By Kristin G. McGurn and Alison H. Silveira

Seyfarth Synopsis: Department of Labor Acting Administrator Bryan Jarrett issued Field Assistance Bulletin No. 2018-4 (“FAB”) on July 13, to guide Wage & Hour Division (“WHD”) field investigators on how to determine whether home care, nurse, or caregiver registries are employers under the Fair Labor Standards Act. A “registry” is “an entity that typically matches people who need caregiving services with caregivers who provide the services, usually nurses, home health aides, personal care attendants, or home care workers with other titles (collectively, caregivers).”

The notable FAB makes no negative reference to independent contractor status, shedding first light on the Trump administration’s approach to independent contractor classification following withdrawal of the DOL’s 2015 Administrator’s Interpretation last year. The guidance is welcome news to the growing number of companies that seek to match workers with individuals who seek in-home care, as well as to entities outside the healthcare sector that engage non-employed workers.

The DOL recognizes that “a registry that simply facilitates matches between clients and caregivers—even if the registry also provides certain other services, such as payroll services—is not an employer” under the FLSA. The FAB provides, however, “specific examples of common registry business practices which may, when the totality of factors is analyzed, establish the existence of an employment relationship under the FLSA.” The FAB reveals a return to DOL’s historical approach of reviewing employer status on a “case-by-case” basis, by assessing a totality of circumstances without allowing any single dispositive factor to dictate the outcome.

The FAB highlights factors that the WHD will analyze during investigations, illustrating that registries, as well as other staffing sources, should avoid becoming embroiled in a relationship with the workers, or unduly control their work, and should be aware in particular of the following:

  • Performance of basic background checks does not indicate employer status. If the registry actually interviews prospective workers or references, or pre-selects candidates for clients, however, it may be acting as an employer.
  • Providing clients or workers with information about typical pay rates in the area “to serve as a benchmark for negotiations” does not indicate employer status. If the registry “designates a set wage range,” or “offers tailored direction” concerning what should be charged for specific services, it appears more like an employer.
  • Performing certain administrative payroll-related functions, such as preparing tax documents or compiling time records, will not create an employment relationship. Direct payment of registry funds, or independent verification or adjustment of workers’ time records, however, may indicate employer status.
  • Charging a one-time fee for service, or ongoing fees for performing administrative functions like payroll, do not indicate employer status. However, charging ongoing fees to the client based on the number of hours a worker works, or based on the ongoing relationship, may indicate employer status, because “[t]he [workers’] pay . . . depends, in part, on the amount charged.”

Other factors to be analyzed by the DOL include the level of involvement in: hiring and firing; scheduling and assigning work (where the worker may “economically depend on … preferences and decisions”); controlling the worker’s work through trainings, setting policies, or monitoring and evaluating performance; and purchasing equipment and supplies, including licenses and insurance. According to DOL, requiring a worker to obtain an EIN, insurance, or bond in accordance with the law is “not relevant” to the analysis, nor is calling the worker an ‘independent contractor’ or issuing him a Form 1099.

The FAB’s focus exclusively on registries may indicate that the DOL intends to increase its scrutiny of employment relationships in the home health care industry. More broadly, however, the factors that the DOL highlights in this FAB translate across a wide variety of industries, and reveal insight into how the current administration views the employer/independent contractor analysis under the FLSA.

After withdrawing its formal guidance on independent contractor misclassification in June 2017, thereby abandoning the relatively strict “economic realities” test that was widely viewed to favor employer status, the DOL has been relatively silent on the topic — until now. The FAB’s return to a “totality of circumstances” analysis portends a more tolerant approach to independent contractor classification, indicating that certain entities, like traditional match-making registries, can liaise between independent workers and their clients without creating an employer relationship. Employers should note, however, that enforcement agencies and courts in various states continue to take a more restrictive view of independent contractor status.

In Dynamex Operations v. Superior Court the California Supreme Court recently held that a defendant disputing employee status must prove each of the three “ABC test” prongs: (A) the worker is free from control and direction of the hirer in connection with performing the work, both under contract and in fact; (B) the worker performs work outside the usual course of the hiring entity’s business; and (C) the worker customarily engages in an independently established trade, occupation or business of the same nature as the work performed for the hirer. Employers are well advised in light of the DOL’s FAB and such state court decisions to consider reviewing their independent contractor relationships under both state and federal evolving law.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Wage & Hour Litigation Group.

By Ariel D. Fenster and Brett C. Bartlett

Seyfarth Synopsis: The Eleventh Circuit recently affirmed the district court’s grant of summary judgment to two Florida counties in an action brought against former sheriff deputies under the Fair Labor Standards Act (FLSA) and Florida Minimum Wage Act (FMWA). The court held that the deputies were not entitled to compensation for the time that they spent donning and doffing police gear at home or the time that they spent driving to and from work in marked patrol vehicles.

Should we be paying our employees before their shifts start?  The answer is highly fact dependent.  In recent weeks, the Eleventh Circuit affirmed the Middle District of Florida’s decision that the time deputies spent putting on their police gear at home and driving to and from work in their patrol cars was not compensable.  In Llorca v. Sheriff Collier County, Florida,  the Eleventh Circuit analyzed what type of pre-shift activities may qualify for hourly compensation.  The decision provided a deep analysis of the Portal-to-Portal Act of 1947, as amended by the Employee Commuting Flexibility Act of 1996.  In relevant part, the act states that an employer does not have to pay its employees for activities that are “preliminary or postliminary” to the “principal activity” of the job.   The U.S. Supreme Court has long interpreted the term “principal activity or activities” to include all activities that are an “integral and indispensable part of the principal activities.”

What Does “Integral and Indispensable” Mean?

In order to determine what activities are integral and indispensable, it is important to understand the definitions of these types of activities.  The United State Supreme Court’s decision in Integrity Staffing provides guidance on the matter and defines the words as follows.  An integral activity “forms an intrinsic portion or element of the principal activities as distinguished from an adjunct or appendage.”  An indispensable activity “means a duty that cannot be dispensed with, remitted, set aside, disregarded, or neglected.”  The test is tied to the productive work an employee is employed to perform.   Thus, the fact that an employer requires or benefits from the activity does not establish it integral and indispensable.   As you can imagine, cases analyzing whether activities are integral and indispensable are highly fact-dependent and there is no bright-line test.  A look at the facts in Llorca helps to illustrate the integral and indispensable test and build off of the Supreme Court’s decision in Integrity Staffing.

Llorca Facts

Plaintiffs are former deputy sheriffs in Florida.  As part of their job, Plaintiffs were required to arrive at work dressed in their uniforms and equipped with a number of protective gear items.  Plaintiffs contend it took them up to thirty minutes at home to get “suited up.”  Plaintiffs also commuted to and from work in marked patrol cars.  During their commute time, they were required to have their radios on and respond to any major calls or emergencies.  They were also told to observe the roads for traffic violations and engage in traffic law enforcement during their commutes.  Of note, Plaintiffs were paid for any time they spent actually responding to emergencies or enforcing traffic violations.  Plaintiffs filed suit alleging they should have been paid for: (1) the time they spent donning their uniform and protective equipment at home and (2) their commute time.

Getting Dressed: Is That Compensable Time?

After analyzing the facts of the case, the court held that uniform and protective gear may arguably be “indispensable,” but it is not “integral.”  The gear is arguably indispensable because the deputies need the items to perform their job.  The court held that the act of donning and doffing the gear, however, is not integral to the job activities.  The court’s reasoning hinged on the fact that the Plaintiffs were allowed to don and doff their protective gear at home and actually did so.  In relying on a DOL opinion, the court explained that dressing in uniform is akin to changing clothes under normal conditions and that time is not compensable.

An important takeaway: where an employee gets dressed matters.  In a slew of other decisions, courts have held that giving the employee the option to change at home is important.  Even if an employee chooses to get dressed at work, the option to change at home lends itself to the time not being compensable.

Commuting To Work: Is That Compensable Time?

With regard to the commute time, the court stated this is the very type of time excluded from the Portal-to-Portal Act.  The general rule is that the time a worker spends driving to and from work is not compensable, and the Federal and Sixth circuits have similarly held that a law enforcement officer’s monitoring of a police radio or observing the roads for emergencies while en route to work do not qualify as exceptions to that general rule.  The court noted, “it would be highly inappropriate for uniformed officers to drive to and from work in marked patrol vehicles without observing the road for traffic violations and other incidents.”  The court explained that while the commute time could be integral to the job, it is not indispensable.  While it would undermine the very essence of law enforcement to ignore traffic law violations during their commute, the deputy sheriffs could fully perform their job without observing the road to and from work.

Lessons Learned

These cases are highly fact-dependent and decided on a case-by-case basis.  Even so, there are still some lessons to be learned from the Eleventh Circuit’s recent decision.

  1. Review any uniform changing policies. If employees have the option of wearing clothes and equipment to and from work, a court is less likely to conclude that those employees are entitled to compensation for time spent donning and doffing such clothes and equipment.
  2. If you do need to require employees to change in and out of clothing or protective gear on your premises, keep track of the actual time each employee spends doing so.
  3. Think about what activities the employees are completing during their commute time. Are the activities indispensable to the position?  For example, think about whether the employee is making stops to and from work to complete job duties.

 

 

By Paul Galligan, Gena B. Usenheimer, and Meredith-Anne Berger

Seyfarth Synopsis: Three Republicans from the House of Representatives hailing from states with paid family and sick leave laws have sponsored the Workflex in the 21st Century Act, signaling increasing frustration with the complexities of multi-state compliance. Representatives Mimi Walters of California, Elise Stefanik of New York, and Cathy McMorris Rodgers of Washington have pitched a bill that would exempt employers who offer certain amounts of paid time off from complying with state paid leave laws. In its current form, the bill would serve to drastically reduce employee access to paid leave, but would also grant employees alternative work arrangements, known as “workflex” options.

The Workflex in the 21st Century Act, H.R. 4219, was proposed on October 26, 2017 as an amendment to the Employee Retirement Income Security Act (ERISA) to “include a voluntary option for qualified flexible workplace arrangements.” Under the law, employers would be exempt from state paid leave law requirements, but since the bill only reaches employees eligible for employer-provided benefits, employers would still have to comply with state and local leave laws for employees ineligible for the company’s benefits.

Employers with a unionized workforce must incorporate the rights of employees to compensable leave and workflex options pursuant to applicable collective bargaining agreements into the plan. The bill provides that plans which meet all of these requirements will also satisfy the requirements of Executive Order 13706, or Paid Sick Leave for federal contractors. However, this law does not, on its face, amend or limit employees’ ability to use unpaid leave in accordance with the Family and Medical Leave Act.

Minimum Amount of Leave

Employers wishing to take advantage of the bill’s preemptive effects must provide a minimum amount of “compensable leave” for employees based on their years of service. Compensable leave includes any leave permitted to be used for paid time off, sick leave, personal leave, or vacation. Employers are permitted to include up to six paid holidays towards meeting the minimum amounts reflected below.

Number of Employees Employees with 5 or more years of service as of the beginning of the plan year Employees with fewer than 5 years of service with the employer as of the beginning of the plan year
1000 or more 20 days 16 days
250 to 999 18 days 14 days
50 to 249 15 days 13 days
Less than 50 14 days 12 days

The bill makes clear that employers who wish to allow employees to take leave exceeding these minimum amounts are free to do so under the law. In that vein, employers who provide unlimited compensable leave, as defined above, are deemed to comply with the minimum amount of leave requirement.

Accrual and Carryover of Leave

Employers may frontload the employee’s compensable leave at the beginning of the plan year, or allow the employee to accrue compensable leave proportionally as the calendar year progresses, and is available for the employee to use as the compensable leave accrues. It is unclear whether the employer can impose a waiting period to use compensable leave, or if there are further limits on accrual of leave based on the wording of the bill. Further, the employer has the option to offer both carryover and cash out of unused leave.

Calculation of Number of Employees

The number of employees is determined by calculating the total number of monthly employees for each month of the preceding plan year and dividing by 12. To be counted, an employee must be considered an employee for first and last day of the month. “Full-time” must be “reasonably” defined, but the bill does not give further guidelines regarding the definition. All other employees are considered “part-time,” but the method of determining how part-time employees may accrue compensable leave is not clear based on the bill.

Use of Leave

An employer may restrict the use of leave during the first 90 days of employment with the employer, and may also limit the use of leave to times when it does not “unduly disrupt the operations of the employer,” and whether to use the leave in full-day or partial-day increments.

Workflex Options

In addition to paid leave, the bill provides that an employer must offer each employee in the plan, so long as the employee meets eligibility requirements, at least one of the following “workflex” options, which are not limited in time according to the bill as written:

Biweekly work schedule: A non-exempt employee may work up to 80 hours in a two-week period. In any one week, the employee may work between 40-60 hours. Employees must be compensated at their regular rate, and may only earn overtime for any time worked over the agreed-upon biweekly work schedule, or over 80 hours in the two-week period. It is unclear how this arrangement will interact with the Fair Labor Standards Act (FLSA) or state wage and hour laws.

Compressed schedule work program: An non-exempt employee may work his or her regular weekly hours spread among fewer days, i.e., a 40-hour week over four days. Employees who choose this option earn overtime in accordance with the FLSA. Moreover, state wage and hour requirements (such as spread of hours) would also apply.

Job sharing program: An arrangement where the employer approves two or more employees to share one employment position.

Flexible scheduling: An agreement under which the employee’s regular work schedule is “altered.” This term is not further defined in the bill.

Predictable scheduling: A system whereby the employer provides a schedule to an employee with reasonable advanced notice and with as few alterations as possible.

Telework program: An arrangement where the employee is permitted to perform the duties and responsibilities of his or her position from a worksite other than where the employee would otherwise work (e., from home).

Options offered may differ depending on the particular position. Employees eligible for “workflex” options must be employed for at least 12 months for at least 1,000 hours of service during the 12-month period. An employer may estimate the number of hours worked by the employee. However, the employer may not force an employee to use workflex options. If an employee elects to use a workflex option offered by the employer, a written agreement signed prior to starting the arrangement must set forth the employee’s work schedule with a description of the workflex option.

Right to Reinstatement

Employees who elect to use a workflex option or compensable leave under the bill must be reinstated to their same or equivalent position, unless the employee has used more than 12 weeks of compensable leave in a 12-month period, or is a key employee as defined under the Family and Medical Leave Act. The bill also notes it is not intended to relieve an employer’s obligations under the Americans with Disabilities Act.

This bill, should it pass, would offer attractive alternatives to employers who find complying with various state and local paid leave regulations challenging. It would also offer flexible work arrangements to employees that could save employers money and reduce turnover of employees who would otherwise leave a job for family or personal reasons. It would ostensibly preempt paid leave laws that are popping up all over the country, including most recently paid family leave in New York and paid sick leave in various municipalities, including Cook County, Illinois, and the state of Washington. However, its overlap with various laws, including ERISA, the FMLA, and the FLSA may necessitate complex legal solutions in order to implement it. We will continue to track this bill as it moves through the legislative process.


By Steve Shardonofsky and Kevin A. Fritz

Seyfarth Synopsis: As employers begin to pick up the pieces following Hurricane Harvey, management will likely encounter questions about employee pay, benefits, and leaves of absence during and after this disaster, and may also have questions about how to help their workers get by during this difficult time. After making sure your workers are safe, and as you start to rebuild and repair, read on for practical guidance on these pressing issues.

This past weekend Hurricane Harvey made land fall, causing unprecedented and catastrophic flooding in southeastern Texas. Our thoughts go out to our colleagues, clients, and friends affected by this natural disaster.  We are thinking of you during this difficult and trying time.

Pay for Non-Exempt Employees

The General Rule

Under the Fair Labor Standards Act (FLSA), an employer is only required to pay non-exempt employees for hours actually worked. In other words, businesses are not required to pay non-exempt employees if they are not working, including times when the employer closes its doors or reduces hours of operation, whether or not forced to do so by inclement weather.  Moreover, while some states require some minimum “reporting” or “show up” pay for employees who show up for work and are either turned away at the door or dismissed before the end of their scheduled shifts, Texas is not one of those states.

An important exception to this general rule exists for non-exempt employees who receive fixed salaries for fluctuating hours from week to week. Because these employees must be paid a “fixed” salary, employers must pay these workers their full weekly salary for any week in which any work was performed and pay not dock their pay for days when the office is closed due to inclement weather.

Even if your business is not open during inclement weather days, you always are free to pay employees for that time, and may also permit them to use their paid leave time, if applicable.

Inclement Weather Delays and Traffic

Flooding and severe weather often cause unpredictable traffic delays, and may even result in employees becoming stranded on the road. Employees who perform work while stranded—for example, by taking phone calls or answering e-mails on their way to work—must be compensated for that time even if done away from the office.  Similarly, an employee who is stranded in an employer’s vehicle on their way to work and instructed to safeguard the vehicle or other property is generally entitled to pay for time beyond their ordinary home-to-work commute (i.e., once their scheduled shift begins).

With respect to inclement weather, the general and most practical advice is to pay for any extra time spent getting to work during a scheduled shift, particularly when employees are stranded for reasons outside their control. It is likely that the Department of Labor or even a court would find that all of the time the employee was stranded within their regular shift is compensable time.  Even where reasonable minds could differ on these questions, since the costs of defending these claims often exceed the underlying payroll costs, it often makes sense to employees for this  time in the first place.

Pay for Exempt Employees

Exempt employees under the FLSA must be paid on a “salary basis” and earn a full day’s pay when they work any part of the day, regardless of the quality or quantity of the work performed. Thus, if a business is closed because of inclement weather and an exempt employee is ready, willing, and able to work, she must be paid for that day.  On the other hand, if the exempt employee does not work for an entire workweek (for personal reasons or because the business is closed), the exempt employee need not be paid for that time—that is, the employer may “dock” her salary for the full workweek.

If the business is open and an exempt employee elects to stay home to make repairs or volunteer at a local shelter, the employer may “dock” their salary in full day increments (but perhaps consider not doing so to encourage volunteerism and aid in recovery efforts). In these instances, and including situations when exempt employees elect to arrive late or leave early for personal reasons, employers may also deduct accrued leave time in full or partial day increments as long as the employee receives his or her full pay for the week.  In the event that the employee does not have any accrued time, an employer may also simply pay him or her for the day or allow the employee to take an advance on accrued paid leave and make it up at a later time. This practice is not allowed for non-exempt employees, who must be paid overtime for all hours worked over 40 in a work week.  For more information on the FLSA salary basis rules, visit our prior blog.

Safe Harbor

Remember, improper or inadvertent deductions from pay will not typically result in the loss of exemption status if the employer reimburses the employees for the improper deductions, has a clearly communicated safe harbor policy prohibiting improper deductions, and a complaint mechanism for exempt employees to use if improper deductions are made.

Telework or Working from Home

Allowing employees to work from home during this time will aid recovery efforts and help families recover faster. Regardless of exemption status, employees who work from home during inclement weather, even if only a few hours per week, must be paid for that time.  Thus, employers who will keep their businesses up and running during the aftermath of Hurricane Harvey should clearly communicate to employees who is and who is not permitted to work from home, when that work can be done, whether overtime is permitted, and how to record time worked outside of the company’s premises.  It is also important to remind employees to record all hours worked, even when the work is done away from the employer’s premises.  Employers should be sensitive to the fact that not all employees will be able to work remotely, and therefore should consider alternative arrangements like temporary or shared offices.

On-Call and Waiting Time

Power outages are common during natural disasters, and many employers will require their employees to wait out or work through such power failures. In most cases, any employee who is required to remain at the employer’s premises or close by and therefore unable to use that time for his own benefit (even if not working) must be compensated for that time.  For example, employees who are onsite to perform emergency repairs and who are not free to leave the company’s premises must be compensated for time even if they do not ultimately perform any work.  Similarly, if an employee is onsite and required to wait through a power outage, the time waiting for the power to resume is typically considered time worked and is therefore compensable.

Volunteer Time for Company Repairs

Employers should generally be cautious about having employees “volunteer” to assist during an emergency, particularly if those duties benefit the company and are regularly performed by employees. Exempt employees who volunteer to help will not be entitled to any additional compensation. But remember that too much time spent on manual tasks or other tasks unrelated to their regular job duties could invalidate their exempt status and allow them to claim overtime compensation.  Conversely, non-exempt employees must be paid for all time worked, even if they offer to work and help make repairs for “free,” with one exception: Employers may accept free work from employees of government or non-profit agencies who volunteer out of public-spiritedness to perform work that is not at all similar to their regular duties.

Leaves of Absence After a Natural Disaster

Otherwise eligible employees affected by a natural disaster may elect to take leave under the Family and Medical Leave Act (FMLA) for a serious health condition caused by the disaster. Additionally, employees affected by a natural disaster who must care for a child, spouse, or parent with a serious health condition may also be entitled to leave. This includes job-protected leave to care for a family member who is a current service member with a serious injury or illness. FMLA leave for this purpose is called “military caregiver leave.”

Adding to the difficulty, employers may encounter uncommon FMLA issues during and after severe storms, including absences caused by an employee’s need to care for a family member who requires refrigerated medicine or medical equipment that is not operating properly because of a power outage. What’s more, under the Americans with Disabilities Act, an employee who is physically or emotionally injured as a result of a disaster may be entitled to leave as a reasonable accommodation, so long as it would not place undue hardship on the operation of the employer’s business.

Employees who are part of an emergency services organization may also have rights under the Uniformed Services Employment and Reemployment Rights Act (USERRA). Under certain conditions, USERRA provides job-protected leave for U.S. service-members.  Although USERRA does require advance notice of military service, there are no strict time limits for notice after a natural disaster as long as it is reasonably “timely.”  Employers should be prepared to receive and assist employees giving notice under USERRA and other laws allowing for job-protected leave.

Many counties in Texas have been declared in a state of emergency following Hurricane Harvey. While this does not provide pay or other protections for Texas employees, the Texas Workforce Commission advices that “absences due to closure of the business based on bad weather or other similar disaster or emergency condition should not count toward whatever absence limit a business has” —particularly for nonessential employees.  On the other hand, if other employees are able to make it in to work (including workers from similar areas), absences for personal reasons may count toward an absence limit. On balance, however, it is always advisable to discourage the discipline of any nonessential employees who are unable to report to work during a state of emergency.

Weathering the Storm Together

While legal compliance is important, there are other practical ways employers can help workers weather the storm an get back on track. Business owners should consider relaxing the usual telecommuting rules to allow affected employees to work from home as much as possible.  To minimize financial hardship, employers should continue to process payroll in a timely manner.  Consider providing pay advances, loans, or even advances for paid time off/vacation time to help employees offset unanticipated expenses for repairs and insurance deductibles.

To the extent possible, employers may consider offering employees paid leave for time spent volunteering to assist with disaster relief efforts. Employers can also implement a leave donation/sharing policy to allow employees to donate paid leave to employees who will use it to volunteer in relief services or for those otherwise affected by this terrible disaster.

For more information on this topic, please contact the authors, your Seyfarth Attorney, or any member of Seyfarth Shaw’s Wage and Hour Team.

By Erin Dougherty Foley and Craig B. Simonsen

Seyfarth Synopsis: Employer is caught by WHD investigator instructing its employees to lie during interviews, and provides falsified records, containing whited-out and edited time records, in order to conform to the Federal Fair Labor Standards Act standards.

In a recent opinion, the Tenth Circuit ruled that a restaurant chain instructed its employees to lie during interviews, and provided falsified “whited-out” and “edited” employee time records, impeding a Department of Labor investigation, and found that the violation was willful (Perez v. El Tequila, LLC, No. 16-5002 (10th Cir., February 7, 2017).

This case provides a rather stunning look at what, as an employer, you don’t want to do during an official government workplace investigation. In this case the employer edited and changed time records, and then he lied about it, and then directed his employees to lie about it. The Court found that “the records Mr. Aguirre provided during the … Investigation, known as middle sheets, were based on his false summaries of how many hours employees worked, rather than actual clock-in and clock-out times…. Mr. Aguirre withheld [the actual] time sheets during the … Investigation, and many time entries had been “whited-out” and edited to conform with the Federal Labor Standards Act (FLSA).”

In addition, “employees revealed that Mr. Aguirre instructed them to lie in their interviews during the … Investigation.” Subsequently,  “employees told the WHD investigator that they had been working from 60 to 70 hours per week and were paid a salary…. They said the time sheets were not accurate, and ‘that they were forced to sign’ them.” During the litigation, Mr. Aguirre admitted that the time sheets and middle sheets were not correct, and that he “told his employees what to say in their interviews.”

In its post-trial motion, the government argued that the owner willfully violated the FLSA by: (1) falsifying payroll records, (2) withholding records requested by the WHD investigator, (3) lying to the WHD investigator and instructing his employees to lie, (4) recklessly disregarding his duty to determine whether it was violating the FLSA, (5) recklessly disregarding FLSA requirements, (6) and recklessly disregarding his duty to keep accurate records.

The Court concluded that the “evidence indicates that Mr. Aguirre took affirmative steps to create the appearance that El Tequila complied with the FLSA, including adjusting records to suggest that workers were properly paid, withholding documents, misrepresenting how employees were paid, and instructing employees to do the same. A reasonable jury could not conclude El Tequila’s violations were negligent” but willful.

In light of this Circuit Court opinion, employers may wish to consider the ramifications of this case as they analyze their management systems, policies, procedures, and training systems. While this is an extreme case, to the extent that FLSA rules apply to your operations, make sure that all employees understand the requirements, and are following company policies and procedures to ensure FLSA compliance. (And don’t lie during a government agency’s interview – they really, really, don’t like that!)

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Teams.

 

By Steve Shardonofsky and Tiffany T. Tran

iStock_000072969307_MediumSeyfarth Synopsis: In a somewhat rare interlocutory appeal, the Fifth Circuit reviewed and reaffirmed a 40-year old case holding that emotional distress and punitive damages are not available under the ADEA. This decision rejected the EEOC’s own interpretation and is welcomed news for employers doing business in the Fifth Circuit because damages under the ADEA will be limited to front and back pay. This victory may be short-lived, however, as we expect many plaintiffs will file claims under the corresponding state-law statutes, which typically do allow for the recovery of emotional distress and punitive damages. 

In Vaughn v. Anderson Regional Medical Center, Susan Vaughan, a nurse supervisor, alleged that her employer fired her in retaliation for raising age-discrimination complaints.  The district court dismissed Vaughan’s claims for pain and suffering and punitive damages under the Age Discrimination in Employment Act (ADEA) based on Fifth Circuit precedent, Dean v. Am. Sec. Ins. Co., 559. F.2d 1036 (5th Cir. 1977), barring such recoveries.  Noting that the EEOC and other circuits held divergent views on this issue, however, the district court certified the question for a rare interlocutory appeal, and the Fifth Circuit granted review.

The Fifth Circuit rejected Vaughan’s effort to distinguish Dean on the basis that the case involved age discrimination claims, as opposed to retaliation claims under the ADEA. According to the Court, Dean held “in unqualified terms” that the type of damages Vaughn sought are not recoverable “in private actions posited upon the ADEA.”  Because the ADEA contained a prohibition on retaliation since its inception, Dean was controlling unless some intervening change in law “undermine[d] its continued vitality.” The Fifth Circuit rejected Vaughn’s arguments on this issue as well.

Vaughn argued there was a change in law since Dean because of the 1977 amendments to the FLSA, which the Fifth Circuit has interpreted as providing remedies “consistent” with the ADEA. According to the Fifth Circuit, those amendments added language that was identical to the provision in the ADEA allowing for “such legal or equitable relief as may be appropriate,” which Dean had already interpreted as precluding emotional distress and punitive damages. These changes, the Court explained, “brought the FLSA’s remedies for employer retaliation into line with the ADEA’s remedies for similar conduct.”  Notably, however, this explanation seems to conflict with another decision (Pineda v. JTCH Apartments, LLC) issued by a different panel of the Fifth Circuit just a few days later, which held that plaintiffs may recover emotional distress damages in FLSA retaliation claims.

The Fifth Circuit also declined to give deference to the EEOC’s interpretation on this issue, finding that the agency’s reliance on a Seventh Circuit decision was unpersuasive because it mistakenly relied on the 1977 amendments to the FLSA, which the Court had already rejected. Even if  the Fifth Circuit had found the EEOC’s view persuasive, it would not be sufficient to displace Dean because it is not binding precedent. The transfer of ADEA administrative/investigative functions from the Secretary of Labor to the EEOC also did not constitute an “intervening change” in law to override precedent.

Given the apparent conflict between this case and the recent Pineda decision, we may see these issues reviewed by the full panel of the Fifth Circuit.  Because the case also creates a split among the circuits courts, we may also see intervention by the Supreme Court in the future.  Until the full panel or the Supreme Court rules on this issue, claims for emotional distress and punitive damages under the ADEA will be subject to dismissal, at least in the Fifth Circuit.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the Labor & Employment or Workplace Policies and Handbooks Team.

By Annette Tyman, Lawrence Z. Lorber, Jaclyn W. Hamlin, and Brent I. Clark

 

Seyfarth Synopsis: The first of several anticipated challenges to Executive Order 13673, “Fair Pay and Safe Workplaces,” has resulted in a preliminary injunction staying the implementation of some – but not all – aspects of the Executive Order and its implementing regulations. In a significant victory for the government contracting community, the Associated Builders and Contractors of Southeast Texas won an injunction staying the application of the reporting and disclosure requirements, as well as the prohibition on entering into mandatory pre-dispute arbitration agreements.  The Judge left the paycheck transparency provisions in effect, however, and as a result, government contractors must still plan for compliance with those requirements.

Introduction

For our readers that are interested in occupational safety and health topics, we are blogging our colleagues “Management Alert” below, with this introductory note. OSHA citations are covered among the labor laws covered by the Executive Order 13673 (Blacklisting Order). The way the Blacklisting Order reads is that the covered violations include citations which are not final, which are being contested by the employer, and which may ultimately be withdrawn through settlement or by a Judge once the employer has had a chance to present its defense.  The Blacklisting Order is another example of the government’s “guilty until proven innocent” approach to regulating businesses and employers.

Note also that the Blacklisting Order will be applicable under:

  • The Fair Labor Standards Act
  • The Occupational Safety and Health Act of 1970 (including OSHA-approved State Plans equivalent to State Laws)
  • The Migrant and Seasonal Agricultural Worker Protection Act
  • The National Labor Relations Act
  • 40 U.S.C. chapter 31, subchapter IV, also known as the Davis-Bacon Act
  • 41 U.S.C. chapter 67, also known as the Service Contract Act
  • Executive Order 11246 of September 24, 1965 (Equal Employment Opportunity)
  • Section 503 of the Rehabilitation Act of 1973
  • The Vietnam Era Veterans’ Readjustment Assistance Act of 1972 and the Vietnam Era Veterans’ Readjustment Assistance Act of 1974
  • The Family and Medical Leave Act
  • Title VII of the Civil Rights Act of 1964
  • The Americans with Disabilities Act of 1990
  • The Age Discrimination in Employment Act of 1967
  • Executive Order 13658 of February 12, 2014 (Establishing a Minimum Wage for Contractors)

In a significant victory for the government contracting community, a federal judge sitting in the U.S. District Court for the Eastern District of Texas partially stayed the implementation of Executive Order 13673, “Fair Pay and Safe Workplaces,” referred to in the government contracting community as the “Blacklisting Order.”  As discussed in more detail here, the Blacklisting Order would:

  1. Require government contractors to disclose “labor law violations” under fourteen different statutes and Executive Orders when bidding for or modifying contracts;
  2. Prohibit employers from entering into mandatory pre-dispute arbitration agreements with employees; and
  3. Require certain disclosures to independent contractors and employees concerning their employment status and information related to wages and hours worked.

When the White House issued the Executive Order, the government contracting community expressed concerns about the substantial burdens it would impose on businesses and noted that the Order seemed to exceed the limits of Executive power.  Judge Marcia Crone, a federal judge in Texas, agreed.  Late on October 24, 2016, Judge Crone issued a preliminary injunction blocking: (1) the labor law violations disclosure requirements and (2) the prohibition against entering into mandatory pre-dispute arbitration agreements.  The preliminary injunction applies to all federal contractors subject to the Executive Order and it blocks all aspects of the requirements and the implementing regulations, except the paycheck transparency provision.

The Plaintiffs, an association of government contractors in Texas, argued that the Executive Order and its implementing regulations and guidance exceeded Executive power and would impose irreparable harm on their businesses.  Judge Crone found the Plaintiffs’ arguments compelling with regard to the reporting and disclosure requirements and arbitration clause prohibitions, and stayed the implementation of those requirements.

In her decision, the Judge addressed several of the arguments raised by the contracting community Plaintiffs and the government Defendants.

  • The Judge found that the Executive Order and its implementing regulations and guidance likely exceeded the limits of Executive power.
  • She noted that fourteen statutes and Executive Orders of which the Blacklisting Order requires contractors to publicly disclose “violations” all have their own detailed enforcement mechanisms and penalties.
  • The Judge noted that under the Blacklisting Order, a contractor could face debarment or disqualification even if it was contesting a violation or over nothing more than the issuance of a citation by an individual government agency official.
  • Judge Crone also found persuasive the Plaintiffs’ arguments that the provisions of the Executive Order and Final Rule which restrict or prohibit certain mandatory pre-dispute arbitration agreements are in violation of the Federal Arbitration Act and the government’s general policy in favor of arbitration.
  • The Judge found the reporting and disclosure requirements to be “compelled speech” that likely violates the contractors’ First Amendment rights and also agreed that the Executive Order likely violates contractors’ Due Process rights by “compelling them to report and defend against non-final agency allegations of labor law violations without being entitled to a hearing at which to contest such allegations.”
  • Judge Crone found that the Executive Order is likely arbitrary and capricious “in view of the complex, cumbersome, and costly requirements . . . which hamper efficiency without quantifiable benefits.”

Although the contracting community’s victory is substantial, it was not complete, as Judge Crone left the paycheck transparency provisions to take effect on their regular schedule (starting on January 1, 2017).  The paycheck transparency provisions require that contractors with procurement contracts of $500,000 provide their employees with a document disclosing “the individual’s hours worked,  overtime hours, pay, and any additions made to or deductions made from pay.” For exempt employees, the document may omit information concerning overtime hours worked so long as the individual has been informed of his or her exempt status.  Covered contractors in states with equivalent paycheck transparency laws, such as New York and California, are deemed to be in compliance with the Executive Order’s requirements so long as they comply with their state’s paycheck transparency law.  Contractors should also be aware that there is always a possibility that the preliminary injunction may be lifted – whether by the Fifth Circuit or another federal court – and in that event, the reporting and disclosure requirements could be reinstated.  For that reason, covered contractors may wish to continue to collect data in case they find themselves once again subject to the reporting and disclosure obligations.

The request for – and subsequent partial granting of – a preliminary injunction staying the implementation of certain provisions of the Blacklisting Order is only the opening salvo in what is likely to be a long fight between the contracting community and the federal government.  As we discussed in our previous alert on the topic, multiple court challenges are possible, and the Blacklisting Order’s provisions may appear before Congress at some point.

Meanwhile, thanks to Judge Crone’s preliminary injunction, the reporting and disclosure requirements and the prohibition on mandatory pre-dispute arbitration agreements are enjoined until further notice, while we continue to closely monitor developments.  Preliminary injunctions typically remain in effect at least until the conclusion of the underlying litigation.  The Plaintiffs may petition the court for the preliminary injunction to become permanent, blocking the government from enforcing the reporting and disclosure requirements and the prohibition on mandatory pre-dispute arbitration agreements (unless the injunction is overturned).  Or the government Defendants may appeal to the U.S. Court of Appeals for the Fifth Circuit, perhaps paving the way for an ultimate ruling by the U.S. Supreme Court.  The ultimate resolution of the contracting community’s concerns about the Blacklisting Order remains to be seen.  One thing is clear, however: while government contractors should be pleased with their victory in Texas, they must still plan to comply with the paycheck transparency provisions.  The contracting community has won the first battle, but the war over blacklisting continues.

For more information on this or any related topic please contact the authors, your Seyfarth attorney, or any member of the OFCCP & Affirmative Action Compliance Team, the OSHA Compliance, Enforcement & Litigation Team, or the Workplace Policies and Handbooks Team.

By Megan P. Toth and Joshua D. Seidman

Seyfarth Synopsis: In case you missed it, on June 22, 2016, Chicago added itself to the growing roster of many major U.S. cities to pass a Paid Sick Leave Ordinance.  

The Council’s Committee on Workforce Development and Audit passed the Chicago Minimum Wage and Paid Sick Leave Ordinance (“PSLO”), which amends the Chicago Minimum Wage Ordinance e (2-25-050).

The new ordinance is effective July 1, 2017.  Thus, employers with employees in Chicago must be aware of the major provisions and requirements of the PSLO, which are summarized below and more thoroughly explained by our colleagues here.

Summary of Major Provisions

  • Effective Date: July 1, 2017
  • Covered Employers: Any individual or entity with one or more employee that maintains a business facility within the city of Chicago or that is subject to city licensing requirements.
  • Covered Employees[1]: Employees working 80 hours within any 120-day period.
  • Eligibility: Employees must be eligible to use paid sick leave (“PSL”) no later than 180 days after the first calendar day of their continuous employment, unless the employer sets an earlier date.
  • Accrual: Employees must begin accruing PSL on the first calendar day after the commencement of their employment, or on the effective date of the PSLO (July 1, 2017) if already employed, at a minimum rate of one hour for every 40 hours worked.[2]
  • PSL Caps: Employers may cap accrual and use of PSL at 40 hours per 12-month period, but are free to set a higher limit.
  • Qualifying Usage: An employee may use paid sick leave for the following purposes: (1) employee or a covered family member is ill or injured, or is receiving medical diagnosis, care, or treatment, or preventive medical or health care;(2) absence of employee or the employee’s family member related to domestic violence or “a sex offense”; and (3) closure of employee’s place of business or the employee’s child’s school or place of care by order of a public official due to a public health emergency.
  • Unused PSL: Employees must be permitted to carry over half of any unused accrued PSL from year to year, up to a max of 20 hours. In addition, if the employer is subject to the Family and Medical Leave Act (FMLA), employees can carry over up to 40 hours exclusively for FMLA-eligible purposes. However, if an employee carries over and uses the additional 40 FMLA hours, they cannot use more than an additional 20 hours of PSL in that 12-month period. Employers are not required to pay out unused PSL from year to year or upon termination.
  • Notice to Employer: If an employee’s need for PSL is reasonably foreseeable, an employer may require up to seven days’ notice. If an employee’s need for PSL is not reasonably foreseeable, an employer may only require notice as soon as practicable on the day intended for PSL.
  • Medical Certification: If an employee is absent for more than three consecutive work days, an employer may require certification that the PSL was in fact used for covered purposes.
  • No Retaliation, Discipline or Coverage: Employers cannot retaliate against or discipline employees for use of PSL and cannot require  employees to find coverage for hours missed due to use of PSL.
  • Notice of the PSLO to Employees: Every covered employer must (1) post notice of the PSLO at each facility where covered employees work (with in the City of Chicago) and (2) provide notice advising covered employees of the PSLO with their first paycheck issues after the PSLO is passed.

Takeaway for Employers:

Employers with employees in the City of Chicago must ensure their leave policies are in compliance. We will continue to monitor news related to the ordinance and will provide any updates here. In the meantime, please contact the author or your Seyfarth attorney if you a have any questions regarding the PSLO, or if you would like help reviewing your paid sick leave policies for compliance with state and local laws.

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[1] Specifically excluded employees: (1) certain employees employed in agriculture or aquaculture, (2) outside salesmen, (3) members of a religious corporation or organization, (4) an individual permitted to work “[a]t an accredited Illinois college or university employed by the college or university at which he is a student who is covered under the provisions of the Fair Labor Standards Act,” (5) certain motor carriers, and (6) any employee working in the construction industry who is covered by a bona fide collective bargaining agreement.

[2] Employees who are exempt from overtime requirements are assumed to work 40 hours each week, unless their normal workweek is less than 40 hours, in which case paid sick leave accrues based on the employee’s normal work week.

By Brent I. Clark, Benjamin D. Briggs, and Craig B. Simonsen

iStock_000045960778_MediumSeyfarth Synopsis: Even in the face of a collective bargaining agreement the State of Arkansas reconsiders whether employees should be compensated for time they spend putting on and taking off required protective gear.

A divided Arkansas Supreme Court recently ruled that a food manufacturing company violated Arkansas state law by not paying production workers for time they spent putting on and taking off required protective gear. Gerber Prods. Co. v. Hewitt, et al., 2016 Ark. 222 (May 26, 2016).

We had blogged previously about donning and doffing cases. See If It Looks Like Pants And It Walks Like Pants… Supreme Court Considers Definition of “Clothes” In Section 203(o) Of The FLSA, where the question before the Court was whether the term “clothes” in section 203(o) of the Federal Labor Standards Act — which allows employers to exclude time spent by their employees “changing clothes . . . at the beginning or end of each workday” from compensable time pursuant to the terms of or a custom or practice under a collective bargaining agreement — includes protective clothing. Also, Try This On For Size: Seventh Circuit Rejects Factory Workers’ Donning and Doffing Claims Based On Expansive View Of The “Workday”, where the Seventh Circuit affirmed the dismissal of the workers’ donning and doffing claims, with Judge Posner taking a broad view of the definition of “workday” and the applicability of section 203(o).

Igniting this controversy was DOL Issues New Interpretation of “Clothes” Under FLSA and Expands What Constitutes Compensable Activity, where the DOL’s then new interpretation concluded that the FLSA exception for changing “clothes” did not include protective gear. Specifically, the interpretation states that the definition of “clothes” does not include “the modern-day protective equipment commonly donned and doffed by workers in today’s … industries where protective equipment is required by law, the employer, or the nature of the job.”

In this new state case the employees alleged that the company failed to compensate them for their time spent donning and doffing “clothing and protective gear, sanitizing clothing and equipment, washing their hands, and walking to and from their work stations.” The employees asserted that these activities were “necessary and indispensable” to their principal work, but the employees were not compensated.

In a 4-3 decision, the court affirmed the appellate court decision that the company was liable for approximately $3 million in unpaid overtime and interest to workers at its Arkansas plant.

The company had argued that the FLSA exception excused its failure to pay for donning and doffing time prior to 2013 because the union representing the workers signed collective bargaining agreements that made such time non-compensable. The Court, though, found that Arkansas Minimum Wage Act doesn’t incorporate the FLSA exception. Instead it ruled that the approximately 14 to 20 minutes that the workers spent daily putting on and taking off protective gear is compensable under the state law.

In the dissent, Justice Wood argued that the majority’s opinion will open the floodgates to litigation, and that it “undermines the collective-bargaining process and destroys any confidence employers and employees have in the enforceability of their agreements.” Particularly, the Justice noted that:

For this court to abrogate the collectively bargained agreements between Gerber and its employees, which have customarily and generally excluded donning and doffing from the rate of pay, and afford the employees a windfall, is unjustified, particularly when the agreements do not violate the minimum-wage requirement.

For employers, certainly those in Arkansas, this case indicates that it may be appropriate to re-examine collective bargaining agreements, company safety programs and policies, and corporate employees pay policies.

In our third installment of articles looking at the employment law cases being heard by the US Supreme Court this fall term, Tyson Foods Inc. v. Bouaphakeo will have importance in both the wage & hour and class action litigation worlds. “Donning and Doffing “ – who knew!

 Another Watershed Moment for Class Actions?  SCOTUS to
Address Limits on Statistical Proof In Class and Collective Actions

 By Michael Kopp

In a case that is certain to provide an important sequel to the Dukes decision, the Supreme Court will hear argument next week on Tyson Foods Inc. v. Bouaphakeo, to address (1) the use of statistical averaging in class actions to prove liability and damages, and (2) whether courts may certify a class that includes individuals with no injury.

Tyson Foods is important because it will likely set further markers on how far the court’s prohibitions against statistical modelling extend, and more significantly, how these concepts apply to collective actions under the Fair Labor Standards Act. For this reason, employers’ eyes are on Tyson Foods, as the Supreme Court has not previously addressed how Dukes’ analysis applies to collective actions under the FLSA, and whether the FLSA’s “similarly situated” standard differs from Rule 23(b).

The road to the Supremes.  Tyson Foods reached the Supreme Court by way of a divided Eighth Circuit opinion affirming a $5.8 million verdict on an off-the-clock class wage claim. Plaintiffs claimed that Tyson’s Iowa meat processing facility had not paid over 3000 plant workers for the time they spent changing in and out of their work gear and walking to and from the production line.  The district court found there was a common question as to whether the challenged time was compensable, and certified the case as a collective action as to the FLSA claim, and as Rule 23 class action as to the state law wage and hour claims.

Tyson unsuccessfully attempted to decertify the class, and argued neither liability nor damages were “capable of classwide resolution … in one stroke,” as required by Dukes.  Tyson pointed to variations in the type and amount of equipment worn by employees in the hundreds of classifications at issue, and highlighted the disparities in the routines and amount of time employees spent on these tasks. Unpersuaded, the district court permitted a nine-day jury trial on the class claims, where plaintiffs used a statistical model to calculate the “average” time employees spent on the donning, doffing and walking activities at issue.  These average activity times were then extrapolated to the class members.  Although plaintiffs’ expert conceded that the actual times for these activities varied considerably – and over 200 class members suffered no injury at all – the jury nonetheless awarded a lump sum verdict, to be divided among all class members.

Divided approaches to Dukes.  The divided Eighth Circuit panel’s majority opinion and dissent highlight the inconsistent approaches lower courts have taken in interpreting Dukes. The panel majority found that there was a common question concerning whether the activities were compensable under the FLSA and state law, and that plaintiffs had “prove[n] liability for the class as a whole, using employee time records to establish individual damages.”

The dissent took the majority to task for ignoring the considerable differences in donning and doffing times, employee routes to their work stations, the amount of time Tyson allotted for such activities, shortened time shifts, “and a myriad of other relevant factors.” Using statistical models to gloss over those differences violated Dukes’ requirement that the action generate “common answers apt to drive the resolution of the litigation.”  Moreover, the dissent highlighted the critical problem with the majority’s distinction between the classwide liability determination and the individual damages analysis.  Unlike other class claims, establishing a violation in wage and hour actions generally turns upon and “includes the measure of a class member’s individual damages.”  In other words, an employer is only liable to an individual if the employee has actually suffered an injury, such as the compensable loss of overtime.  For that reason, a verdict that “result[s] in a single-sum, class-wide verdict from which each class member, damaged or not, will receive” compensation, is fundamentally inconsistent with Dukes’ prohibition against “trial by formula.”

Why This Case Matters.  First, the Supreme Court will have the opportunity to clarify the extent of Dukes limitations on the use of statistical techniques to establish damages and liability.  Second, the case has particular significance in the wage and hour context, because it provides the opportunity for the Supreme Court to weigh in for the first time as to whether the standards for certifying a Rule 23(b) class action apply to collective FLSA actions, and whether the FLSA’s “similarly situated” standard alters the analysis.  Third, the case provides the opportunity for the court to address Tyson Food’s constitutional argument that an award of monetary damages to uninjured class members is impermissible.  This is particularly critical, as it is a common feature for wage and hour actions to include class members with no identifiable actual wage loss or injury.

Stay Tuned … This case is set for oral argument on Tuesday, November 10, so be on the lookout for a follow up blog post here when a decision is reached.

If you would like more information regarding this article, please contact the author or your Seyfarth attorney.