West Coast—Time to Check Your Employment Agreements: Ninth Circuit Negates No-Class Action Clause in Arbitration Agreements

West Coast—Time to Check Your Employment Agreements: Ninth Circuit Negates No-Class Action Clause in Arbitration AgreementsThis week, the Ninth Circuit held that Ernst & Young’s (E&Y) arbitration agreement that prohibited its employees from filing class actions violates the National Labor Relations Act (NLRA). E&Y required as a condition of employment that its employees sign an agreement stating that they could not bring any class action or concerted claim regarding wages, hours, and terms and conditions of employment. Instead, an employee bringing those claims would arbitrate as single plaintiff.

Two former E&Y employees brought a class and collective action alleging that E&Y misclassified its workers to deny overtime under the Fair Labor Standards Act (FLSA). Pursuant to the employment agreement, a district court ordered individual arbitration of the claims and dismissed the case. The employees appealed claiming that the employment agreement’s waiver of collective actions violated numerous federal statutes, including the NLRA and the FLSA.

The Ninth Circuit found the arbitration agreement violated Sections 7 and 8 of the NLRA, which protect concerted employee activity to improve working conditions. It held that the requirement that all claims be individually arbitrated was an “interference” with the rights the NLRA guarantees. Specifically, the Court stated:

“Sections 7 and 8 make the terms of the concerted action waiver unenforceable. The ‘separate proceedings’ clause prevents concerted activity by employees in arbitration proceedings, and the requirement that employees only use arbitration prevents the initiation of concerted legal action anywhere else. The result:  interference with a protected Section 7 right in violation of Section 8. Thus, the ‘separate proceedings’ terms in the Ernst & Young contracts cannot be enforced.”

The opinion reconciles its decision with the Federal Arbitration Act by stating that the problem is not arbitration, but the prohibition on concerted legal claims. The dissent, by Judge Ikuta, took issue with this and pointed out that the United States Supreme Court has held that waiver of class actions is typical in the arbitration context because class procedures create a scheme that is inconsistent with the FAA. As noted by Judge Ikuta, arbitration provides benefits of speed and informality—neither of which would be accomplished by class or collective actions. The dissent cited numerous examples where Courts had held that arbitration requirements were not vacated by federal statutes.

Within the Ninth Circuit’s jurisdiction, this decision may cause some immediate heartburn for employers and they may need to consider revising agreements. As we have noted before, collective and class actions on overtime issues are juicy temptations for plaintiff lawyers. Under this decision, even if there is an arbitration agreement prohibiting such actions, we should expect employees to take advantage of this new avenue for such claims.

Sixth Circuit Confirms That The ADA Does Not Require Employers To Create Permanent Light Duty Positions For Disabled Employees

Sixth Circuit Confirms That The ADA Does Not Require Employers To Create Permanent Light Duty Positions For Disabled EmployeesGiving an employee temporary light duty does not mean you have to create a permanent light duty position as a reasonable accommodation, at least according to a recent Sixth Circuit case. Here are the facts the Court considered in Meade v. AT&T Corporation:

Stephen Meade worked for AT&T as a facility technician, installing and maintaining telephone and internet equipment. After working for over 30 years, he suffered a job-related injury that resulted in a blood clot in his leg. Meade’s physician released him to return to work with temporary limitations that prevented him from working as a facility tech. When Meade returned to work, AT&T allowed him to perform light-duty tasks around the office. After AT&T learned that that his limitations were permanent, it offered Meade 40 weeks of termination pay, and provided options for Meade to apply for and obtain another position with AT&T.  Following his termination, Meade did not apply for any positions; instead, he filed a lawsuit alleging that AT&T failed to reasonably accommodate his disability. Specifically, he claimed that AT&T should have allowed him to continue to perform light-duty work indefinitely.

Rejecting Meade’s claim, the court found that AT&T’s refusal essentially to create a permanent light-duty position did not violate the ADA. The district court granted summary judgment in favor of AT&T, and the Sixth Circuit affirmed.

The ADA requires an employer to provide reasonable accommodations, not any accommodation that an employee requests. The Sixth Circuit’s opinion underscores the fact that every possible accommodation is not necessarily reasonable. Here, the court found that requiring an employer to transform a temporary light-duty accommodation into a newly-created light-duty permanent position is unreasonable.

Employers in the Sixth Circuit can rest easy knowing that a short-term assignment of light duty tasks will not be construed as an agreement or obligation to create a permanent light duty position.

Isn’t it Ironic, Don’t You Think? DOL Settles Overtime Claims With Its Own Employees

Employer Strategies for the DOL’s New Overtime RuleLast week, attorneys for the Department of Labor (DOL) employee union announced that the government agency had agreed to pay $7 million to settle an almost 10-year-old grievance by DOL workers who claimed they were not paid for off-the-clock work. The claim covered alleged compensable time from 2003 to 2013. Part of the claims were for misclassification and others were for work being required to be performed during lunch breaks and weekends.

The litigation itself stretched over 10 years—including many years when the DOL itself was taking aggressive stances against private employers for unpaid overtime and misclassification, as well as changing regulations regarding exempt and non-exempt status. One of the union lawyers estimated that there may be 2,000 to 3,000 DOL employees that will split the settlement to cover unpaid back wages.

So many thoughts on how to end this: what’s good for the goose…..; physician heal thyself………; remove the log from your own eye…… But I think I will just finish with, thanks DOL, for letting me title a post with an Alanis Morissette lyric.

What the EEOC’s Revised Pay Rule Means for Employers

What the EEOC’s Revised Pay Rule Means for EmployersThe EEOC’s revised pay rule expands collection of pay and hours-worked data from employers filing EEO-1 reports. The proposed rule requires employers, including federal contractors, with 100 or more employees to report summary W-2 income by sex, race, ethnicity, and job group. The proposed rule is the EEOC’s most recent tool focusing on discriminatory pay practices.

Here’s what you need to know:

  1. Time for Compliance.

Once the new rule takes effect, you will have an additional 6 months to submit your company’s EEO-1 survey. The proposed rule moves the due date for the EEO-1 survey from September 30, 2017, to March 31, 2018. This time shift allows employers to use existing W-2 reports for pay data and gives employers an opportunity to closely review (and potentially correct) current pay data.

Use this extra time wisely. Analyze employee pay disparities, gaps, and differences, and determine whether you can explain any disparities by legitimate job-related factors. Conduct a system-wide audit of your company’s pay data and fix any potential issues before submission to the EEOC. You shouldn’t turn over data to the EEOC until you know what you’re dealing with (and the types of claims your company may ultimately face).

  1. Changes in the Workforce Snapshot.

The “workforce snapshot”the pay period during which employers count the total number of employees for that year’s EEO–1 reportwill be October 1 through December 31 of the reporting year (compared to the current rule using a July 1 through September 30 workforce snapshot). This means that employers will count employees (for purposes of the EEO-1 report) during a pay period between October 1 and December 31, and will report W-2 income and hours-worked data for those employees for the entire year ending December 31.

  1. Reports by Job Category.

The proposed rule requires pay data to be reported by job category. This is new and much more specific than the current rule. Because of this new requirement, employers must be diligent in keeping accurate pay data records by job category and classification, as well as making sure that the people in a job category are actually doing the work of that job category. If someone’s duties change, make sure to change their job title and put them in the proper category. Keep this in mind as you conduct an audit to assess potential pay discrepancies.

  1. Hours-Worked Data.

The proposed rule also adds a requirement to report hours worked by employees. For nonexempt employees, the EEOC adopts the definition of hours worked as set forth in the Fair Labor Standards Act: “(a) [a]ll time during which an employee is required to be on duty or on the employer’s premises or at a prescribed workplace and (b) all time during which an employee is suffered or permitted to work whether or not he is required to do so.” 29 C.F.R. 778.223. For exempt employees, however, employers can report either: (1) 40 hours per week for full-time workers, and 20 hours per week for part-time workers, multiplied by the number of weeks employed that year; or (2) actual hours-worked data that the employer already keeps.

The comment period on the new proposed rule closes August 15, 2016. Although it’s unlikely the final rule will change substantially from the present version, keep apprised of any changes that may affect the final rule. Once implemented, the EEOC will post notice of the rule’s approval on its website at www.eeoc.gov.

Hit by the Pitch: Federal Judge De-Certifies FLSA Class Action of Minor League Baseball Players

Hit by the Pitch: Federal Judge De-Certifies FLSA Class Action of Minor League Baseball PlayersIn a 100+ page opinion, federal Magistrate Judge Joseph Spero of the Northern District of California refused to grant the Plaintiffs’ motion to certify a class of minor league baseball players and instead granted the baseball clubs’ motion to de-certify. As noted in a previous blog post by my colleague, Matt Miller, minor league players across the country have filed numerous suits claiming they are paid only during the actual championship playing season (what some would call the regular schedule of games in the summer and fall), and were not adequately compensated for other activities like spring training, instructional leagues, winter workouts or other mandatory work performed outside the championship season.

The California Plaintiffs claimed that a class was proper because Major League Baseball and its franchises had uniform contracts and policies that applied to everyone. The Plaintiffs’ motion attempted to consolidate claims filed in California, Florida, Arizona, North Carolina, New York, Pennsylvania, Maryland and Oregon.

The baseball clubs opposed the motion by arguing that differences among the players’ circumstances precluded them from meeting the class certification requirements. The Court agreed. The opinion notes that the minor league players engaged in a wide variety of activities during the off-season to stay in top playing condition and there is not a good way to determine if and where the workouts occurred and whether the clubs monitored those activities.

The very nature of those activities also varied greatly from player to player and it was too difficult to determine if each activity constituted compensable “work” under the statute. The Court ultimately determined that these wide variations in the type of off-season workouts was fatal to the players’ certification efforts. Specifically, the Court found “that the collective members are not similarly situated and that adjudicating the FLSA on a collective basis will be unmanageable.” It is important to note that this does not end the suit; it simply means that it will have to proceed as individual actions and not as a class.

While this opinion may be interesting to those of us that love America’s Pastime, it also has implications for other employers. Some argue that recent court decisions indicate a trend toward more certifications of class actions. This opinion provides a very good (and long) roadmap as to what is required for that to happen. The wide variation among the plaintiffs’ activities are not unique to baseball. Many industries have workers that share a job title, but their day-to-day work is different from location to location. Documentation of those variations may be ample ammunition to avoid a collective action in the future—at least under the FLSA.

HR to the Rescue: Prompt Investigation Beats EEOC’s Sex Harassment Claim

HR to the Rescue: Prompt Investigation Beats EEOC’s Sex Harassment ClaimDon’t listen to all the doubters – HR truly can save the day.

A recent federal court decision from the Western District of Tennessee illustrates the point again: prompt and appropriate investigation of a sexual harassment complaint can prevent employer liability.

In Equal Employment Opportunity Commission v. Autozone, Inc. and Autozoners, LLC (collectively, “Autozone”), the EEOC filed suit on behalf of three aggrieved female employees, alleging that Autozone was liable for sexual harassment in violation of Title VII because a male store manager engaged in “lewd and obscene” behavior toward them. Autozone argued that, even assuming the store manager’s conduct occurred, it was not liable because it took appropriate corrective action that was reasonably calculated to end the harassment.

The court agreed, finding that the undisputed facts showed that the day after Charging Party A complained in writing to HR (accusing the store manager directly of sexual harassment for the first time), the HR manager took immediate action. The HR manager met with Charging Party A and obtained a written statement. During that meeting, she identified another employee (who, by filing her own charge of discrimination, became Charging Party B) as a potential victim of harassment. The HR manager followed up by obtaining statements from both Charging Party B and another employee (soon to become Charging Party C) regarding the store manager’s alleged harassment.

About a week later, HR informed Charging Party A that the store manager would be transferred from the store and asked if she could work with him until then. Charging Party A said she could, and they worked in the same store for a few days until the store manager was transferred (during which time the alleged harasser stayed away her). About two weeks later, Autozone fired the store manager for acts and conduct detrimental to Autozone, inappropriate comments, and loss of confidence.

The court held that Autozone’s actions shielded it from liability:

“The undisputed facts and deposition testimony demonstrates that, as soon as Defendants knew or had reason to know that harassment was taking place, they began to take corrective action.”

As a result, the court granted Autozone’s Motion for Summary Judgment and dismissed the EEOC’s case.

A key precursor to the ultimate holding was the court’s determining that the store manager was not a supervisor because he did not have the ability to “fire, demote, promote, or transfer employees.” The court reasoned he only had the “ability to direct a co-worker’s labor,” and could not effect a significant change in a co-worker’s employment status. As a result, the court held that he was not a supervisor under the Supreme Court’s Vance v. Ball State standard. Consequently, the EEOC had to meet a higher standard or proof: that the Defendants “knew or should have known of the offensive conduct but failed to take appropriate corrective action.” The EEOC could not meet this burden. If the store manager had been a supervisor, then the Defendants may have been vicariously liable for his conduct.

This case highlights that an appropriate and prompt investigation of a harassment complaint can prevent employer liability for the harassing conduct, regardless of how bad the harassing conduct may be. Human resources should promptly and appropriately investigate all harassment complaints and take action reasonably calculated to stop the harassment. If HR does that, HR may just save the day.

The Labor Board Wants Those “Temp” Workers to be “Your” Workers So That You Can Become a Union Company

The Labor Board Wants Those “Temp” Workers to be “Your” Workers So That You Can Become a Union CompanyAs I was explaining to a client last week that just “sending her back to the temp agency” likely would not be a simple end to a complicated sexual harassment problem, the National Labor Relations Board issued yet another decision impacting joint-employer issues. The Board’s new opinion in Miller & Anderson, Inc., through the joint-employer concept, makes it easier for workers to elect union representation at your company. So, even if your company is nonunion, this Labor Board development is of interest.

The Big Issue

Most companies become union as a result of a petition and subsequent vote of their employees. First, 30% of the employees must sign petition cards requesting a representation election. Then, if that occurs, the Board subsequently holds an election, and, if a majority of the workers vote for union representation, then they become union workers with the right to bargain collectively over terms of employment at your company. Obviously, one of the big issues in the procedure is who gets to vote. If you increase the number of workers with no historical allegiance to the company, the more likely the vote will be pro-union. Enter the Miller & Anderson decision.

The Specific Issue

The specific issue in the Miller & Anderson decision was whether workers referred by a temporary agency can vote in an election and ultimately be represented in the collective bargaining process. Recall our previous blog posts regarding the McDonald’s franchisor-franchisee case and the Browning-Ferris temporary workers case. In both of those posts, we described how the Board was doing everything possible to impose joint-employer status on franchisors and “users” of temporary workers. The principle in those cases was that, if the company has potential control over the workers, then an employer-employee relationship is established. The Board’s new Miller & Anderson decision extends this joint-employer principle even further and establishes that, once the temporary workers are determined to be employees, they also can vote and participate in collective bargaining activities assuming other normal labor law requirements are met. An agreement between the two employers (the user company and the temp agency) to allow this is not required (which was the Board’s old rule) and typically is the case in so-called multi-employer bargaining settings.

What it Means to You

The bottom line is that, in the labor relations setting as well as in many other settings like employment discrimination and wage and hour law, it continues to become easier for workers employed by another company legally to become your employees. If the other company is hired to do a specific job and sends its own supervision, such as with a medical clinic or with a cleaning service, then your company probably is safe. On the other hand, if those workers come onto your site and perform work traditional to your business and report to your supervisors, then you no longer are in the safe zone. And now, if those workers come in with union backgrounds – or if they do not like you very much – they can instigate organizing activity and ultimately can have a direct and devastating impact on the percentage of employee support for a union vote. Because of this development, all employers would be wise to look at all of their temporary-worker arrangements to be sure that they are necessary and serving the intended needs of the company.

New OFCCP Revised Scheduling Letter: Your Secret’s Not Safe with the OFCCP

New OFCCP Revised Scheduling Letter: Your Secret's Not Safe with the OFCCPYou are officially on notice—the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) is going to share your data with other federal agencies. What data, you ask? The OFCCP annually selects numerous federal contractors to evaluate their compliance with affirmative action regulations. It gets the data by sending a Scheduling Letter and Itemized Listing to federal contractors and subcontractors to initiate an audit of compliance with Executive Order 11246, Section 503 of the Rehabilitation Act of 1973, and the Vietnam Era Veterans Readjustment Assistance Act of 1974.

The Scheduling Letter starts the evaluation process by notifying the contractor it has been scheduled for a compliance evaluation and requesting submission of its affirmative action programs and supporting data. The Itemized Listing, which is used with the Scheduling Letter, identifies the documents and information that government contractors must provide during a compliance evaluation.

The OFCCP recently announced that the Office of Management and Budget (OMB) has renewed the Scheduling Letter and Itemized Listing for three years. The OFCCP began using revised Scheduling Letter and Itemized Listing documents to initiate compliance evaluations on July 1, 2016; it last released a revised Scheduling Letter and Itemized Listing in October of 2014.

The important thing to know about the revised Scheduling Letter and Itemized Listing is the change in the confidentiality of the collected data. The previous Scheduling Letter assured contractors that information they provided in response to a Scheduling Letter would be treated as “sensitive and confidential,” and disclosed only as required by the Freedom of Information Act. No more—the revised Letter alerts contractors that the OFCCP may share information with other enforcement agencies:

“Please also be aware that OFCCP may use the information you provide during a compliance evaluation in an enforcement action. We may also share that information with other enforcement agencies within [the U.S. Department of Labor], as well as other federal civil rights enforcement agencies with which we have information sharing agreements.”

Although the OFCCP has existing cooperative agreements with the Equal Employment Opportunity Commission and Department of Justice, these changes to the Scheduling Letter should alert contractors that more frequent information sharing may be in the works. As well, the timing of this revision seems more than coincidental given the National Labor Relations Board’s recent announcement that it would buttress federal contractor compliance under the Fair Pay and Safe Workplaces Executive Order by requiring employers to report information related to all unfair labor practice complaints filed on or after July 1, 2016.

UPDATE: Deadline for OSHA Anti-Retaliation Provisions delayed to November 1, 2016

November 1 calendarAs an update to last week’s blog post [Mark Your Calendar! Deadline on New OSHA Recordkeeping Rule is Around the Corner], the initial deadline to comply with OSHA’s new anti-retaliation provisions has been pushed back from August 10, 2010, to November 1, 2016.

Several industry groups filed a complaint in federal court in Texas seeking to block the final rule, leading OSHA to delay the enforcement date. The delay will allow OSHA “to conduct additional outreach and provide additional materials and guidance for employers.” Employers are still required to inform employees that they have the right to report work-related injuries and illnesses and that employers are prohibited from discriminating against employees for such reporting – which can be accomplished by posting a workplace poster dated April 2015 or later.

Employer Strategies for the DOL’s New Overtime Rule

Employer Strategies for the DOL’s New Overtime RuleIn a recent post, my partner, Anne Yuengert, wrote about the DOL’s new overtime rule and the changes that go into effect December 1, 2016. Most significantly, the rule increases the minimum salary requirement for the executive, administrative, and professional exemptions from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). In addition, the minimum salary threshold for the highly compensated employee (HCE) exemption will jump from $100,000 per year to $134,004 per year. According to the DOL’s projections, these changes are expected to affect over 4.2 million U.S. employees.

If an employee is currently a salaried exempt professional, administrative, or executive employee earning between $455 and $913 weekly, on December 1, that employee will lose his exempt status and must be paid overtime for all hours worked over 40 in a workweek. There is an exception for lawyers, doctors, and teachers, who do not have to meet a minimum salary requirement to qualify under the professional exemption. This change to the minimum salary requirement is expected to significantly increase employer overtime costs, particularly in certain industries, such as food service, hospitality, and retail.

What Should Employers Do?

There are some measures that employers should take – and should take now. Initially, you should inventory your workforce and gauge how the new rule will affect your individual jobs and your overall labor costs. You should also consider whether there are changes to your compensation structure or other strategies that might alleviate the impact of the new rule. Some of the possible options are:

  • If you have exempt employees currently making a salary of less than $913 per week, consider raising their weekly salaries to at least $913 so they remain exempt. As a practical matter, this may work only for those employees who are already reasonably close to the new $913 minimum. You can alleviate the impact of an employee’s salary increase by reducing other components of the employee’s compensation, such as a year-end bonus. Also, if you give an employee a higher salary to maintain the exemption, there is nothing to prevent you from requiring additional work. Before doing this, you should check to be sure that the employee’s duties clearly meet the exemption.
  • You can keep the employee’s salary constant, but make it clear that the salary is based on an expectation that the employee will work a specific number of hours each week. By setting the employee’s expected hours higher, you can effectively lower the regular hourly rate that’s used to compute the employee’s overtime pay. Remember, though, that since the employee is no longer exempt, you must track hours and pay 1½ times the regular rate for all hours worked over 40 in a workweek. With this approach, you must have the employee record all the hours worked each week.
  • You can reduce the employee’s salary to keep the employee’s total compensation level. If you have a good estimate of the overtime an employee will work, you can set the new pay rate for that employee, factoring in that overtime, so that the employee’s overall pay will remain relatively unchanged. However, before going down this path, you should consider what impact this reduced salary could have on employee morale and workplace turnover. Again, you must have the employee record all hours worked.
  • Manage your non-exempt employees’ overtime carefully. The new rule will have no effect on your labor costs if your employees do not work over 40 hours in a week. Require all non-exempt employees to record all hours worked and seek advance approval to work overtime. Use your disciplinary process to ensure compliance with your overtime policies.
  • Look at other workplace modifications that might reduce your overtime costs. Do you have positions that could be restructured in a way that reduces the need for overtime work? For instance, are there situations where you could use two part-time employees instead of one full-time employee to avoid unnecessary overtime?
  • Consider whether you should use alternative methods of compensating your employees. As we noted previously, some employers may benefit from paying their employees on a fluctuating workweek basis. Under this method of payment, the non-exempt employee receives a guaranteed base salary each week regardless of the hours worked and must still be paid overtime for all hours worked over 40. However, because of the way overtime is calculated under this method, the total amount of overtime compensation is often reduced. Other compensation schemes, such as paying employees on a day-rate basis, might be advantageous in some situations.

Use Your Time Wisely

The new rule will likely result in some cultural changes in your workplace that you will need to plan for and manage carefully. Previously exempt employees who lose their exempt status will have to start recording their time. As a result, you may need to change procedures, implement automated systems, conduct training, and give employees a chance to adjust.

You should also use the new rule as an opportunity to review your job classifications and make any changes that may be needed or overdue. The new rule does not make any changes to the duties test for the executive, administrative, or professional exemptions. However, if you have employees who have been misclassified as exempt under that test, this may be the perfect time to get those issues fixed.

You have time to prepare for the upcoming changes, but you should use that time wisely.

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