Managing Your Employees: What New and Small Businesses Need to Know

Employment attorneys Michael Neary and Nida Kanwal presented to new and small business owners on January 19 about managing their employees. You can watch a recording of the presentation here:

Micheal and Nida touched on several important topics, including:

1.  Hiring Process and Accompanying Risks
2.  Registering Employees With the State
3.  Immigration Compliance
4.  Documenting Employment Relationship: Offer Letters, Contracts, Equity Grants
5.  Best Practices for Employer Policies
6.  Wage and Hour Issues – Employee/Independent Contractors
7.  Protecting Your Intellectual Property and Trade Secrets
8.  Workplace Health and Safety – COVID-19
9.  Insurance
10.  Benefits

You can find a copy of their presentation here: https://www.lerchearly.com/events/managing-your-employees-what-new-and-small-businesses-need-to-know

For more information, contact Michael at mjneary@lerchearly.com or Nida at nkanwal@lerchearly.com.

Avoid Liability with Express Disclaimers in Employee Manuals and Handbooks

Josh SchmandJosh Schmand

Last month, in Sanchez v. Whole Foods Mkt. Grp., Inc., the United States District Court for the District of Maryland reaffirmed the general rule that express disclaimers in employee manuals and handbooks will protect employers from creating unintended implied contracts under Maryland law.

This is a good reminder of the importance of including clear and conspicuous disclaimers, even as simple and overt as “this manual is not a contract,” because absent such language employee manuals and handbooks can create contractual obligations for employers.

Employee manual was not a contract under Maryland law

Employees supervised by Ms. Sanchez complained about her managerial style. They alleged that she touched employees inappropriately and that she intimidated and harassed them. Whole Foods placed Ms. Sanchez on administrative leave, investigated the allegations, concluded that she was not meeting the expectations of her role, and presented her with a Final Written Warning for “repeated inappropriate behavior.” Her offense constituted a “major infraction” under the employee manual.

After resuming her job, Whole Foods gave Ms. Sanchez an action plan for improving conditions within the team and performance in general. However, Ms. Sanchez failed to achieve the objectives set forth in the plan, and Whole Foods terminated her employment. In turn, Ms. Sanchez filed a lawsuit alleging, among other claims, that Whole Foods breached its contractual obligations arising from its employee handbook. Specifically, Ms. Sanchez argued that Whole Foods failed to follow its own progressive discipline policy contained in the employee handbook and that she was terminated without verbal counseling, written reprimand, or a legitimate final warning.

Whole Foods argued in response that the employee handbook that Ms. Sanchez relied on repeatedly states that employees are employed at-will and that the employee handbook creates no contractual rights or obligations. And, Whole Foods highlighted that it had its employees, including Ms. Sanchez, sign a similar disclaimer every time a policy in the employee handbook was updated. The Court agreed with Whole Foods (and the United States District Court for the District of Columbia’s similar 2018 opinion) that, based on the repeated express disclaimers, the employee handbook was not a contract under Maryland law.

Progressive discipline policies allow employers to use their discretion

Even though the Court found that no contract existed based on the employee manual, it addressed Ms. Sanchez’s other arguments. In response to one of Ms. Sanchez’s arguments, that Whole Foods’ corrective action policy contained in the employee handbook required progressive discipline before employees can be terminated, the Court noted that the policy gave Whole Foods the discretion and flexibility to use differing disciplinary procedures and to terminate employees without prior notice. The corrective policy defined different types of infractions, and carved out situations where counseling and warnings were not required.

Takeaways

Besides ensuring that their employee manuals and handbooks actually have an express disclaimer that nothing contained therein creates any contractual rights or obligations, employers should also:

  • Place an express disclaimer on the first page (or in the preface or introduction) to indicate that it applies to the employee manual or handbook;
  • Repeat the express disclaimer throughout the employee manual or handbook;
  • Make sure that the express disclaimer is prominently highlighted; and
  • Have employees sign and acknowledge the express disclaimer.

Because of the recent updates to Maryland’s employment laws (discussed throughout Employment Edge), now is the perfect time for employers to review their employee manuals and handbooks for the appropriate disclaimer language needed to avoid potential contractual liability.

For more information, contact Josh at 301-347-1273 or jcschmand@lerchearly.com.

Montgomery County Council Enacts Legislation Amending the County’s Ban the Box Law

Michael NearyMichael Neary

Well that happened fast. As discussed in my prior article, the Montgomery County Council was considering a bill to amend the County’s Ban the Box law first introduced in late July. Since mid-September, the Council was awaiting a report on the merits of the bill from the Health & Human Services and Public Safety Committees. The Council received that report on November 10 and promptly voted to pass the bill the same day. The County Executive signed the bill quickly thereafter on November 20. The amendments to the County’s Ban the Box law become effective on February 19, 2021.

The sole change to the draft bill recommended by the two committees was to prohibit employers from considering a conviction for a first offense of misdemeanor Second Degree Assault instead of the prior language prohibiting employers from considering a misdemeanor or felony Second Degree Assault conviction when making employment decisions.

During the November 10, 2020 hearing on the bill, two further changes to the draft legislation were approved by the Council. First, Council Member Jawando moved to amend the bill so that it would apply to any employer with one employee, even if part-time, in the County. Previously, the bill stated it applied if an employer had one full-time employee in the County. This amendment passed 9-0. Second, Council Member Albornoz moved to remove entirely a first conviction of Second Degree Assault from the list of offenses that an employer can never ask about. The expressed rationale behind this amendment was that a misdemeanor Second Degree Assault conviction often arises from a domestic violence offense. Council Member Albornoz’s amendment to the bill passed 5-4. The Council then voted to pass the amended bill 9-0.

As such, once the bill becomes effective, any employer employing one individual, even if part-time, in the County will have to comply with the mandates of the Ban the Box law. All such employers will have to wait until after the employer makes a conditional offer of employment before asking about criminal histories or running criminal background checks. Further, employers can no longer ask about or consider the following criminal offenses:

  1. Any arrest records that did not lead to a conviction;
  2. A first conviction for:
    a. Trespass; or
    b. Disturbing the peace.
  3. A conviction for a misdemeanor if at least three years have passed since:
    a. The date of conviction; and
    b. The date any period of incarceration for the misdemeanor has ended;
  4. Juvenile records deemed confidential by statute; or
  5. Convictions that have been expunged.

Employers also cannot inquire about these offenses when considering current employees for promotions.

The legislation delegates to the County Executive responsibility for preparing implementing regulations and regulations necessary to notify employees and employers of their rights and responsibilities under the legislation.

Employers in Montgomery County should act now to update their hiring processes to ensure compliance with the amendments to the County’s Ban the Box law before they go into effect on February 19, 2021.

For more information, contact Michael at 301-657-0740 or mjneary@lerchearly.com.

Voluntary Acceptance of a Transfer May Waive Employees’ Claims in Maryland and Virginia

Recognition of “Constructive Demotion” Claims Seems Imminent.

Lauri ClearyLauri Cleary

In October, the Fourth Circuit Court of Appeals confirmed in Laird v. Fairfax County, Virginia, that an employee voluntarily accepting a lateral transfer to another position (there, to settle a disability discrimination claim) may not be able to establish discrimination or retaliation just because the new job is not all she had hoped.

To make out a viable claim, the employee must suffer an “adverse employment action” such that the transfer resulted in “a significant detriment” to the employee. Whether an employee’s dissatisfaction rises to the level of “significant detriment” is a factual issue determined on a case-by-case basis.

A transfer must cause a “significant detriment” to be actionable

After working in the new position for some months, Ms. Laird came to believe she had been demoted. She found her new position “boring” and to be a “thinkless job, just data entry,” and hurt her potential for future promotion.

She sued the County for discrimination and retaliation under the Americans with Disabilities Act. The federal trial judge in Alexandria entered judgment against her, finding her disappointment, however genuine, was not significant enough to establish a significant detriment.

After reviewing all facts anew, the Fourth Circuit Court of Appeals agreed. Offering no real guidance on what establishes a “significant detriment,” the Court of Appeals discussed what does not. In her new job, Ms. Laird received the same compensation, asked for and received changes to the new title and duties, and received additional accommodations of her disability.

The Court noted near the end of its opinion that she had abandoned her argument that intolerable discriminatory conditions in her original job had compelled her to accept a transfer—in essence that she was forced to accept a demotion. Having waived that argument, she could no longer claim that the transfer itself had been discriminatory or retaliatory.

A transfer that is not “voluntary” may be a “constructive demotion”

Had she not abandoned her “constructive demotion” argument, Ms. Laird may have prevailed by claiming acceptance of the transfer had not been “voluntary.”

The majority did not address that potential, but a member of the three-judge panel did in a concurrence. Observing that the DC Circuit (and every other circuit court of appeals to address the issue) has recognized constructive demotion claims, and noting that this circuit already has recognized claims for “constructive discharge” (for employee left with no option but to resign), the concurrence concluded: “Logic dictates that if a demotion can constitute a constructive discharge, then a constructive demotion can similarly constitute a constructive demotion.”

Thus, as in DC, an employee who can allege a work experience so intolerable as to leave no option but to accept a transfer likely will have a viable claim for constructive demotion claim in MD and VA.

Employer takeaways

Making a lateral transfer of a (current or potential) disability claimant to settle claims of discrimination and/or retaliation may not be an easy panacea. The transfer must be both “voluntary” and it not trade one “significant detriment” (discrimination or retaliation) for another (a significantly inferior position).

For more information, contact Lauri at 301-657-0176 or lecleary@lerchearly.com.

Maryland Employers Must End the Inquiry into Applicant Wage History

They Also Must Provide Applicants with Wage Ranges for Open Positions

Julie ReddigJulie Reddig

The Maryland legislature has joined approximately 25 other state and local jurisdictions in restricting employer use of applicant pay history to determine future pay if the applicant is hired for a position. Instead, Maryland employers must set pay ranges for open positions based on job-specific criteria, without regard to an applicant’s prior earnings.

Specifically, Maryland employers are prohibited from requesting that applicants provide prior pay information. In addition, employers cannot rely on prior pay information voluntarily provided by job applicants except in one narrow exception: when the applicant seeks to negotiate a higher wage than the one offered by the employer.

In that situation, the employer can seek to confirm an applicant’s prior pay and also rely on wage history voluntarily provided by the applicant in order to support the employer making an offer higher than the one initially provided. However, the employer can only make this higher offer if it does not create an unlawful pay differential in violation of Maryland’s equal pay law.

There is no prohibition on an applicant voluntarily disclosing prior pay information. In addition, Maryland employers may still request that an applicant provide a desired pay range if hired for the position.

The law also requires that Maryland employers provide an applicant with the wage range for an open position when the applicant makes such a request.

The goal of this legislation is to ensure that compensation is based on the criteria that is important for the job, such as qualifications, market factors, and the job duties themselves, and end the pay disparities in wages paid to women and minorities.

As a result of this new law, Maryland employers should:

  • Review their job applications to ensure that the application does not request prior compensation information;
  • Train recruiters, managers, and others involved in the hiring process not to request prior pay information of applicants; and
  • Revise policies and procedures so that prior pay information is no longer disclosed when responding to requests for employment verification and reference checks either entirely or from employers in Maryland or one of the other jurisdictions prohibiting such an inquiry.

For more information, contact Julie at 301-961-6099 or jareddig@lerchearly.com.

Montgomery County Makes It Easier for Employees to Prove Unlawful Harassment

Marc EngelMarc Engel

Last month, the Montgomery County (Maryland) Council enacted amendments to the county’s anti-discrimination statute, which substantially lowers the standard for proving unlawful hostile harassment claims.

The amendment was signed into law on October 16, 2020 and takes effect on January 15, 2021. As discussed below, the amendments are likely to have a profound impact upon employers.

Overview

Sexual harassment is a form of sex discrimination prohibited by local, state, and federal law (Title VII). There are two types of unlawful harassment: (i) quid pro quo harassment (“you do this for me, and I do that for you”) and (ii) the more common type of harassment, known as hostile work environment.

Under current county, Maryland state, and federal law, in order to establish unlawful harassment, an employee must:

  • Establish that the conduct was unwelcome;
  • Was based upon the sex of the employee;
  • Was sufficiently “severe or pervasive” to alter the employee’s conditions of employment and to create an abusive work environment; and
  • The wrongdoing is imputable on a factual basis to the employer.

These requirements also apply to harassment claims based upon other unlawful factors, such as age and race.

The “severe or pervasive” prong has both a subjective and an objective component. With regard to the subjective component, an employee must show that she or he subjectively perceived, as a reasonable person would perceive, that the environment was hostile or abusive.

The conduct must also be objectively “severe or pervasive” and have a substantial effect on the terms or on the conditions of employment. The “severe or pervasive” requirement has proven challenging for employees to satisfy. The Fourth Circuit (where Maryland is located) has noted that boorish and crude behavior alone is not sufficiently “severe or pervasive” to be actionable under Title VII. As the Fourth Circuit explained: “While no one condones boorishness, there is a line between what can justifiably be called sexual harassment and what is merely crude behavior.”

Summary of Impact of New Legislation

The amendments to the Montgomery County anti-discrimination statute effectively replace the requirement that workplace conduct be sufficiently “severe or pervasive” to alter the working conditions of a reasonable person in the employee’s shoes, with the requirement that a reasonable person in the employee’s shoes “would consider the conduct to be more than a petty slight, trivial inconvenience, or minor annoyance.”

Although the law still contains an element of objective reasonableness, the employee is only required to establish that the conduct was more than a trivial inconvenience, minor annoyance or petty slight (and not that the conduct was sufficiently “severe or pervasive” to alter the working conditions of a reasonable person in the employee’s shoes) – which is a significantly lower standard than the one used under Maryland’s state anti-discrimination law and under Title VII.

Takeaways

To learn about steps employers should consider taking, read the rest of the article on our website: https://www.lerchearly.com/news/montgomery-county-makes-it-easier-for-employees-to-prove-unlawful-harassment.

For more information, contact Marc at 301-657-0184 or mrengel@lerchearly.com.

Montgomery County Council Considers Legislation to Amend its Ban the Box Law

Michael NearyMichael Neary

A proposed Montgomery County bill greatly expands the County’s law prohibiting employers from asking about the criminal histories of job applicants until after an initial interview. In 2014, the County passed its “Ban the Box” law, which applies to employers with fifteen or more employees. Councilmember Will Jawando proposed an amendment reducing the employee threshold from fifteen to one on July 29, 2020. If passed, any employer in the County employing one individual would have to comply with the mandates of the Ban the Box law.

What Else is in the Proposed Bill?

The proposed legislation also would push the timeline back for when an employer could inquire about criminal histories from after a first interview until after the employer makes a conditional offer of employment. Further, as currently drafted, the bill would prohibit employers from asking about certain criminal offenses. Under the proposed legislation, employers could not ask about or, run a criminal records check to discover, whether the applicant has:

  1. Any arrest records that did not lead to a conviction;
  2. A first conviction for:
    a. Trespass;
    b. Disturbing the peace; or
    c. Second degree assault;
  3. A conviction for a misdemeanor if at least three years have passed since:
    a. The date of conviction; and
    b. The date any period of incarceration for the misdemeanor has ended;
  4. Juvenile records deemed confidential by statute; or
  5. Convictions that have been expunged.

The bill also prohibits employers from inquiring about these offenses when considering current employees for promotions.

The legislation delegates to the County Executive responsibility for preparing implementing regulations and regulations necessary to notify employees and employers of their rights and responsibilities under the legislation.

How Would the Bill Impact Employers?

If passed, the bill would significantly limit employer’s ability to investigate the criminal histories of applicants. The current Ban the Box law simply regulates the timeline for when employers can check the criminal histories of applicants. The public policy behind the current law is that employers may be willing to hire an applicant with a criminal history if the information is learned after the applicant has an opportunity to make a good impression during an initial interview. The proposed legislation, however, would ban inquiry into certain offenses preventing employers from considering them at all during the hiring process. The list of excluded offenses includes what some would consider more than simple nuisance crimes. For instance, a conviction for second-degree assault in Maryland can result from a defendant intentionally or recklessly causing physical contact or physical harm to another.

The legislation also could significantly slow down the hiring process. Employers would not discover an applicant’s criminal history until the end of the hiring process meaning employers might have to start the search again if the employer disqualifies a successful candidate because of a criminal record.

The Council held a public hearing on the bill on September 15, 2020 at which five speakers testified. The Council referred the bill to the Health & Human Services and Public Safety Committees for consideration. The council staff issued a work session staff report to the Committees on September 23, 2020. The next step is for the two Committees to make a recommendation to the full Council on the bill.

For more information, contact Michael at 301-657-0740 or mjneary@lerchearly.com.

Are DMV Employers Required to Give Employees Time Off to Vote? It Depends.

Josh SchmandJosh Schmand

With Election Day around the corner on November 3, 2020, and early voting ongoing, employees may need time off from work to vote.

Federal law does not require employers to give employees time off from work to vote, but the local jurisdictions have varying voting leave requirements. Here’s what employers need to know about giving employees time off to vote in D.C., Maryland, and Virginia:

Time Off to Vote in D.C.

On April 27, 2020, the District of Columbia enacted the Leave to Vote Amendment Act of 2020, which went into effect on October 1, 2020, just in time for the 2020 election season. The Act gives all D.C. employees the right to at least two hours of paid leave off to vote.

This means that paid voting leave is only available to employees who are voting in person. The leave can be used for either an election held in the District if the employee is eligible to vote in the District or in an election held in the jurisdiction (such as Maryland or Virginia) in which the employee is eligible to vote.

Employers may ask employees to submit the request for paid leave a reasonable time in advance of the date the employee plans to vote and to specify the hours during which employees can take paid leave to vote, including requiring employees to vote early instead of on Election Day or to vote at the beginning or the end of a shift. Employers may not interfere with, restrain, or deny any attempt employees make to take paid leave to vote under the Leave to Vote Act or retaliate against employees for taking paid leave to vote.

The Leave to Vote Act requires employers to post notice of the voting leave requirements in a conspicuous location and on their websites. A notice suitable for posting in the workplace can be found here.

Voting Leave in Maryland

Every employer in Maryland must allow employees at least two hours of paid leave off to vote on Election Day in order to cast a ballot. Like in D.C., this means that paid voting leave is only available to employees who are voting in person.

All employees in Maryland are eligible for paid voting leave if they claim to be registered voters in Maryland and if they do not have two hours of continuous off-duty time during the time that the polls are open. Employees are not eligible for paid voting leave if they have two consecutive nonworking hours while the polls are open.

Employers may require that employees provide written proof that they voted or attempted to vote. The paid voting leave law does not specify whether employers may designate the hours during which employees may take paid leave to vote. The law also does not specify any obligations for employers to inform employees of their right to paid voting leave.

Election Officer Leave in Virginia

Virginia does not have voting leave laws requiring time off (paid or unpaid) for employees to vote.

However, Virginia employers should be aware that they are obligated to provide election officer leave. An election officer is a person appointed by an electoral board to serve at a polling place for any election.

Requests for election officer leave must be made reasonably in advance of Election Day, and the leave does not need to be paid. Employees that serve four or more hours (including travel time) as election officers on Election Day cannot be required to start a shift on or after 5 p.m. that day or before 3 a.m. the day after service.

Voting Leave Policies

The voting leave requirements outlined above are the minimums required by applicable laws, and employers, even those in Virginia, can always amend their policies to provide additional paid voting leave as necessary. Employers should review all requests for voting leave consistent with established policies and applicable laws.

At a minimum, employers should review and modify their leave policies now to ensure compliance with the amended D.C. Leave to Vote Act and to provide employees with their required voting leave.

For more information, contact Josh at 301-347-1273 or jcschmand@lerchearly.com.

Maryland Law Bans Natural Hair Discrimination

The state joins Montgomery County and Virginia in adopting such legislation

Nida KanwalNida Kanwal

Effective October 1, 2020 Maryland’s anti-discrimination law prevents discrimination against persons based on their protective hairstyles and textures.

These types of laws, referred to as Creating a Respectful World for Natural Hair (CROWN) acts, are now being enacted in many states and localities. Montgomery County has had such a law in place since February of 2020, making it the first county in the country to ban hair discrimination. Virginia’s law went into effect on July 1, 2020. DC has not yet enacted such a law.

Maryland’s anti-discrimination law, Title 20 of the State Government Article of the Maryland Code, prevents various types of discrimination including discrimination in employment, places of public accommodation, leasing of commercial property, and housing. The definitional section of the title, Md. Code, State Gov’t § 20-101, has been amended to broaden the definition of “race” by including “traits associated with race including hair texture, afro hairstyles, and protective hairstyles.” Additionally, protective hairstyles is defined to include “braids, twists, and locks.”

Notably, the Senate version of the bill attempted to restrict the law by including language that an employer could establish and require an employee to “adhere to reasonable workplace appearance, grooming, and dress standards that are directly related to the nature of the employment of the employee.” However, this language was ultimately struck before the Act’s passage.

Employers should review any grooming and personal appearance standards or handbook policies in their workplace to ensure that they do not violate the new law.

For more information, contact Nida at 301-657-0744 or nkanwal@lerchearly.com.

Business Interruption Insurance

To Claim or Not to Claim?

Lauri ClearyLauri Cleary

Now that we are several months into the COVID-19 experience, most businesses have suffered some type of interruption, and many have suffered appreciable income loss.

The latter group may have considered submitting lost income claims on their business insurance policies. Those with offices, warehouses or any other physical premises (and many with only a virtual presence) likely have an all risk “CGL” (commercial general liability) insurance policy. These policies work by process of elimination or “exclusion” rather than “inclusion,” covering more than a narrow group of selected risks by covering any and all risks not expressly excluded–either by a narrow definition of the injury or loss that triggers coverage or express exclusion of certain causes of loss. They are “all risk” in that they insure against covered risks for covered losses.

Claims inquiries to many agents and brokers are met with the pessimistic advice that there likely is no coverage and will be no payout for COVID-19 losses. Many have been counseled not to bother submitting a claim. Given the new burdens the pandemic has placed on businesses trying simply to function, the temptation to forego an exercise in futility is understandably strong. But it should be resisted, and here’s why.

The Case for Making the Claim

As courts and legislatures begin to see and address claim denials, rays of hope are piercing the darkness.

First, and as always, a basic legal principle requires that insurance policies be interpreted in favor of the insured business and against the insurer, whose policy language is at issue. Initial court cases have begun to expose weak spots in the policy language armor insurers donned starting in 2008, after outbreaks of SARS and H1N1 inspired global pandemic fears. Before then, few businesses other than medical or biotech firms had policies excluding bacterial or viral diseases, as those risks were only addressed when they were inherent in the insured’s business.

Once hotel chains racked up huge SARS losses, and their insurers suffered huge verdicts, exclusions were rushed into policies for all businesses. But these exclusions, like all policy language, are narrowly interpreted against the insurer. Exclusions for “bacteria,” “virus,” “viral pandemic,” and other communicable disease sources are not interchangeable: a bacteria exclusion will not cover COVID-19 or any other virus (and vice versa), to justify denial for lack of a “covered cause of loss.”

Another ready refuge for insurers seeking to deny coverage is found in policy definitions of “covered loss.” That language, too, is under strict scrutiny in the courts. The issue is whether there must be physical damage or harm to property owned or rented by the business (or, in contingent income loss policies, to property of a customer or supplier or venue that draws customers to the business); and, if so, what constitutes “damage” or “harm” that may cause a “covered loss.”

Interpreting COVID-19

While courts in the past have interpreted policies to require a permanent structural change to physical property, the COVID-19 issue is whether contamination that does not effect a structural change, but adds a patina of toxicity, might be sufficient. There are apt analogies to be drawn from cases finding coverage for accidental chemical releases requiring decontamination to support an argument that property damage occurs wherever COVID-19 is present. Again, the policy language is paramount, and those providing coverage for “loss” may be broadly interpreted to include “loss of use” rather than only “damage” or “harm” to property.

Policies that interchange these words in other coverage parts may be interpreted against the insurers who argue a more limited meaning in policies that do not contain express exclusions of losses caused by viral pandemics or governmental shutdown orders. A recent D.C. Superior Court, case now headed to the D.C. Court of Appeals, demonstrates this well (Rose’s 1, LLC, et al. v. Erie Insurance Exchange, D.C. Superior Court, August 6, 2020).

In addition, since the onset of COVID-19 in March, state legislatures anticipating coverage denials in 10 states and the District of Columbia have been exploring ways to expand coverage under policies that otherwise would provide none. Most legislative measures would not simply declare coverage to exist where it did not otherwise. Rather, they would require insurers to offer such coverage for an additional premium. This approach balances the insureds’ need with concerns that the insurance industry not be bankrupted by COVID-19 loss payouts.

If nothing else, the judicial and legislative indications strongly support taking the time to submit a lost income claim under any policy that arguably affords any type of business interruption or lost income coverage, however limited.

For more information, contact Lauri at 301-657-0176 or lecleary@lerchearly.com.