United States: 2001 Oregon Employment Law & Legislative Update

In May 2000, the Oregon Court of Appeals, in Vento v. Versatile Logic Systems Corp., suggested that wage claim settlements between an employer and employee may be subject to the statute. In the past, BOLI has not reviewed such settlements and, according to the staff measure summary for this bill, it is not prepared to do so.

House Bill 2220 would exclude wage claim settlements from supervision by BOLI, so long as the claim involves "a settlement between an employer and employee of a known and identified claim… relating to the payment of wages, and "the settlement does not provide for the employee to relinquish a claim for additional or future violations."

According to the legislative measure summary, this bill is intended to "clarify unclear or inconsistent language relating to enforcement procedures." The expectation is that the bill would make the civil rights statutes easier to use and clarify the administrative process through which the laws are enforced. However, the bill is not intended to substantively change existing law.

For employers with six or fewer employees, this bill would allow an employer to pay an employee who is quitting employment at the next regularly scheduled payday. This bill would not change the final paycheck requirements for larger employers and for small employers who fire an employee.

ORS 652.200 presently allows for the recovery of attorney fees in an action to collect unpaid wages. ORS 652.150 provides that an employer who willfully fails to pay any wages owed at termination is liable for a penalty for each day the wages remain unpaid. "Willful" is defined to include most unpaid wages. The statute caps the penalty at 30 times the employee’s daily wage.

Knowledgeable plaintiff attorneys wait until 30 days have elapsed before making a demand for wages. By that time, the employer has no option but to pay the entire penalty. To add insult to injury, the plaintiff then seeks reimbursement of his or her attorney fees. These claims are very lucrative for the plaintiff attorney, as the employer has usually erred in good faith, and wishes to settle to avoid further liability for the employee’s ongoing attorney fees.

HB 2500 would require that the employee prove that the employee made a written demand for payment before taking legal action. The employer then has 10 days to pay the amount owed. If the employee cannot show proof of a prior written demand, the employee will not recover attorney fees.

This bill is similar to HB 2500. Employees have long enjoyed an advantage over the employer in proving wage claims. An employer may honestly believe that all wages have been paid. The employer is then blindsided by a wage claim seeking penalties and attorney fees. Often, the amount of wages in dispute is very small. The penalty usually is 30 times the employee’s daily wage, plus reimbursement of attorney fees.

HB 2867 seeks to force employees to provide employers with an opportunity to pay legitimate wage demands. So long as the employer pays the wage demand within 12 days from the date the employee sends written demand, the employer’s liability for penalty wages is limited to the an amount equal to the amount of wages the employer failed to pay the employee. This bill would allow the fair resolution of small wage claims by avoiding an otherwise disproportionate penalty.

This bill would allow a credit against taxes an employer owes if the employer sponsors commuter benefits. The credit would be up to 50% of the cost of providing commuter benefits, but not to exceed $30/month for each employee using the benefit. "Commuter benefits" include providing or paying for: a van/bus seating at least eight people; transit passes; or commuting incentives, such as cash in lieu of use of a parking space.

This tax credit would apply when an employer grants paid leave to an employee who volunteers at the public elementary or secondary school where the employee’s child attends. The paid leave would be in addition to existing paid vacation, sick or personal leave. Only employers with 50 or fewer employees would qualify. The bill does not yet specify the amount of the credit, but it would be based on the amount of hours of leave granted.

Employers have always been strictly liable for the negligent conduct of employees that occurs within the course and scope of employment. However, employers have traditionally not been liable for the intentional misconduct of an employee, so long as the employer prohibits such conduct. Because the conduct is prohibited, the argument was that the conduct cannot be within the course and scope of employment.

Recently, the Oregon Supreme Court extended an employer’s liability to certain intentional acts. In Lourim v. Swensen, 328 Or 380 (1999), the Court held that the Boy Scouts could be liable for the intentional child abuse of a volunteer leader. The court held that the leader, with the Boy Scout’s approval, was given the opportunity to develop a relationship of trust with the child and have opportunities alone with the child. Because the Boy Scout’s policies set up the eventual opportunity for child abuse, they could be liable even though the child abuse was an unpermitted and intentional act of misconduct.

Last year, HB 2985 sought to limit the liability of employers for intentional torts (i.e. misconduct). The bill failed after it was vetoed by the Governor. This year’s bill is similar. It provides that an employer is not liable for an intentional misconduct, except when either of the following occurs:

• the employer knew or should have known that the employee intended to engage in the misconduct; or
• the employer knows that there was an unreasonable risk that the employee would engage in the misconduct, and the employer failed to prevent the misconduct from occurring; or the misconduct was the kind of conduct that the employee was employed to perform, the conduct occurred during the time the employee was authorized to act, the conduct occurred within the area were the employee was authorized to act, and a reasonable person would have believed that the conduct was for the benefit of the employer.

ORS 653.295 limits when an employer can enter into a noncompetition agreement with an employee. Under the statute, the employee can only enter into an enforceable noncompetition agreement upon commencement of employment, or upon a "subsequent bona fide advancement of the employee with the employer" (i.e. promotion or significant pay increase).

However, many employment law attorneys have believed that a nonsolicitation agreement was not within the scope of the statute. A nonsolicitation agreement prohibits a former employee from calling on the employer’s customers. In contrast, a noncompetition agreement prohibits a former employee from engaging in any competition whatsoever within a specified geographic area and for a limited period of time.

However, the Oregon Court of Appeals, in Dymock v. Norwest Safety Protective Equipment, held that a nonsolicitation agreement is also subject to the statute. Therefore, a nonsolicitation agreement signed by a current employee, without a significant pay increase or promotion, is not enforceable. Moreover, the court held that an employer who fires an employee who refuses to sign such an agreement can be liable for wrongful discharge.

In Dymock, the court focused on the word "compete" within the statutory definition of a noncompetition agreement. House Bill 3438 deletes the reference to "compete," by more carefully defining "noncompetition agreements" to include only those agreements where the person promises to "refrain from carrying on a business similar to the business of another person within a specified geographic area or for a period of time." The bill also clarifies the enforceability of noncompetition agreements for persons who sell an ownership interest in their business and promise not to compete as part of the sale.

Oregon has taken a very expansive view of family leave. For example, unlike the federal FMLA, Oregon’s OFLA allows employees who have children with minor illnesses to take family leave time off. Oregon also expands family leave coverage to employers with only 25, rather than 50, employees.

HB 3459 would further expand family leave benefits. Employers who are eligible for family leave would be allowed to take up to 25 hours per year, but not more than 3 hours per month, for school activities. This leave would be in addition to the leave already authorized by OFLA. The additional leave requirement would only apply to employers with 50 or more employees.

"School activities" include any activity sponsored or sanctioned by the child’s school, whether or not the activity is on the school’s premises. The bill would also allow two parents employed by the same employer to take leave concurrently if the presence of both employees was requested or required by the school. To use the leave, the employee would need to give the employer at least seven days prior written notice, unless the employee is summoned in an emergency situation or other last-minute circumstance.

Senate Bill 87 would require that all employers prohibit smoking, except in designated smoking areas. Employees could not smoke in hallways to/from the smoking area. The designated area would need to be enclosed, separated, and well ventilated. The bill excludes motor vehicles, private residences, and smoking-rooms in motels and hotels, even when conducting company business.

Last year, the Clinton administration published its controversial Birth and Adoption Unemployment Compensation Rule (BAA-UC). SHRM has taken a strong position against the rule, including filing a lawsuit seeking the withdrawal of the rule and a declaration that the rule is invalid.

The Federal Unemployment Tax Act (FUTA) regulates the state’s payments of unemployment trust funds. The language of FUTA should prohibit a state from using its UI trust funds for any purpose other than the payment of unemployment compensation benefits. However, the BAA-UC gives states the option to use these UI funds for leave taken after the birth of a child, even though the employee is not really "unemployed." In light of the BAA-UC, states may enact legislation that diverts these trust funds towards payment of parental leave benefits.

SB 241 & HB 3310 are Oregon’s response to the BAA-UC. These bills would permit the use of unemployment insurance trust funds for parental leave. Under the language of the bill, a parent on a leave of absence, or who left employment to be with the child during the first year of life, or during the first year following adoption, could not be denied unemployment benefits.

This bill would allow an employer to pay a reduced "opportunity wage" to an minor employee during the first 60 days of employment. The opportunity wage could be up to 50 cents an hour less than the state minimum wage. However, the employer would not be allowed to displace current workers to make room for employees who would be paid the opportunity wage.

This bill would not have an immediate effect, as the opportunity wage could not be less than $6.50/hour, which is the current Oregon minimum wage rate.

ORS 659.030(1)(a) prohibits discrimination on the basis of sex, or on the basis of the sex of any other person with whom the individual associates. In Tanner v. Oregon Health Sciences University, the Oregon Supreme Court held that discrimination against an employee on the basis of sexual orientation was prohibited under the statute. Note that Oregon’s interpretation of its own statutes differs from the federal courts’ interpretation of Title VII, where courts have typically found that sexual orientation is not a protected class.

SB 728 adds sexual orientation to the list of specifically protected classes under ORS Chapter 659. The bill would prohibit discrimination based on a person’s sexual orientation, or on perceptions of the person’s sexual orientation. The bill would exempt church and religious institutions, including schools and hospitals, so long as beliefs about sexual orientation are bona fide religious tenants of the church or organization.

It is still very early in the session for the 107^th Congress. Bills are still being introduced, and many issues are in flux in light of the change of administration. The following are issues that are currently before Congress, or anticipated to arise this term.

In March, Congress repealed the OSHA Ergonomics Standard. The complex and burdensome standard was estimated by some to cost nearly $100 billion per year to implement and administer. The rule would have required employers to establish burdensome and costly procedures to track, prevent, and compensate employees for musculoskeletal injuries. The rule would have applied to such repetitive stress injuries as carpal tunnel syndrome, back strain, and tendonitis. Employers would have been required to pay 90 percent of an employee’s regular weekly wage for employees who miss work altogether, and 100 percent of the employee’s regular wage for employees on light duty.

Both houses of Congress rapidly defeated the new rule using the 1996 Congressional Review Act (CRA). Under the CRA, Congress has a limited time to review and reject an administrative agency's rule. In light of Congress’ action, the controversial ergonomics rule has no force or effect. During the final debate on this matter, Labor Secretary Elaine Chao issued a letter to the senators indicating that she would pursue her own comprehensive approach to ergonomics issues. The implication is that Chao will have OSHA revise its rule in the future, to "provide employers with achievable measures that protect their employees before injuries occur."

However, Democrats were skeptical that a new rule will be forthcoming. Congress has not set any deadlines for creation of a new rule. More importantly, the CRA restricts an agency from issuing future rules that are substantially similar to a rule repealed by Congress.

Although employers are required to give employees time off for jury service, that time has always been unpaid. Employers are free to provide paid leave for this purpose, or allow employees to use sick or vacation leave. However, HR 732, which was introduced in February of this year, would require employers to pay the employee’s wage during jury service. The law would apply to both public and private employers.

This law would only apply to employees serving on federal juries. However, the Oregon Legislature, if this legislation is passed, could consider a similar measure for service on state court juries. Although most jury trials tend to be 2-3 days long, trials involving criminal matters or complex civil litigation can last weeks or even months.

The U.S. Supreme Court has just resolved a long-standing controversy regarding an employer’s ability to require that all employment claims be arbitrated.

In the past, the Ninth Circuit federal court, which includes Oregon, took the unique position that employment contracts are not subject to the Federal Arbitration Act (FAA), and that Title VII and other federal employment claims must be litigated in a jury trial. In contrast, federal courts in other jurisdictions have enforced arbitration provisions in employment contracts.

The U.S. Supreme Court, in their March 21, 2001 decision, Circuit City Stores v. Adams, held that the FAA mandates that agreements to arbitrate employment claims be enforced. The decision went on to clarify that even in states where there are state laws requiring a court trial for arbitration claims, the FAA supersedes the state law.

HR 815, which was introduced in the House of Representatives this month, could upset the Court’s decision. The bill provides that "an employer subject to this act may not require an employee to arbitrate a dispute as a condition of employment." If HR 815 is passed, it would supersede the Circuit City decision. HR 815 would apply to employment contracts entered into or modified after the effective date of the act. Therefore, it would make sense to obtain arbitration agreements with current employees, if possible, before such a law becomes effective.

The Right Start Act of 2001 contains several measures that would expand FMLA. These include lowering the application of FMLA to 25 employees. The Act also proposes leave for school activity similar to Oregon’s HB 3459. According to Senator Chris Dodd, D-Conn., the Right Start Act of 2001 is one of the top ten priorities of Senate Democrats as the 107th Congress begins.

The Right Start Act would also authorize federal matching funds for paid family leave programs for the birth or adoption of a child. Over a 5 year period, the grants would encourage the award of funds to states that expand their family leave programs through an expansion of state unemployment and disability insurance programs.

The Paycheck Fairness Act is intended to amend the FLSA. It would enhance the remedies available to victims of pay discrimination based on sex under the Equal Pay Act. For example, the bill would make employers liable for unlimited compensatory and punitive damages.

The Act would also change how class action lawsuits are formed, creating a system where all employees are included in the class, unless they affirmatively "opt out." Presently, the Equal Pay Act requires that employees "opt in" if they want to be included in the class action lawsuit. The Act would also prohibit employers from retaliating against employees who share their salary information. This would be consistent with recent cases, where sharing salary information was considered a protected concerted activity.

Although equal pay is very important, SHRM has expressed concern about the Paycheck Fairness Act because it greatly increases employers’ liability. For example, the Act could cause an employer to be liable for discrimination by paying a male employee in New York more than a similar female employee in Portland, even though recruiting and cost of living issues might justify the disparity.

Several of the Department of Labor FMLA regulations have been called into question.

Most recently, the requirement that an employer promptly determine eligibility has been questioned by courts in other circuits. The DOL regulation, 29 CFR 825.110(d), requires that an employer advise the employee whether the employee is eligible for family leave prior to the date the requested leave is to begin. If the employer does not timely give notice to the employee, then the employee is deemed to be eligible for family leave. Likewise, if the employee does not give prior notice to the employer, then the employer must advise the employee of eligibility within two business days of receiving the employee’s notice.

Once an employee is deemed eligible for family leave, the regulations further provide that the employer cannot later deny the leave. When an employer does not act promptly as required by the regulations, the effect is to grant family leave to employees who would not otherwise be eligible for leave. According to the Seventh Circuit, the Department of Labor "had gone too far" in trying to "wedge its policy preference for forcing employers to respond to leave request within a reasonable period of time." According to the court, the rule of law in general, and separation of powers principles in particular, "require that such administrative hubris be reigned in."

This court has been critical of the Department of Labor family leave regulations in the past. For example, in 1999, the court invalidated the DOL regulation that requires that an employee designate leave or that leave will not count against the employee’s twelve-week entitlement under the FMLA.

Although these decisions are not binding on Oregon courts, they do illustrate a judicial trend towards softening the impact of FMLA on employers.

Continuing Duty To Engage In Interactive Process

In a Ninth Circuit case decided in February of this year, the court clarified that an employer has a continuing duty to engage in the interactive process with employees who have disabilities.

In this case, the employee engaged in a series of obsessive rituals that hindered her ability to arrive at work on time. For example, she felt compelled rinse her hair for up to an hour, and if after brushing her hair, it didn’t feel right, she would return to shower and wash it again. This could take up to three hours each day. As a result, she was often late to work or absent. After receiving several warnings from her employer, the employee began to suspect that her condition might have a medical cause.

The employer and employee discussed several potential accommodations. Eventually, they agreed on a flextime accommodation, which would allow the employee a flexible start time. Despite the accommodation, the employee continued to miss work. In light of her continuing problems, the employee suggested that she be allowed to work from home, rather than come into work, as a reasonable accommodation. The employer’s policies allowed employees in this employee’s position to work at home, so long as the employee is in good standing with no pending disciplinary action. Because of her absenteeism, the employee was not in good standing and, therefore, ineligible for the work at home arrangement. The employer eventually fired the employee for attendance issues. The court held that working at home could have been a reasonable accommodation, which might not have caused undue hardship for the employer.

The court held that once an employer becomes aware of the need for an accommodation, the employer has a mandatory obligation under the ADA to engage in an interactive process with the employee to identify and implement appropriate reasonable accommodations. The reasonable accommodation must be effective, in that it enables the employee to perform the duties of the position.

The interactive process requires communication and good faith exploration of possible accommodations between employers and individual employees, and neither side can delay or obstruct the process. Most importantly, the court held that the duty to accommodate is a continuing duty that is not exhausted by one effort. Therefore, if a reasonable accommodation turns out to be ineffective and the employee with the disability remains unable to perform an essential function, the employer must consider if there are alternative reasonable accommodations that would not pose an undue hardship.

In this case, the employer failed by closing off discussion with the employee about potential reasonable accommodations. The rejection of the request to work at home, and a failure to explore other accommodation that might be effective in the alternative, constituted a violation of the employer’s duty to engage in the interactive process.

In a recent Ninth Circuit case interpreting Washington State law, the court held that Washington employers have the affirmative obligation to engage in the interactive process with employees to find a reasonable accommodation, merely upon notice that the employee has a disability.

This rule is inconsistent with, and more protective, than the ADA, where the duty to engage in the interactive process is triggered by the employee or employee’s representative giving notice of the employee’s disability and the need for accommodation. In contrast, Washington law imposes an "affirmative obligation" to reasonably accommodate all disabled employees. In Washington, the employee need not request an accommodation in order for the employer’s duty to accommodate to be triggered.

A recent case from the Ninth Circuit Court of Appeals, which includes Oregon, has clarified an employer’s liability for co-worker harassment. An employer is liable for co-worker harassment, if the employer knows about the harassment and fails to take prompt action that stops the harassment. In the past, the Ninth Circuit Court has used the word "discipline" to describe the actions the employer must take in response to harassment.

However, the recent case of Star v. West clarifies that the employer need not take disciplinary action, so long as whatever action the employer takes is adequate to stop the harassment. Appropriate action can include counseling or admonishing the offender, or as in this case, transferring the accused to a different shift. However, if these actions are not adequate to stop the harassment, the employer will be liable.

In a recent Ninth Circuit case, the court held that one severe instance of coworker harassment is not sufficient to violate Title VII. In this case, a co-worker put his hand on the plaintiff’s stomach, pined her in a chair, forced his hand under her sweater and bra, and fondled her bare breasts. The harassment was promptly reported, and the employer suspended the employee. The employee eventually resigned.

The court did not decide whether there can ever be a single instance of sexual harassment that is so severe that it creates hostile environment liability for the employer. Rather, the court stated that the "severity or seriousness of the harassing conduct varies inversely with the pervasiveness or frequency of the conduct . . . If a single incident can ever suffice to support a hostile work environment claim, the incident must be extremely severe."

In May of 1996, the EEOC issued an Enforcement Guidance regarding the right of "testers" to apply for jobs, posed as job seekers, for the sole purpose of testing whether the employer engages in discriminatory hiring practices. In July of 2000, the use of testers gained increased exposure when a federal court of appeals upheld the use of testers.

A tester can be either an agent of the EEOC, or even someone working on behalf of a civil rights organization interested in discrimination issues. Although the tester applies for the job with no intention of ever working for the employer, the tester is entitled to sue the employer for discrimination. In addition, the organization that employs the testers has the right to sue the prospective employer on the employee’s behalf. Although actual damages in such an action are likely to be small, an employer may be liable for compensatory and punitive damages for discriminating against the tester.

In Kyles v. J.K. Guardian Security Services, the testers worked for the Legal Assistance Foundation of Chicago (LAF). LAF is a public-interest law firm that provides legal assistance to individuals who lack the means to retain counsel privately. The LAF sent two white testers and two black testers in to apply for jobs. The prospective employer offered the white testers jobs on the spot, while giving the black testers the brush off. The court held that the black testers had standing to sue for discrimination.

In 1975, the U.S. Supreme Court, in NLRB v. Weingarten, held that unionized employees have the right to have a representative present during an investigatory interview. In July of last year, the National Labor Relations Board (NLRB) held that this right also applies to non-union employers. According, the NLRB, employees in a non-unionized workplace have the right to have a co-worker present at an investigatory interview, which the employee reasonably believes might result in disciplinary action.

Under the Weingarten standard, the employee must request that a co-worker or a representative be present. The employer does not need to offer this to the employee or let the employee know about this right. Weingarten rights also apply only to investigatory interviews. Therefore, a meeting held to discipline the employee would not fall within this requirement.

During an investigatory interview, the employee has a right only to allow a co-worker or representative to be present. The employer need not allow outsiders such as an attorney. While the representative has the right to ask questions and make comments, the representative does not have the right to obstruct the interview. It is important to note that where the employee refuses to attend an investigatory interview without a co-worker present, and the employee is disciplined for such refusal, the termination could result in liability for wrongful discharge, including a claim for emotional distress and punitive damages.

©2001 Randy Sutton – Saalfeld Griggs et. al.