Kansas City Employment Lawyer Blog

It's Not Broken, Don't Fix It: Congress Proposes Barriers to Unemployment Insurance

Thu, 26 Jan 2012 09:35:39 -0600

During the last few years, which represent the worst economic downturn since the Great Depression, many workers have been able to benefit from state unemployment insurance (UI) programs. UI benefits prevent middle class Americans from sliding into the depths of poverty by providing them a portion of their former wages while they look for new work. These programs not only serve the worker, but also help shore up local economies.

Recently, Congressional House Republicans have proposed several changes within H.R. 3630, Middle Class Tax Relief and Job Creation Act of 2011. These proposals would present new obstacles to obtaining state UI benefits as well as reducing the duration of federal benefits. The argument is that the UI program does not need fixing. It is operating as intended, not only by keeping Americans out of poverty, but by working to keep the unemployed more active in pursuing new work.

Under the newly proposed provisions, workers are subjected to mandatory drug tests and they are disqualified if they have not finished high school. It also provides for states to investigate new workfare-type requirements. The point is that participation in UI programs by unemployed Americans has already been insured through their work. The new requirements make it more difficult to get help and increases costs at the state level. Workers need help with re-entry into the workforce, oftentimes after long periods of unemployment.

Rather than institute new barriers and increase administrative expenses by requiring drug testing and inquiries with regard to high school completion, all of which cost money, Congress should be funding programs that offer help with job search and training. Under the new proposals, states would absorb the cost of drug testing unemployed workers. It is estimated that each test would cost between $25 and $75. In the state of Texas, according to estimates by Texas Legislative Budget Board, implementation of this type of program is projected to be almost $30 million for one year. This is hardly a wise expenditure of limited budget dollars, considering that of those recipients of federal assistance in the state of Florida that underwent drug testing, only 2% tested positive for drug use.

More perplexing than building additional barriers to entry, the legislation would give the states carte blanche, through the granting of waivers, to utilize UI funds for purposes other than paying UI benefits. This denies benefits to workers who have been working for years. The fact of the matter is that unemployment insurance is a social insurance program whereby federal law provides that payroll taxes can be withdrawn from dedicated UI trust funds "solely for payment of unemployment compensation." So the program would eventually unravel as more and more states begin to use these trust funds for "demonstration projects," and not related to the specific payment of UI benefits to the jobless. These demonstration projects place conditions such as income limits and education requirements on the payment of unemployment benefits, conditions that are not related to any particular claimant's unemployment. Trust funds could be raided by the states.

It is imperative that scarce resources be utilized to help the unemployed obtain the necessary skills for re-entry into the job market and to obtain new employment. Imposing federally mandated rules on state unemployment insurance programs that increase state administrative expenses resolves nothing. It diverts dollars that could be used for training and job search programs. It only pushes those Americans, already surviving in the margins, even further to the edge and consequently, worsens state and local economic conditions.

Sources:

House Republican Proposal Would Undermine Foundation of Unemployment Insurance System, by Hanna Shaw and Chad Stone, Center on Budget and Policy Priorities, January 17, 2012.

Sticking to Principles: Congress Should Oppose Barriers to Unemployment Insurance and Instead Provide Meaningful Reemployment Tools, NELP National Employment Law Project, Legislative Update, January 12, 2012.

Unpaid Internships, Are they Legal?

Thu, 27 Oct 2011 15:13:02 -0600

In an effort to get a head start on the quest for gainful employment upon graduation from college, many students participate in internship programs offered by businesses through college and university career centers. Students use the internship programs to accumulate work experience while in school in order to enjoy a significant advantage over the competition. Unfortunately, for the studends, a great many of these internships are unpaid. Regardless, in a very uncertain job market, students are accepting no pay in exchange for the experience and a competitive edge.

The volume of available internships has grown substantially in the last few years. This growth results from many factors including cost containment by employers and the students' desire to add experience to their resumes. At Stanford University alone, the number of unpaid internships has tripled in the past two years. Estimates in 2008 indicate that as many as 50 percent of graduating students had worked in unpaid internship positions, whereas the figure from 1992 was 17 percent.

Federal and state regulators are worried that many employers are taking advantage of these programs in order to get free labor. The concern is that, depending upon how the internship is structured, it may be in violation of minimum wage laws. Many states are already investigating and fining employers for these violations. When M. Patricia Smith was the labor commissioner for New York, she ordered many investigations into various internship programs. Now in her capacity as the federal Labor Department's top law enforcement official, she is working with the wage and hour division to increase enforcement on a nationwide basis.

It is not always easy to enforce the rules, given that many students are hesitant to file complaints since they do not wish to begin their careers on the wrong foot or to develop a reputation within their field as a complainer or troublemaker, thus ruining their opportunities for full time, paid employment. However, two individuals in the film industry have filed a lawsuit in federal court in Manhattan against Fox Searchlight Pictures, the producer of "Black Swan." The suit alleges that the producer hired the interns and then directed them to perform menial work that should have been the responsibility of paid employees, rather than providing them with the necessary experience and following the specific rules that exempt employers from paying interns. The interns were hired as production assistants and bookkeepers, yet they were actually responsible for such duties as preparing coffee, delivering lunch orders for the staff, cleaning the office and removing the trash.

The federal labor department has very specific criteria for unpaid internships. Among them are that the intern does not displace a regular employee, the position must benefit the intern, and the training must be similar to what the student would gain through an educational system or apprenticeship program. Unfortunately, lawyers for many companies believe the criteria are obsolete and believe that the rules are rarely enforced.

Besides the issue of adherence to the labor department's criteria for unpaid internships, in many of these cases the intern is not considered an employee. Because of this misclassification, the intern may not be protected by employment laws regarding harassment and discrimination.

Nancy J. Leppink, the acting director of the Labor Department's wage and hour division said, "If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law." Her department is going after firms that do not follow the rules, while also seeking to educate employers, students and universities on the laws regarding internships.

Sources:

The Unpaid Intern, Legal or Not, The New York Times, by Steven Greenhouse, April 2, 2010

Interns, Unpaid by a Studio, File Suit, The New York Times, by Steven Greenhouse, September 28, 2011,

Multiple State and Federal Agencies Join Forces to Battle Wage Theft

Thu, 13 Oct 2011 16:44:56 -0600

The Labor Department is cracking down on employers who cheat their employees out of wages. In so doing, the Department is entering agreements whereby information will be shared between the Department, several states, and the Internal Revenue Service. The Labor Department's top attorney, Patricia Smith, has indicated that when state and federal agencies share information, businesses can then be assessed multiple fines. She explained, "There's more of an incentive to be in compliance because the cost of what we consider to be illegal activity has increased." So, for example, a company that in the past might have paid only a single fine to a state agency for improper unemployment insurance payments will now pay additional fines and penalties to the Labor Department and the IRS.

This information sharing targets specific illegal wage and hour practices that deprive employees of minimum wage and overtime pay as well as other benefits. These practices include misclassification of workers as exempt employees and improper labeling of employees as independent contractors. Such misclassifications result in the denial of employees' rights to workers' compensation benefits, unemployment insurance, overtime pay, and social security benefits. Additionally, employers engaging in independent contractor misclassification do not make proper deductions for federal taxes. So, the reporting of these violations by any state to the IRS allows the IRS to go after the company for unpaid taxes. The states cooperating with the Labor Department on these issues include Connecticut, Hawaii, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington. The states of New York and Illinois are expected to follow suit in the near future.

Since taking office in 2009, Labor Secretary Hilda Solis, has made increased enforcement of federal wage-and-hour laws a top priority. The industries that are the focus of such "wage theft" by the Department include the hotel, restaurant, janitorial, health care and day care industries. Additionally, the Department has targeted homebuilders for failing to pay workers the minimum wage or overtime. The head of the Department's Wage and Hour Division, Nancy Leppink, recently stated, "The urgency of addressing this issue has become more pronounced because we're seeing these illegal business practices used by more and more industries, like restaurants."

The stepped up enforcement comes at a time when businesses are favoring the employment of independent contractors or freelancers in order to save money or avoid hiring staff in an uncertain economy. Figures and estimates from some government agencies indicate that 20 to 35 percent of all employers have classified people as independent contractors either mistakenly or intentionally, when they really should be classified as employees.

Notwithstanding the losses borne by misclassified employees, these illegal employment practices have broad implications for both business and government. For example, when an employer classifies an employee as a contractor, that employer maintains a competitive advantage since his or her total labor costs are lower. Richard A. Sebeck, program manager for the Maryland Department of Labor, Licensing and Regulation's Division of Labor and Industry explained, "It's bad for all honest businessmen." From a Government perspective, millions of dollars in payroll tax and other revenues are lost. For the worker, many benefits are lost, including Social Security, health care and unemployment insurance. Mr. Sebeck also added that when employees are misclassified as contractors and get hurt on the job, they are not entitled to workers' compensation.

It is very important that workers be properly classified as employees to prevent the employer from being potentially subject to thousands of dollars in fines and back wages. If a company's so called "independent contractors" are required to follow the company's specific instructions for completing tasks and are also required to clock in and out on a routine basis, it is likely that they are misclassified, and are, in the eyes of the law and the various enforcement agencies, employees.

Frank Vasquez, with Case & White law firm, states that, "The penalties for this misclassification [are] so severe that every employer is wise to consider it." If a complaint is filed by a contractor that is really an employee, the employer could be liable for any overtime wages owed, back payroll taxes, plus unemployment insurance. Mr. Vasquez suggests that if an employer wishes to utilize temporary workers, the employer should consider hiring them through arrangements with a temporary employment agency.

Just since 2009, upwards of $9 million in back wages for 15,000 workers have been collected by the Labor Department just in cases where misclassification of independent contractors was alleged.

Sources:

Labor Department Expands Enforcement of Wage Violations, Associated Press, by Sam Hananel, September 19, 2011

Working: U.S. and Local Governments Crack Down on Employers Who Pay Workers as Contractors, The Washington Post, Capital Business, by Vickie Elmer, October 9, 2011.

Tyson Pays $32 Million to Settle Donning and Doffing Lawsuit

Thu, 22 Sep 2011 11:01:15 -0600

On September 15, 2011, a class action wide settlement was approved on behalf of workers at 41 Tyson poultry plants. More than 17,000 Tyson employees had participated in the lawsuit in which plaintiffs claim they had not been properly paid for putting on (donning) and taking off (doffing) required protective gear prior to and after the close of their daily shifts. These practices by Tyson, the lawsuit alleges, are in violation of the Fair Labor Standards Act (FLSA).

The settlement for $32 million dollars was approved by the US District Court in Georgia. The United Food and Commercial Workers International Union, not a party in this case, issued a press release stating that each current and former Tyson worker would receive a payment of approximately $1,000. The spokesman for Tyson, Gary Mickelson, reported that the terms of the settlement are such that public commentary is not allowed either from the company or the plaintiffs. Mr. Mickelson also stated that the matter was settled satisfactorily.

Around the same time that Tyson's competitor, Perdue Farms, Inc., reached an agreement with the Department of Labor (DOL) regarding pay practices for time spent donning and doffing, the DOL filed a similar suit against Tyson Foods Inc. in Alabama. The suit alleged that Tyson violated the FLSA and that back wages and liquidated damages should be paid to current and former employees. Additionally, the complaint sought an injunction restraining Tyson from future violations of the FLSA at all of its domestic poultry processing facilities.

In the agreement that the Department of Labor reached with Perdue Farms Inc. in 2002, the company decided to change current and future pay practices at all of its U.S. facilities to compensate workers for the time they must spend donning and doffing personal protective equipment (PPE). Under the Consent Judgment, Perdue Farms agreed to retroactively pay its processing employees on the production line an additional eight minutes each workday for time spent putting on and taking off certain clothing and equipment, as well as developing an initiative to record and pay employees for such activities going forward. The agreement was estimated at that time to be worth approximately $10 million for Perdue's current and past employees.

So, the gamble made by Tyson several years ago, with the decision not to pay for donning and doffing did not pay off, and now the company is paying $32 million to compensate employees for the time they spend putting on and taking off personal protective equipment (PPE), which are essential tasks in order to perform their job duties, according to a consent decree filed in U.S. District Court in Columbus, Ga. Workers sued the company, stating they were deprived of compensation for the time they spent putting on and taking off PPE, time they considered part of their job. Tyson settled a similar dispute last year with the Labor Department by agreeing to change its compensation policy.

Sources:
Tyson Pays $32 Million to Settle PPE Donning and Doffing Lawsuit, by Sandy Smith, EHS Today, September 20, 2011.

Perdue Farms Settles, Tyson Foods Fights Donning and Doffing Disputes, EHS Today, May 10, 2002.

Tyson Settles Donning, Doffing Case for $32M, Meatpoultry.com, September 20, 2011.

Fair Pay to Resolve Economic Woes

Thu, 08 Sep 2011 15:27:03 -0600

The New York Times published an editorial during the Labor Day weekend of 2010, written by former Labor Secretary, Robert Reich. The article addressed the issues this country continues to endure one year later. Specifically, Mr. Reich states that, "this dismal state of affairs is unlikely to improve until we address the deep structural flaws in our economy; flaws that have made it impossible for the American consumer - i.e. the middle class American worker - to sustain the level of spending needed to keep our economy going." The state of affairs includes the low population of organized labor relative to total private work force, high unemployment, and little hope for recovery.

Added to this dismal state of affairs is the fact that the U.S. poverty rate has now risen faster during the last 3 year period than any similar period since the early 1980's, a time when this country was suffering from an energy crisis, unemployment and out of control, spiraling interest rates. According to the census, there are 46 million now living in poverty, which is the largest number since the census started tracking poverty in 1959.

The average American worker's ability to consume continues to erode, as working wages have been on a steady downward trend during the past three decades. During this timeframe, we have seen major U.S. manufacturing firms invest in technology to reduce labor expenses and move manufacturing overseas in order to take advantage of a non-unionized, low wage labor pool. Mr. Reich goes on to predict that full employment, when calculated in conjunction with real income decline, would not be enough to provide the demand necessary for the products that the U.S. is capable of producing. He cites the structure of the economy as the real culprit, not the business cycle. The wealthiest 1% of our population in 1970 earned about 9 percent of the nation's total income, compared with 23.5 percent of the nation's total income by 2007. Reich theorizes that the rich spend much smaller portions of their income than the rest of the population, and so the economy loses much of the demand needed to continue to grow.

As Harry Truman once said, "There is nothing new in the world except the history you do not know." As we watch the U.S. poverty rate rise and as wages continue to stagnate, perhaps we need to stop and look back on our history of success. What structure really worked? What were the very basic building blocks that led to the financial strength of the United States?

The reform that was the New Deal provided the necessary tools for long term economic prosperity for both the American worker and the American economy. The New Deal was not just about relieving the unemployed with WPA projects. It introduced labor legislation in the form of The National Labor Relations Act, passed in 1935, which in turn, put into place the National Labor Relations Board, and along with it, the right to collective bargaining. Additionally, the Fair Labor Standards Act (FLSA) set a minimum wage and mandated the 40 hour work week, along with the right to overtime pay. All of these laws, in conjunction with financial reform and investment in education through the GI bill, led to a much larger and better paid middle class with access to post secondary educational opportunities.

On July 1, 2011, Janice M. Nittoli offered solutions in her op-ed piece in the New York Times. She realistically assumes that our government is unlikely to generate good paying jobs. Instead, Nittoli hones in on the jobs already financed with federal dollars and the fact that nearly one fourth of workers are employed by companies that have contracts with the federal government to supply goods and services. Many of these contractors violate wage and hour laws, so not only do workers not get paid properly, but they are likely to utilize government subsidies such as food stamps and Medicaid in order to survive. Employers should have to certify adherence to wage and hour laws or risk the loss of large, multimillion-dollar contracts.

Instead of arguing against jobs bills and solutions such as that offered by Nitolli, our Washington politicians should consider the ongoing expense of entitlements and low economic demand in the face of high unemployment and low wages. Why not diligently enforce the rules implemented with the FLSA, especially for employers providing jobs with Federal money, and improve the structure of the economy with an environment that entices manufacturing back to the United States, and once again build a strong middle class? The proven lessons of history should not have to be relearned at so great a cost to our society and its members.

Sources:

FDR and Labor: Earning Our Way Out of the Great Recession, Huffington Post, September 1, 2010

How to End the Great Recession, New York Times, September 2, 2010

Pay Workers Fairly and Save Money, NY Times, July 1, 2011

Income Slides to 1996 Levels, Wall Street Journal, September 13, 2011

Home Care Workers Fight for Minimum Wage and Overtime Protection through FLSA

Thu, 28 Jul 2011 16:53:12 -0600

In 1974 Congress added domestic workers to the Fair Labor Standards Act (FLSA), however, those employees that provided "companionship services" were exempted. At that time, the business of providing home care was barely a cottage industry with companions described as "elder-sitters."

Fast forward to present day. In the 37 years since the 1974 change to the FLSA with respect to domestic workers when the companionship exemption was enacted, the home health care industry has grown exponentially. With the baby boomer generation sandwiched between caring for children and aging parents and making a living, the services provided by these agencies are high in demand. It is also these types of services that extend the possibilities for elders to have the freedom to stay in their own homes and remain independent, thus postponing the expensive alternative of an assisted care or skilled nursing facility.

These home health workers provide a very valuable service, that if performed in an assisted living facility or nursing home would be covered by the minimum wage and overtime provisions of the FLSA. As it is, these home health workers are some of the lowest paid jobs. Additionally, due to the nature of the work and its physical demands, these workers are more prone to injury and are generally not covered by health insurance. The turnover rate is very high, thus making the consistency and quality of care unstable. Most importantly, because they are not covered by the FLSA, their employers are not required to pay them a minimum wage or overtime pay for all hours worked in excess of 40 in a work week.

A bill has recently been introduced by Rep. Linda Sanchez (D-CA) and Sen. Robert P. Casey, Jr. (D-PA) on June 23, 2011. The Direct Care Job Quality Improvement Act [S. 1273/H.R. 2341] promises to provide the framework to allow for higher valued home care workforce.

This bill should be considered in the long run as a vehicle that could provide government savings. It is estimated that more than 75% of long-term care is financed by federal programs. If the value of these home health care jobs were protected and promoted by FLSA rights, the quality of home health care would increase due to a more stable and trained workforce, which would, in turn, provide savings to our health care system by postponing the use of nursing homes and decreasing hospitalizations. In addition to minimum wage and overtime provisions, the proposed bill would implement data collection and reporting requirements and provide for grants to states in support of recruitment, training and supply of these workers.

On the other side of the issue Paul Hogan, who is chairman of Home Instead, a very large company that employs more than 65,000 caregivers in the United States, is seeking a Congressional sponsor for another bill. This competing bill would enforce the companionship exemption in the FLSA and would go another step further by preventing any future administration from changing the rules. "We're asking that the decision-making be removed from the Department of Labor," Mr. Hogan said.

Sources:
A Fair Wage for Home Care Workers, NYTimes.com, July 20, 2011.

Fair Pay for Quality Care, Direct Care Alliance, Inc.

Do Republicans Want to Diminish Overtime Protection in the Fair Labor Standards Act?

Thu, 21 Jul 2011 17:14:29 -0600

The Fair Labor Standards Act or "FLSA" is a federal statute, enacted by congress that protects many workers' rights to fair pay. Under the FLSA, covered employees have minimum wage protections as well as rights to receive overtime compensation for hours worked over 40 in a workweek. The act, originated during the Great Depression, was passed in 1938, and has protected workers' rights to fair pay for over 70 years. Republican lawmakers are now indicating a willingness to reform the FLSA, this evidenced by a Congressional hearing held mid-July.

The hearing was called by Rep. Tim Walberg (R-Mich.), the chair of the House education and workforce committee, in order to discuss the FLSA, relative to today's work force and business environment. Specifically, the purpose was to investigate if the FLSA is "meeting the needs of the 21st century." Two business executives and a lawyer testified and said, "The statute has become too onerous for contemporary employers, leading to an explosion of costly lawsuits brought by workers."

Walberg said, "The law was a significant expansion of the government's authority when it was created in the midst of the Great Depression. Good intentions can often lead to unintended consequences. It is hard to imagine a law intended for the workforce known to Henry Ford can serve the needs of a workplace shaped by the innovations of Bill Gates."

At the time of Henry Ford, the assembly line was a huge innovation in the manufacture of automobiles, just as Bill Gates' Microsoft continues to lead innovation today. So, are workers any less deserving of fair pay for a fair day's work today than they were during the Great Depression? Are workers today less deserving of rightful protection under the law? Are today's workers less deserving of overtime pay for all hours worked over 40 in a work week?

Henry Ford said himself, "Where people work longest and with least leisure, they buy the fewest goods. No towns were so poor as those of England where the people, from children up, worked fifteen and sixteen hours a day. They were poor because these overworked people soon wore out -- they became less and less valuable as workers. Therefore, they earned less and less and could buy less and less." Ford also said, "There is one rule for the industrialist and that is: Make the best quality of goods possible at the lowest cost possible, paying the highest wages possible." Henry Ford wanted to assure that any man working on his assembly line could afford to buy one of his automobiles.

The major topic of Walberg's hearing was with regard to exempt vs. non-exempt employees and how these categories of employment relate to employees' protection under the FLSA. Non-exempt employees are protected by the law's provisions, that provides for federal minimum wage plus overtime pay for any hours worked in excess of 40 in a week. Exempt employees that are predominantly white-collar workers and paid on a salary basis, are not protected by the law and can be worked overtime without being paid for it. The issue involves the definitions for exempt and non-exempt.

Republican witnesses at the hearing used large, million dollar law suit settlements as evidence that employees and their attorneys exploit the FLSA. This is because non-exempt employees that think they have been cheated out of pay can sue an employer.

A senior vice president at IBM, J. Randall McDonald said "Our ability to use technology has dramatically changed the workplace". His opinion is that the FLSA statute needs to be amended so that some workers now covered by the law would no longer be able to rely on its protections.

Again, Henry Ford's assembly line dramatically changed the workplace. Just because a worker slaves over a computer instead of an assembly line, that worker is not less deserving of protection under the law.

Aaron Albright, who was the spokesman for the Democrats, commented that Republicans would like to "roll back" the FLSA so that fewer workers are covered by its provisions. He feels the Republican goal is to diminish the number of workers that are eligible for overtime or the minimum wage. He said, "What's the purpose for the tinkering? It's basically to reclassify workers so they're not eligible for overtime or minimum wage."

Rep. Dennis Kucinich (D-Ohio) asked all the witnesses if the federal minimum wage (7.25) should be raised, lowered or kept the same.

J. Randall McDonald said he did not understand the question and the other two Republicans dodged the question altogether.

Does this exchange tell us anything about the Republican intent toward the Fair Labor Standards Act?

Source:
Minimum Wage, Overtime Laws Due For Reform: Republicans, Huffington Post, Dave Jamieson, July 14, 2011

Women of Wal-Mart Lose - Supreme Court Rules

Thu, 23 Jun 2011 12:27:10 -0600

The allegations were too vague and the evidence too weak to make a case for common injury, which was essential to include all female employees employed since 1998 in a sweeping sex discrimination lawsuit against Wal-Mart. So said the Supreme Court Monday when throwing out the sex-discrimination lawsuit against Wal-Mart. The alleged victims had too little in common to form a single class of plaintiffs.

This decision will surely affect other employment class action cases because lower courts will look harder at the factors that constitute a class for bringing mass claims. The majority held that plaintiffs must identify a specific employment practice that unlawfully discriminates. The plaintiffs alleged that Wal-Mart's personnel policy permitted sex biases that pervaded the corporate culture and denied fair opportunity to women. Consequently, women remained concentrated in the rank and file positions with lower wages while men rose and dominated the managerial ranks with higher wages. The statistics showing these pay and promotion differences prove nothing according to the justices.

The Federal Rules of Civil Procedure set out the criteria for class-action lawsuits. Plaintiffs must demonstrate that the facts and law at issue are "common to the class." Justice Scalia did not accept the data and experts the plaintiffs provided.

Justice Ruth Bader Ginsburg wrote that the allegations met the test that earlier Supreme Court decisions have set out for employment-discrimination suits. The lower courts records indicated promotions were made by a tap on the shoulder process. Vacancies are not regularly posted...managers choose individuals to promote on the basis of their own impressions.

Wal-Mart and the business community are praising the ruling as demonstrating that company-wide discriminatory pay and promotion policies cannot be demonstrated statistically.

The plaintiff's attorneys intend to regroup and will concentrate on smaller, more focused class action groups. They are encouraging women that Wal-Mart may have discriminated against to file individual complaints with the Equal Employment Opportunity Commission.

Source:
Justices Curb Class Actions, The Wall Street Journal, June 21, 2011

Supreme Court Rules: Employers Can be Held Liable for Unlawful Discrimination under USERRA Using Cat's Paw Theory of Liability

Thu, 09 Jun 2011 15:48:08 -0600

"Cat's paw" theory is used to describe a situation where in one uses another to accomplish his or her purpose. It is based on a 17th Century French fable, "The Monkey and the Cat," about a devious monkey persuading an unworldly cat to obtain chestnuts from a burning fire. The poor cat gets burned, only to watch the monkey gobble up all of the chestnuts.

In the case, Staub v. Proctor Hospital, on March 1, 2011, the U.S. Supreme Court Ruling addressed employer liability regarding unlawful discrimination under the Uniformed Services Employment and Reemployment Rights Act (USERRA). The statute prohibits adverse employment decisions in which discrimination is a motivating factor. Under this statute, "[a]n employer shall be considered to have engaged in actions prohibited [by USERRA] . . . if the person's membership ... in the uniformed services is a motivating factor in the employer's action."

Mr. Victor Staub worked for Proctor Hospital as an angiography technician and during his tenure with Proctor was also a member of the United States Army Reserves. Trial evidence revealed that Staub's management team, including his supervisor and her boss, discriminated against Staub because of his military obligations.

His supervisor repeatedly crafted the work schedule so that Staub was responsible for shifts during which he also had Reserves commitments. The supervisor was known to make disparaging comments regarding military responsibilities and allegedly requested that one of his co-workers, "help her get rid of him." A disciplinary warning was issued to Staub in which he was accused of violating a company rule. At a later date, he was accused again for violating the rule. Finally, the hospital's vice president of human resources was involved and terminated Mr. Staub's employment, having relied on the supervisor's accusations and reports.

Ultimately, Staub's lawsuit against the hospital was filed under USERRA, and alleged that the supervisor's discrimination against Staub, due to military obligations, was what influenced the human resources vice president to make the ultimate decision to fire Staub. Initially, the jury found Proctor Hospital to be liable; however, this was reversed by the U.S. Court of Appeals for the Seventh Circuit. The Court of Appeals' decision held that Mr. Staub's supervisor, a non-decision maker, would have to have "singular" influence" over the Human Resources Vice President, the ultimate decision maker, in order for Proctor Hospital to be liable. The court was not convinced that the final decision maker was wholly dependent upon the representations of Mr. Staub's management team, thus Proctor Hospital was "entitled to judgment as a matter of law."

The Supreme Court reversed this decision and its majority opinion held that "if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA." Consequently, because the vice president of HR had relied on the actions and statements by Staub's management team, the Court found that discrimination played a part in the decision to fire Staub. Even though the firing agent, the vice president of HR, harbored no unlawful animus, but relied partly on the basis of discriminatory reports and actions by the management team, then discrimination could be a factor in the action to terminate the employee.

It is important to note that effects of this Supreme Court decision extend beyond the USERRA statute. This statute is very similar to Title VII and both prohibit negative employment actions where discrimination is the motivating factor. This decision will likely be applied to Title VII claims.

Sources:
What The Heck Is The 'Cat's Paw Theory' And Why Should You Care?, Staffing Talk, by David Gee, March 22, 2011

EMPLOYMENT LAW; The Cat's Out of the Bag; U.S. Supreme Court Endorses 'Cat's Paw' Theory of Liability in Employment Cases, New Jersey Law Journal, May 31, 2011, By Andrew M. Moskowitz and Carly J. Skarbnik

Supreme Court Review in Labor and Employment Law, Part I, New York Law Journal, June 3, 2011

Are You Entitled to Be Paid For Time Spent Hauling Equipment From Home?--Federal Appeals Court Says "Yes"

Thu, 12 May 2011 11:00:02 -0600

In 2006, a federal appeals court whose decisions are binding precedent for the United States District Court of Kansas (as well as lower federal courts in several other States) examined whether oil riggers were entitled to be paid overtime for certain travel time under the Fair Labor Standards Act (FLSA). In that case, the Tenth Circuit Court of Appeals sided with the employer. Nonetheless, the Court's reasoning could provide a basis for FLSA overtime claims for many other employees.

The Court held that the oil riggers in question were not entitled to have certain travel time included as "compensable time" for purposes of overtime rights because the traveling amounted to preliminary "commute time" rather than "work time." Nonetheless, the court relied on prior decisions to establish a framework to distinguish between "commute time" and "work time." Specifically, the court explained that if an employee is hauling equipment that is indispensible to the work to be performed, the travel time is not merely commute time, but rather is compensable work time. On the other hand, where the "equipment" being transported is nominal or incidental, the travel time remains non-compensable commute time, unless other factors would lead to a contrary result. The case law and regulations provide some examples to draw this distinction. For example, where a construction worker transports a hard hat, earplugs and steel-toed shoes, or where a repair person transports "ordinary hand tools," the travel time, unless other factors lead to a contrary result, is not compensable. By contrast, where a logger transports a portable power saw to the woods for tree cutting, or an oil rigger transports 109 gallon tanks of butane gas 30 miles in a pickup truck to the rigging site, such travel time is compensable.

Many installation and repair technicians transport equipment far more substantial than "ordinary hand tools" or a hard hat, earplugs and steel-toed shoes, such as computer-related electronic equipment, HVAC equipment, plumbing equipment, etc. As a general proposition, the more substantial the equipment, and the more unique the equipment is for the task at hand, such as installing such equipment at the job site, the more likely the transportation time will be found to be compensable for purposes of the employee's overtime rights.

FCRA: Revenge of the Gossip Chain Victims

Thu, 28 Apr 2011 12:19:48 -0600

In the information age, not all information is benign. For example, you probably don't want people to think you are a convicted felon, especially if you are not. In fact, most employers are reluctant to hire convicted felons--some simply won't hire one, and others won't hire people with particular types of criminal convictions.

Congress has decided that because certain types of information can end up costing you, you should have a chance to refute such information before you bear such costs. A recent settlement of a federal lawsuit highlights some little-known rights of employees and job applicants regarding information that can impact their employment opportunities. Specifically, an employer can be liable to employees and job applicants for having a third party run criminal background checks on them without allowing them the opportunity to contest the information therein.

The Fair Credit Reporting Act (FCRA) is a federal statute generally designed to provide consumers with the opportunity to contest or correct inaccurate statements on their credit reports. The protections of the FCRA, however, extend to the employment context. The statute defines a "consumer report" to include a criminal background check performed by a third party agent of an employer regarding the criminal history of employees and job applicants. The statute requires the employer to provide conspicuous advance written notice of such a criminal background check to the person who is the subject thereof. The notice provisions in the statute are designed to provide the "consumer" who is the subject of the "consumer report" the opportunity to correct inaccuracies therein before the report can be relied upon by another party, such as an employer, to the consumer's detriment. Thus, in the employment context, the law is intended to provide an employee or a job applicant the opportunity to correct inaccuracies in a third party criminal background report before the employer relies on it to make an employment decision, such as firing or demoting the employee or not hiring the job applicant.

FCRA provides for the affected employee or job applicant to recover the higher of either "actual damages" or statutory penalties of between $100 and $1000 from the employer. Actual damages could apply where an employee lost wages from being fired or demoted, or where a job applicant lost wages from being passed over for hiring. The statutory penalties apply whether or not the employee or job applicant suffered any actual monetary loss resulting from the employer's violation of the statute.

In the recently-settled consolidated case of Hunter v. First Transit, Inc. and Joshaway v. First Student, Inc., a class action was brought on behalf of employees and job applicants against a transit and bus company for using a third party to perform criminal background checks without proper notice to the members of the class. The case was settled with varying amounts of monetary relief to the class members, depending on whether each member suffered an actual monetary loss stemming from a lost employment opportunity, or was otherwise entitled to a lesser amount as a statutory penalty.

The moral of the story: That old adage, "If you got something to say about me, say it to my face" has actually been codified as an employment right when it comes to an employer using a third party to perform criminal background checks on employees and job applicants.

Wage Lawsuit Filed Against Creekstone Farms

Thu, 21 Apr 2011 14:01:32 -0600

Unpaid wages and overtime are sought by employees at a Kansas slaughterhouse, Creekstone Farms Premium Beef. The federal lawsuit seeks class-action status for the 700 individuals employed by the Arkansas City plant.

Workers at the plant are seeking monies for uncompensated work and time as well as the legal costs associated with bringing this action. The lawsuit filed in U.S. District Court, claiming unpaid wages for all time worked, names Paz Sanchez and Elvis Posadas as the representative plaintiffs and will endeavor to include any individuals who worked at the plant in the past three years.

Allegedly, Creekstone Farms pays hourly meat processing employees "based on a principle of so-called gang time." The suit contends that workers are paid only for the time that their assigned production lines are running, along with 10 minutes a day to put on their protective clothing. Additionally, the suit also charges that the company failed to pay for overtime.

"The failure of an employer of food processing employees to pay the employees for all their compensable time is a common occurrence," said Mark Kistler, the Overland Park attorney representing the workers. "It seems the employers have an attitude of 'catch me if you can.'"

Source:
Workers file wage lawsuirt against Creekstone Farms, Business Week, April 7, 2011

A Tip of the Cap to the Department of Labor for Supporting Tipped Employees

Thu, 14 Apr 2011 15:10:57 -0600

The federal minimum wage is $7.25 an hour, but federal law allows an employer to take a "tip credit" of up to $5.12 an hour for a "tipped employee." If the employer pays the tipped employee at least $2.13 an hour and the tipped employee effectively receives at least $7.25 an hour in combined wages and tips during the pay period, the arrangement generally will comply with federal law (unless the employee worked more than 40 hours in the workweek, in which case a more complicated formula for the applicable overtime rate would apply).

The employer, however, can lose the right to claim the tip credit if the employer uses an invalid "tip pool." Only employees who directly serve the public may be included in a "tip pool." A tip pool is where tips during a shift are pooled and then redistributed to employees, usually on a pro rata basis. Paying out part of a tip pool to employees who don't directly serve the public nullifies the employer's right to the tip credit, entitling all employees participating in the tip pool to be paid $7.25 per hour by their employer. (For example, some employers unlawfully include "expediters" in their tip pools. An expediter doesn't directly engage with the public, but performs "quality control" prior to food being served to customers, making sure that orders are filled correctly and plates are appetizingly presented.)

Where an employer does not claim a tip credit for its minimum wage obligations, issues have arisen as to whether an invalid tip pool (for example one that "tips out" to employees who don't directly serve the public) or "tip skimming" (where the employer, its owners or its managers keep some of the tips for themselves) violate federal labor laws. Federal courts have split on this issue. Some courts have concluded that the applicable federal statute, the Fair Labor Standards Act (FLSA), only requires the employer to pay the minimum wage and otherwise doesn't prohibit the employer's hand from the tip jar. According to those courts, where the employer directly pays the full minimum wage and claims no tip credit, rules on valid tip pools, which by definition also prohibit tip skimming, don't apply for purposes of violations of the FLSA. Other courts have looked to the purpose and legislative history of the 1974 amendments to Section 3(m) of the FLSA to conclude that the statute was intended to prohibit invalid tip pools or tip skimming whether or not the employer claims a tip credit. Under that view, the statute creates a per se right of tipped employees to keep their tips, and prohibits forcing tipped employees to share their tips, via a tip pool or otherwise, with either the employer or "non-tipped employees" who do not directly serve the public. Under that view, tip skimming is a violation of tipped employees' rights, whether or not the employer takes a tip credit.

On April 5, 2011, the U.S. Department of Labor published final regulations to formalize its long-held position, in agreement with the latter view of the federal courts noted above, that the FLSA prohibits both tip skimming and forcing tipped employees to share tips with "non-tipped" employees period. In explaining its position, the DOL relied, in part, on a Senate Report stating that the 1974 amendment to Section 3(m) of the FLSA was intended to "requir[e] that all tips received be paid out to tipped employees." In conformity with that statutory intent, and pursuant to the DOL's express authority to issue regulations under the FLSA, the DOL explained the effect of the new regulations on this issue as follows: "[T]he Department is amending [its prior regulations] to make clear that tips are the property of the employee, and that section 3(m) sets forth the only permitted uses of an employee's tips--either through a tip credit or a valid tip pool--whether or not the employer has elected the tip credit." [Emphasis added.] The Department explained that the revised regulation is intended to make clear that "an employer in all cases is prohibited from using an employee's tips for any reason other than as a tip credit to make up the difference between the required cash wage paid and the minimum wage or in furtherance of a valid tip pool." Stated conversely, in the DOL's view, any tip skimming or any invalid tip pooling amounts to an employer's unlawful diversion of tips from tipped employees in violation of the tipped employees' rights to receive their tips under Section 3(m) of the FLSA.

In sum, the DOL has taken the view that under federal law, tips belong to tipped employees--no exceptions--and the employer can't convert them for the employer's use. A tip of the hat goes out to the Obama DOL for standing up to corporate lobbyists and weighing in on the side of thousands of hardworking waitpersons, bartenders, carwash attendants, and other tipped employees throughout the nation.

Supreme Court Clarifies That Verbal Complaints Can Trigger Retaliation Protection

Thu, 07 Apr 2011 16:01:51 -0600

In a new ruling by the Supreme Court workers who complained to their superiors, even verbally, about the way they are paid now have strong retaliation protections that they can exercise. These protections can help them to be compensated if they are fired, or if their employer takes any other adverse employment action against him.

The ruling is significant because the Court clarified the meaning of the phrase "filed any complaint" as it is used in the retaliation provision of the Fair Labor Standards Act. Under the Supreme Court's new ruling, "filed any complaint" includes making a verbal complaint to supervisor, not in writing, and not a formal lawsuit.

Before this ruling, the common wisdom was that employee had to have documented in writing, either by way of formal complaint, or filing a Fair Labor Standards Act lawsuit, to invoke the retaliation provisions of the FLSA. This new standard set by the Supreme Court gives workers substantially increased protection and more comfort to workers in deciding whether or not they should inform their supervisors about being paid properly.

Although the Supreme Court was clear that verbal complaint would trigger the Fair Labor Standards Act retaliation provisions, it is still important for workers to remember that an FLSA lawsuit or formal complaint either to their employer or the Department of Labor is still likely the best method of invoking the retaliation provisions.

However, if an employee only makes a verbal complaint he or she must still meet some standards. The Court stated "a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute," Justice Breyer wrote. This is a key phrase in the holding so that employees know that in order to exercise their rights they still must follow some guidelines and any verbalization or complaint may not necessarily trigger the retaliation provisions.

Overtime Pay Lawsuit for Oppenheimer Stock Brokers: $2M Settlement Approved on Preliminary Basis

Thu, 31 Mar 2011 13:57:17 -0600

On March 28, 2011, Judge Barbara S. Jones, a Federal judge of the U.S. District Court for the Southern District of New York, preliminarily approved a $2 million class and collective action settlement for Creighton v. Oppenheimer & Co. Inc. et al. A hearing is scheduled for September 7, 2011 to determine fairness and good faith of the settlement based on class and collective action procedures and requirements and to enter judgment.

The class action lawsuit was filed in May of 2006 by Leon Greenberg along with Mark Thierman, Blumenthal & Markham and United Employees Law Group. The suit alleges that the Oppenheimer brokerage firm violated the Fair Labor Standards ACT (FLSA) by misclassifying stock brokers as exempt from overtime pay.

Brokers allege that their pay is based on sales commissions and that they are not paid a guaranteed salary. Oftentimes they work greater than 40 hours per week, for which they should be paid overtime.

Sources:
Oppenheimer To Settle Stockbrokers' OT Suit For $2M, Law360, March 29, 2011

Lawsuit against Oppenheimer alleges Stock Brokers may be entitled to Overtime Pay, LawyersandSettlements.com, May 29, 2006