Presented by the Employment Law Practice Group

Legal Updates for Employment Law

March 9, 2018

Amended NYC Law Requires Employers to Cooperate With Employees Seeking an Accommodation

By Nicholas P. Chrysanthem, Esquire

Effective October 15, 2018, covered employers in New York City will be required to engage in written or oral “cooperative dialogue” with employees who may be entitled to a reasonable accommodation.

As many know, the New York City Human Rights Law (NYCHRL) is one of the most comprehensive and progressive local anti-discrimination laws in the country. It requires covered employers to make reasonable accommodations for religious needs, victims of domestic violence, disabilities, and individuals with pregnancy and related issues so long as the accommodations do not impose “undue hardship” on the covered entity. Prior to the current amendment, the NYCHRL did not specifically require covered employers to engage in a process with regard to a request for a reasonable accommodation by an employee.

The amended law does three things:

Makes it an “unlawful discriminatory practice” if a covered entity refuses or fails to “engage in a cooperative dialogue within a reasonable time with a person [entitled to a reasonable accommodation under the law] who has requested an accommodation or who the covered entity has notice may require such an accommodation”;
Requires the covered entity to “provide a written determination” [to the person requesting the reasonable accommodation] “identifying any accommodation granted or denied” at the conclusion of the dialogue;
Mandates that the determination that no reasonable accommodation “would enable the person requesting an accommodation to satisfy the essential requisites of a job or enjoy the right or rights in question may only be made after the parties have engaged, or the covered entity has attempted to engage, in a cooperative dialogue.”

Notably, “compliance with this amendment is not a defense to a claim of not providing a reasonable accommodation under provisions of Title 8 other than this subdivision.” This amendment overrides how some New York State courts have interpreted the NYCHRL, and this amended process differs somewhat from the federal “interactive process” mandated by the Americans with Disabilities Act. Accordingly, covered employers in New York City should adjust their procedures to require their human resource professionals, or those charged with employee relations, to engage in a cooperative dialogue with those employees who request an accommodation. They must be prepared to provide a written determination identifying any accommodation granted or denied.

While the statute does not appear to require that the written determination include the basis for granting or denying the accommodation, it is highly recommended that the covered employer be prepared to back up the determination with a sound, rational basis for any claim of “undue hardship.” Finally, it should go without saying that, if the dialogue takes place in the form of emails or other written electronic communication (i.e., texts), it is highly recommended that such communications be vetted prior to being sent to the requesting employee.

Nicholas P. Chrysanthem is a shareholder in our New York City office and may be reached at npchrysanthem@mdwcg.com.

New Guidance on the Permissibility of Employer Commission Draw Policies

By David J. Oberly, Esquire

The recoverable draw is a common practice utilized by companies that employ commissioned sales staff to ensure compliance with minimum wage and overtime regulations. Under a recoverable draw system, an employer will supplement a worker’s commissions during a given pay period where the worker earns less than the minimum wage in order to raise the worker’s pay to the applicable minimum wage level. The employer will then recoup these funds by deducting future commissions earned by the worker in a subsequent pay period. In Stein v. hhgregg, Inc., No. 16-3364 (6th Cir. Oct. 12, 2017), the Sixth Circuit Court of Appeals held that such recoverable draw policies are permissible under the Fair Labor Standards Act (FLSA). At the same time, however, the court held that similar company policies requiring reimbursement for any outstanding draw amounts following a worker’s termination runs afoul of the FLSA. The Stein decision is noteworthy for employers as the opinion provides key guidance as to the permissible contours of company draw policies and practices.

Hhgregg owns and operates over 220 appliance, furniture and electronic stores across the U.S. The company’s entire sales and retail staff is compensated exclusively on the basis of commissions. Pursuant to the company’s “draw-on-commission” policy, in pay periods where an employee’s commissions fall below the federal minimum wage level, the worker is paid a draw to meet minimum wage requirements. When this occurs, hhgregg subsequently deducts the amount of the draw from commissions earned during the employee’s next pay period to recoup the funds. In addition, pursuant to the policy, upon termination from employment, an employee is required to immediately reimburse hhgregg for any outstanding draw amounts. Robert Stein, on behalf of himself and all other former and current employees of hhgregg, brought suit against the company, claiming that the draw policy violated the Fair Labor Standards Act. The district court found the policy to be lawful and dismissed all of Stein’s federal claims. Stein appealed.

On appeal, the Sixth Circuit agreed with the district court that hhgregg’s practice of deducting draw amounts from an employee’s future earnings did not violate the FLSA. In doing so, the Sixth Circuit found that hhgregg’s practice of deducting amounts from wages not delivered, that is, from future earned commissions that had not yet been paid, was permissible under the FLSA and related U.S. Department of Labor (DOL) regulations. Significantly, however, the Sixth Circuit ruled that hhgregg’s post-termination liability policy violated the FLSA and, in particular, the DOL’s “free-and-clear” regulation, because it required a repayment of wages already delivered to the employee, even if the company did not enforce the policy.

The Stein decision is a significant win for employers as it reaffirms the longstanding view that recoverable draw policies allowing for the recoupment of draw advances from “future earned commissions that have not yet been paid” are permissible under the FLSA. In addition, Stein also offers a clear warning to employers that post-termination repayment provisions pertaining to outstanding, unpaid draws may give rise to a cognizable wage claim, even where the policy is not enforced. As such, employers should take heed from the Stein opinion to tread cautiously as it relates to how they manage the reimbursement of outstanding draw balances following the termination of an employee.

David J. Oberly is an associate in our Cincinnati office. He may be reached at djoberly@mdwcg.com.

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