Author Archives: Ryan Portugal

The NLRB Shifts its Strategy in its Attempts to Change the Joint-Employer Standard

After a failed attempt to change the joint-employer standard through legal decision arising out of a pending case before the NLRB, on September 14, 2018, the National Labor Relations Board (the “Board”) published a Notice of Proposed Rulemaking in the Federal Register regarding its joint-employer standard. The proposed rule would overturn the standard set by the Board in Browning-Ferris, 362 NLRB No. 186 (2015) to determine if an employer is a joint employer. Under the Browning-Ferris standard, the inquiry turns on whether the alleged joint employer had the potential to control aspects of the workplace, either directly or indirectly, regardless of whether the employer actually exercised that authority.

The proposed rule would revert to the pre-Browning-Ferris standard for determining whether an employer will be considered a joint employer of a separate employer’s employees. Under this proposed rule, an employer may be considered a joint-employer of another employer’s employees only if it possesses AND exercises substantial, direct, and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. This would effectively reverse the Browning-Ferris standard and render indirect influence and contractual reservations of authority insufficient to establish a joint-employer relationship.

The 60-day period for public comments on this proposed rule began on September 14, 2018, and continues through November 13. After the Board receives and reviews the public comments and replies, it will issue a final rule regarding the joint employer standard. If issued without substantial changes, this rule would be great news for employers as this stricter standard is clearer, provides more consistency, and reduces the likelihood of an employer inadvertently becoming a joint employer.

Ryan P. Portugal
rportugal@williamsparker.com
941-329-6626

The Tax Act May Limit Resolutions of Sexual Harassment Complaints

One aspect of the new Tax Act (the Act) that has not been widely reported impacts employers that amicably resolve claims of sexual harassment. The provision denies tax deductions for any settlements, payouts, or attorneys’ fees related to sexual harassment or sexual abuse if such payments are subject to a non-disclosure or confidentiality agreement. Specifically, Section 162(q) to the Internal Revenue Code provides:

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.

The intent of this provision is to deter confidentiality provisions in settlements of harassment claims. It is unclear if this provision will actually have the desired impact. Companies may value the confidentiality provisions more than the tax deductions permitted in their absence, and thus continue to enter into confidential settlement agreements. Alternatively, this provision of the Act may end up hurting those bringing harassment claims. Alleged victims may want confidentiality provisions in order to avoid any publicity about their claims. However, by removing tax incentives for employers, an employer may reject a higher settlement amount or settlement of claims altogether.

Section 162(q) of the Act is bound to create confusion as to its applicability as it fails to define key terms. Namely, the Act fails to define “sexual harassment” or “sexual abuse,” both of which are pivotal to the application of the new provision. The Act also fails to contemplate how the provision is to be applied in settlement arrangements involving a variety of claims. Are the sex-based claims separable from a universal confidentiality covenant? Causing further confusion, the Act fails to explain what attorney’s fees are considered to be “related to such a settlement or payment.” Are these only the fees related to settlement negotiations, drafting the agreement, and execution or payment? Or does it extend to the claim’s inception and include the underlying investigation of the claims?

In light of the numerous questions raised by Section 162(q), employers should review their standard settlement agreements and practices and consider revising the breadth of any releases, nondisclosure provisions, or any representations or remedies.

Ryan P. Portugal
rportugal@williamsparker.com
941-329-6626