the meeting. Although no major action was taken on this legislation this year, President-Elect Obama was a co-sponsor of the Senate bill.  

Independent Contractors

In the current session of Congress, legislation was introduced in both the Senate and House seeking to correct what sponsors see as misclassification of independent contractors as employees. In September 2007, then-Sen. Obama introduced the Independent Contractor Proper Classification Act (S. 2044), which would allow workers treated as independent contractors to petition the Internal Revenue Service for a determination as to whether they are being properly classified for employment tax purposes. The Act would prohibit retaliation for filing such a petition, and require employers that had misclassified such a worker to pay the petitioner’s expenses incurred in filing the petition, including attorneys’ fees and expert witness fees. The law would also require employers to notify each individual retained as an independent contractor about the employment law protections not afforded to independent contractors and the individual’s right to petition the IRS for a determination about his or her status. The Treasury Department would be required to notify the Department of Labor of all misclassifications.  

In April 2008, Rep. McDermott (D-Wash.) introduced the Taxpayer Responsibility, Accountability and Consistency Act (H.R. 5804), which would permit workers to file similar petitions, increase the penalties an employer faces for misinforming the IRS that employees are independent contractors, and eliminate an employer’s current ability to avoid tax liability by showing that its misclassification of a worker as an independent contractor was reasonable.  

Finally, this September, Sen. Kennedy introduced the Employee Misclassification Prevention Act (S. 3648). The bill, co-sponsored by former Sen. Obama, would amend the FLSA to clarify that misclassification is a prohibited act and to allow for harsher penalties for employers who misclassify workers. It would also require employers to notify workers of their right to challenge their classification and would require the U.S. Department of Labor to conduct audits of employers in industries that frequently misclassify employees. The companion bill (H.R. 6111) was introduced in the House in May 2008.  

Workplace Safety

In April 2007, both the House and Senate introduced the Protecting America’s Workers Act (H.R. 2049, S. 1244), which would amend the Occupational Safety and Health Act of 1970 (“OSHA”) by expanding OSHA’s coverage to employees who are not currently covered, including government employees. It would also raise civil penalties for fatal incidents to a maximum of $250,000 and allow employers to be sent to prison for some violations that result in workers’ deaths. Finally, the Act would increase whistleblowers’ protections by requiring the Secretary of Labor to investigate, hold a hearing, and order reinstatement and compensatory damages if an employee was discharged or disciplined for complaining about OSHA violations. Although no action was taken on this legislation this year, President-Elect Obama was a co-sponsor of the Senate bill.  

Arbitration  

The Arbitration Fairness Act of 2007 (H.R. 3010, S. 1782) was introduced by Sen. Feingold (D-Wis.) in July 2007 and was the subject of Senate Judiciary Committee hearings that December. The Act would prohibit any pre-dispute arbitration agreement (other than in a union contract) that requires arbitration of: (1) an employment, consumer, or franchise dispute, or (2) a dispute arising under any statute intended to protect civil rights or to regulate contracts or transactions between parties of unequal bargaining power. It would also declare that the validity or enforceability of an agreement to arbitrate would have to be determined by a court, under federal law, rather than an arbitrator, regardless of whether the party resisting arbitration challenges the arbitration agreement specifically or in conjunction with other terms of the contract containing such agreement. Congress will likely take up this legislation again in 2009.  

Conclusion  

With a new Congress and a new Administration, it is reasonable to expect that many of the bills discussed above will be reconsidered and enacted in 2009. Employers should remain vigilant to see how this legislation, as well as the Employee Free Choice Act and other important bills sought by organized labor, fare next year.