New Sexual Harassment Guidelines!

January 15, 2018

Well, this is definitely a sign of the times. In addition to fueling the filing of more sexual harassment lawsuits across the country, the recent sexual harassment scandals involving high-powered public figures have led to legislative efforts to prevent settlements of sexual harassment suits from being “confidential,” and to disallow individuals or entities from taking tax deductions for attorneys’ fees and/or settlements related to such claims.  This will have the perhaps unintended consequence of hampering settlement of these cases and instead fueling continued costly litigation in courts whose dockets are already overburdened (particularly in California).

Recent Amendment to Federal Tax Code

As part of the tax bill recently passed by Congress and signed into law, Section 162 of the Internal Revenue Code, which pertains to “ordinary and necessary” business expenses that may be deducted from income, now provides:

(q) PAYMENTS RELATED TO SEXUAL HARASSMENT AND SEXUAL ABUSE – No deduction shall be allowed under this chapter for – (1) any settlement or payment related to sexual harassment or sexual abuse if such settlement or payment is subject to a nondisclosure agreement, or (2) attorney’s fees related to such a settlement or payment.

Dubbed as the “Harvey Weinstein Tax,” (even though it isn’t a tax), this provision essentially means that the amount of any settlement of a sexual harassment claim that is subject to a confidentiality agreement, and/or the attorneys’ fees incurred in connection with the case, may not be deducted from income on a business’ tax return.  This may have significant consequences for employers entering into settlement agreements in sexual harassment cases because such settlement agreements very commonly contain confidentiality provisions.  And, contrary to public sentiment of late, confidential settlements of harassment cases (just like any other cases) are not a bad thing.  Believe it or not, not all claims of harassment are brought in good faith and not all claims have legal merit.  However, given the exorbitant cost of litigation, it is often economical to settle these cases rather than litigating them through trial.  Including a confidentiality provision in a settlement agreement provides some protection against the “domino effect” that might otherwise occur if a settling employee was free to tell a bunch of coworkers that he or she received a payout.  If employers are not able to include a confidentiality provision in a settlement agreement, this greatly hampers the possibility of settlement, and this is not particularly beneficial to anyone.

California’s SB 820

Of course California wants to jump on the bandwagon and take the matter was step further. Along similar lines, legislation was introduced a couple of weeks ago before the California Legislature to prohibit confidentiality provisions in settlements agreements concerning sexual harassment and gender discrimination claims.  SB 820 (Leyva) seeks to prohibit provisions in settlement agreements that prevent the disclosure of factual information related to the claims in any lawsuit alleging sexual assault, sexual harassment, gender discrimination, failure to prevent sexual harassment or gender discrimination, or retaliation for reporting sexual harassment or gender discrimination.  The bill would allow the inclusion of a non-disclosure provision only if requested by the alleged victim.  The bill also would allow a limited non-disclosure provision that prevents the parties from disclosing only the amount of the settlement.

SB 820 is newly introduced, and is far from being passed or signed into law in California.  However, this effort, like the changes to the federal tax code, are not good news for employers. I will keep you posted.

Reminder: We are conducting “Active Shooter” Training on a national basis. Contact us to set up an appointment at 626-396-1070.

 

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Clarification of the New Marijuana Law

January 8, 2018

It’s a new year, and there is a lot of publicity about recreational marijuana now being legal in California.  However, many people seem to have the mistaken belief that they cannot be fired or refused a job for smoking marijuana (since it’s legal and all).  Wrong.  It is important for both employers and employees to understand that the new law does not impact employers’ rights to maintain and enforce drug-free workplace policies and drug testing policies that make a positive test for marijuana a terminable offense (or a bar to hiring).

The new law expressly states that that it should not be construed or interpreted to:

  • restrict the rights and obligations of public and private employers to maintain a drug and alcohol-free workplace;
  • require an employer to permit or accommodate the use, consumption, possession, transfer, display, transportation, sale, or growth of marijuana in the workplace;
  • affect the ability of employers to have policies prohibiting the use of marijuana by employees and prospective employees; or
  • prevent employers from complying with state or federal law.

Under federal law, marijuana remains a Schedule I drug that is prohibited under the Controlled Substances Act, and the California Supreme Court held in 2008 (Ross v. RagingWire Telecommunications, Inc.) that an employer lawfully may enforce a policy of refusing to hire an applicant who tests positive for marijuana — even if the employee was using the marijuana for medical purposes as has been permitted under California law for several years.  The expanded legalization of marijuana for recreational use in California does not change the legal analysis. Because marijuana remains illegal under federal law (and in most states), employers are entitled to continue maintaining policies prohibiting the use of drugs classified as illegal under federal law and to enforce those policies equally as to applicants and employees regardless of whether the applicant/employee is in California.

But what about the fact that California has a law prohibiting employers from taking adverse action against an employee for lawful off-duty conduct (Labor Code section 96, 98.6)?  If smoking pot off-duty is legal, doesn’t this law protect an employee from being fired solely because of this legal activity?  No.  California courts generally have interpreted these laws to apply to lawful off-duty conduct related to political activity and expression.  They have not been interpreted to protect marijuana use.  Of some note, Colorado, which legalized marijuana a few years ago, has a similar law protecting employees from adverse action based on lawful off-duty conduct.  The Colorado Supreme Court considered whether this law prevented an employer from firing an employee who tested positive for marijuana.  Answering this question in the negative, the court held that because marijuana is still illegal under federal law, its use is not “lawful off-duty conduct” and, therefore, an employee properly may be fired for a positive drug test.  It is likely that a California court would reach the same conclusion under California law, particularly given that California’s recreational marijuana law expressly states that it is not intended to alter employers’ rights to maintain existing drug-free workplace and testing policies.

Employers who wish to maintain such policies should ensure that their policies make clear that prohibited drug use extends to all drugs prohibited by federal law, including marijuana — even in states where medical and/or recreational use has been legalized.  For employers who do not wish to make recreational or medical use of marijuana a bar to employment (for fear that they won’t have a workforce), they may wish to revise their policies to have a carve-out for marijuana in states where its recreational use has been legalized.  However, even these employers will want to maintain a policy that prohibits being under the influence of marijuana while at work and/or performing duties on behalf of the company.

Employers are also reminded that the passage of this new law does not entitle them to suddenly drug test their current workforce.  Employers generally may only drug test applicants for employment (after a conditional offer has been made).  Post-employment drug-testing generally is limited to reasonable suspicion testing.  Random drug testing of current employees is, for the most part, prohibited.  There are exceptions for certain safety-sensitive positions and positions covered by special laws and regulations that require more frequent drug testing and/or drug testing based on certain circumstances (e.g. post-accident testing).  Employers should have clear policies that employees acknowledge (in writing) setting forth the circumstances under which the company requires drug testing of applicants/employees and how the company treats the use of marijuana in states where its use is legal for medical and/or recreational purposes.

Multistate employers should also measure their policies against the marijuana-related laws of other specific states (other than California) where they employ workers. At least one state, Connecticut, has held (contrary to California’s highest court) that employers must accommodate medical marijuana use.  Because there is an increasing public sense of “unfairness” in the fact that an employee could be fired for doing something that is legal in their non-working time, it is possible (and perhaps likely) that more states will begin enacting laws that protect the employment rights of marijuana users where such use has been legalized.  For now, marijuana users in California do not have job protection.

A final note. U.S Attorney General Jeff Sessions has announced he may rescind the “Cole Memorandum” (under the O’Bama Administration) which permitted the State’s the opportunity to legalize marijuana. If this happens the use of marijuana whether for medicinal reasons, or recreational use, will once again be illegal at the State level.


The High Cost of Sexual Harassment

January 3, 2018

NOTE: Not sure why this did not publish on January 2, 2018! Sorry for any inconvenience.

This Blog post is longer than usual but it is for a reason. Please take the time to read it! Stick with it because by now, you’ve probably lost count of how many prominent celebrities, CEOs, and politicians who have publically faced allegations of some form of sexual harassment in the wake of revelations over former Hollywood producer Harvey Weinstein’s decade’s long pattern of sexual misconduct towards women with whom he worked. You could be next!

Title VII

Within the Civil Rights Act of 1964, Title VII is the part of the law that lays out the legal parameters prohibiting discrimination in the workplace on the basis of any “protected class”, including sex (i.e., gender). So, it is not news that discrimination in the workplace is unlawful.  What is newsworthy of late is just how prevalent harassment continues to be more than 30 years after the U.S. Supreme Court decreed that workplace harassment is a form of unlawful discrimination. It never ceases to amaze me how managers and supervisors continue on this path of destruction!

At one time, the damages that could be awarded in sexual harassment cases were limited to recouping back-pay and lost wages, and reinstatement in their previous position if the victim had been fired for bringing the claim. Those days are gone!

Today, when sexual harassment claims do go to court, the plaintiff can now pursue damages that would include “future pecuniary losses, emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment of life, and other non-pecuniary losses” as well as punitive damages in certain circumstances.

$125,000 (up to millions)

The most easily calculated cost for employers, and probably the most asked about cost when it comes to handling sexual harassment claims in the workplace, are the LEGAL BILLS!

Assuming that the claim is settled out of court, the average harassment claim will typically run an organization anywhere from $75,000–$125,000.

If it goes to court, employers are often looking at more like double those numbers, again in legal fees alone. And, if the employer is found liable in the case, well, that price tag can get pretty big in a hurry. With legal costs that can escalate exponentially, it quickly becomes clear how important it is for employers to both take sexual harassment claims seriously, as well as to create a workplace culture that doesn’t allow them to occur in the first place.

Economic Impact-Millions

A severe lack of research on the economic impact that sexual harassment in the workplace has on companies where it occurs makes putting a dollar figure on anything but the legal bills challenging. Studies have shown businesses can lose as much as $6.7 million per year due to sexual harassment.

But what goes into that $6.7 million number?

  • Absences: Victims call off work to avoid interacting with the perpetrator before, during, and after a formal complaint is filed. Once the allegations come to light, insurance companies have reported that it takes an average of 275 days for a harassment claim to be settled (and this is for unsuccessful claims that simply settle). For cases that do see a court room, any and all parties involved (including any witnesses) may absent from work periodically for court proceedings, investigations, depositions, etc. And of course, personal time may also be taken for any number of reasons connected with the emotional or physical damage caused by the alleged harassment.
  • Turnover: Victims quit, because they don’t think their employer will believe them if they bring these issues to their attention from the start. Victims quit, because they feel ostracized by co-workers after bringing a case of sexual harassment to light. Victims quit, because they are unhappy with how their employer handled their sexual harassment claim. Others in the organization leave for any of the same reasons—employees talk, and if someone doesn’t feel safe or don’t like how a case was handled, it will not positively impact turnover numbers in the long run. And of course, on the other side of the equation, those against whom the allegations are filed (can, depending on the disciplinary standards set out in the harassment policy) get fired.
  • Low productivity: Employees gossip about the harassment case, overall morale is low (How could this happen at our company? Why didn’t they do more to stop this? Am I safe at work?), victims suffer psychological damage that makes it difficult for them to concentrate on their work (especially if the perpetrator is still employed with them), and HR has to spend time conducting internal investigations that could be spent elsewhere if this problem didn’t exist. 

    More recent research finds that 80% of women who reported either unwanted touching or a combination of other forms of harassment changed jobs within two years. Basically, sexual harassment makes it harder for everyone in the company to get their work done in ways big and small, and that (not legal bills) is what will likely cost the employer the most money in the long run.

    PricelessDespite all of the facts and figures thrown out above, another damaging price that both employers and employees pay when it comes to instances of sexual harassment in the workplace, does not come with a dollar amount attached. For the employer, reputation is far and away the primary indirect financial concern.

    For those involved in the harassment directly, whether that’s victims, perpetrators, or witnesses, the damaging nature of the harassment itself and the claims brought to light will undoubtedly have long lasting negative consequences.

    From the cost of psychological and emotional damage to career ending (or stunting—in the case of victims who do not come forward or those that come up against an employer that does not take their claims seriously) blowback to bringing down morale among the entire workforce when a toxic workplace culture fraught by sexual harassment is allowed to continue unchecked, these more abstract costs truly cannot be quantified.

    Let 2018 be the year! Start clamping down on this costly area of the law. Zero tolerance is the only way to go!