Hunton Employment & Labor Perspectives

Unpaid interns have increasingly become a hot topic among lawmakers and courts.  Last week, New York Governor Andrew Cuomo signed into law legislation which prohibits New York State employers from discriminating against, or sexually harassing, unpaid interns.  New York State enacted this legislation only a few months after New York City passed a law which prohibits discrimination against unpaid interns.  New York City unanimously enacted its legislation in response to a district court ruling in October 2013, which found that an intern could not proceed with a sexual harassment claim because she was unpaid, and therefore, she was not entitled to protections under Title VII or the New York City Human Rights Law.  (Wang v. Phoenix Satellite Television US, Inc., 976 F. Supp. 2d 527 (S.D.N.Y. 2013)).  Although few jurisdictions currently offer unpaid interns protection from discrimination or sexual harassment (only New York, Oregon and Washington, D.C.), legislators in New Jersey and California have introduced bills which would grant unpaid interns these same protections.  The California bill has already passed the State Assembly and is being reviewed by the State Senate.

On February 12, 2014, President Obama announced Executive Order 13658, “Establishing a Minimum Wage for Contractors.”  The order seeks to raise the hourly minimum wage paid to workers performing services on covered Federal contracts to: (i) $10.10 per hour, beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of Labor in accordance with the Order.

You're Invited: Pay Equity Under The Obama Administration

Pay equity for women and minorities has been a priority throughout President Obama’s administration. President Obama has wielded his Executive power with increasing frequency in 2014. President Obama recently issued an Executive Order and a Presidential Memorandum that target the pay practices of federal contractors. Both actions are designed to increase transparency in employee compensation. They may have significant consequences for covered employers.

During his most recent State of the Union Address on January 28, 2014, President Barack Obama stated that one of his top priorities in the coming year was to address what he described as “stagnant wages.”  More importantly, he warned Congress that if they did not take steps to tackle the issue soon, he was prepared to attempt to address the issue unilaterally through exercise of his executive power.

President Barack Obama is expected today to direct the Department of Labor to revise its wage-payment regulations so that more workers will receive overtime compensation. 

Currently, the Fair Labor Standards Act provides an overtime exemption for categories of salaried employees who receive at least $455 a week.  President Obama intends to increase the weekly $455 salary threshold so that employers must pay affected employees a higher salary, cut their hours, or pay them overtime for work in excess of 40 hours a week.

Under Section 203(o) of the federal Fair Labor Standards Act (“FLSA”), an employee’s time spent “changing clothes” at the beginning or end of each workday is not compensable if such time is expressly excluded from compensable work time in a bona fide collective bargaining agreement or if there is a “custom or practice” of non-payment for such activities (or payment for a set amount of time).  On Monday, the Supreme Court clarified the definition of “changing clothes” for purposes of the FLSA, holding that a class of 800 unionized steelworkers, whose employment was covered by a collective bargaining agreement, were not entitled to compensation for time spent changing into and out of protective gear.

On September 17, 2013, the U.S. Department of Labor (“DOL”) announced a final rule that will extend overtime and minimum wage protections to many direct care workers.  The rule is set to go into effect on January 1, 2015.

When the Fair Labor Standards Act (“FLSA”) was enacted, it did not protect workers employed directly by households in domestic service.  Congress amended the FLSA in 1974 to apply to employees performing household services in a private home.  However, that amendment did not apply to certain workers, such as domestic service workers employed to provide “companionship services” to elderly persons or persons with illnesses, injuries, or disabilities.  With the DOL’s new rule, many direct care workers, such as certified nursing assistants, home health aides, personal care aides, and other caregivers will be subject to the minimum wage and overtime requirements of the FLSA. 

EMPLOYMENT DECISIONS

Vance v. Ball State University: Narrow Definition of Supervisor in Harassment Suits
In Vance, the Supreme Court announced a narrow standard for determining which employees constitute “supervisors” for purposes of establishing vicarious liability under Title VII. In a 5-4 decision, the Court decided that a supervisor is a person authorized to take “tangible employment actions,” such as hiring, firing, promoting, demoting or reassigning employees to significantly different responsibilities. The majority opinion rejected the EEOC’s ...

Now that summer is here and the interns have arrived, it is important to consider whether your interns should be paid.  A New York District Court has recently issued a decision highlighting this concern in its ruling against unpaid internships.  In Glatt v. Fox Searchlight Pictures Inc. interns who worked on the set of Black Swan brought suit alleging that Fox Searchlight Pictures Inc. and Fox Entertainment Group, Inc. violated the Fair Labor Standards Act (“FLSA”) and the New York Labor Laws (“NYLL”) by classifying them as unpaid interns rather than employees.  11 Civ 6784 (WHP) (S.D.N.Y. June 11, 2013).

Pundits have written much about the Affordable Care Act’s forthcoming Health Insurance Exchanges, but they have paid little attention to employers’ obligations to notify employees of those Exchanges.  The state-based Exchanges, also known as the Health Insurance Marketplace, are expected to go into effect on January 1, 2014, with open enrollment beginning on October 1, 2013.  Employees may purchase health insurance through these Exchanges.

Many buyers in asset sales may assume that if the seller and buyer agree that the buyer does not assume the seller’s liabilities, the buyer would have no liability for employment-related issues pertaining to the seller prior to the sale.  A recent Seventh Circuit decision authored by the influential Judge Posner in Teed v. Thomas & Betts Power Solutions, L.L.C. reminds purchasers that their assumption is not necessarily true, as the Seventh Circuit noted that when liability is based upon a violation of a federal labor or employment statute, courts apply a more aggressive standard of successor liability than the typical state-law standard to which courts might otherwise look.

A pending federal case highlights some of the wage-and-hour pitfalls emerging from the use of e-mail and smartphones.  Chicago Police Department Sergeant Jeffrey Allen originally filed his suit, alleging overtime compensation violations under the Fair Labor Standards Act (FLSA) in 2010.  On January 14, 2013, U.S. Magistrate Judge Sidney Schenkier of the Northern District of Illinois, Eastern Division, granted Allen’s conditional certification for a collective action under the FLSA.  In his suit, Allen claims that the City of Chicago violated the FLSA when it failed to compensate him, an hourly non-exempt employee, and a putative class of Chicago police officers for time spent reading and responding to emails via city-issued BlackBerries outside of normal working hours.

California employers may be familiar with Wang v. Chinese Daily News, a wage-and-hour class action that has been in litigation for almost a decade. The latest decision in this case, a published opinion from the Ninth Circuit on March 4, 2013, offers a boost to defense counsel who face a class actions in this circuit.

On July 24, 2012, the Fifth Circuit Court of Appeals issued what may turn out to be one of the more significant Fair Labor Standards Act rulings in recent years.  In Martin v. Spring Break ’83 Productions, LLC, the Fifth Circuit held that, under certain circumstances, a settlement agreement between an employer and its employees involving FLSA claims is enforceable notwithstanding the fact that neither the Department of Labor nor a court approved the agreement.  This ruling is the first appellate-level decision enforcing a private FLSA settlement and potentially opens the door for other circuits and district courts to follow suit.

The Supreme Court recently announced the cases for which it has granted certiorari for the 2012-2013 term.  Among these, and now slated to be adjudicated in the nation’s highest court next term, are the appeals of three cases that will surely impact employment litigation.  In these cases, the Court will discuss (1) what the evidentiary standard is in federal courts, post-Dukes,  for class certification, (2) whether a case becomes moot, and thus beyond the judicial power of Article III, when the lone plaintiff receives an offer from the defendants to satisfy all of the plaintiff's claims, and (3) what constitutes a “supervisor” for a vicarious liability claim under Title VII.

On June 18, 2012, in Christopher, et. al. v. SmithKline Beecham Corp., the United States Supreme Court issued its first decision interpreting the so-called white collar exemptions under the Fair Labor Standards Act and finally resolved the circuit split over whether pharmaceutical sales representatives are exempt as outside salespeople.  This decision is not only a long-awaited victory for the pharmaceutical industry, but also a key win for employers in all industries. In Christopher, the Supreme Court held that pharmaceutical sales reps qualify for the outside salesman exemption and are not entitled to overtime wages. The Court also unanimously rejected the U.S. Department of Labor’s (“DOL”) attempt at back-door regulation through an amicus brief, delivering a blow to the DOL’s recent enforcement campaign.

A federal court jury returned a unanimous verdict in favor of Tyson Foods today in a Rule 23 class and FLSA collective action, alleging failure to pay overtime under state and federal law.  Tyson was represented at trial by Hunton & Williams' lawyers Michael J. Mueller, Emily Burkhardt Vicente and Evangeline Paschal and local Baird Holm lawyer, Thomas E. Johnson.

Two members of the National Labor Relations Board recently held that employers may not require employees to enter into arbitration agreements, as a condition of employment, that waive the ability to pursue class or collective claims. The Board’s ruling does not sound the death knell for class action waivers, however, as many Plaintiff’s lawyers have touted.

The U.S. Department of Labor provides general information and compliance guidance regarding numerous wage, hour, employment, and labor laws via “fact sheets” which are available to employees, employers, and the general public. Fact sheets can serve as helpful reference and compliance material for employers. On December 23, 2011, the DOL issued three new fact sheets on the issue of unlawful retaliation.  These newly released fact sheets address retaliation under the Fair Labor Standards Act (“FLSA”), the Family and Medical Leave Act (“FMLA”), and the Migrant and Seasonal Agricultural Workers Protection Act (“MSPA”).

On December 15, 2011, the Department of Labor issued proposed rule changes that would extend the Fair Labor Standards Act’s minimum wage and overtime protections to the roughly two million in-home caregivers providing services to the elderly and infirm.  If enacted, the changes would eliminate the FLSA’s longstanding companionship and live-in domestic service exemptions, and likely lead to a major change in the in-home care worker industry.

A little known law that permits the disabled to be paid sub-minimum wage is currently under attack. To foster employment opportunities for disabled workers in the mainstream workforce, the Fair Labor Standards Act (FLSA)  has contained, since its passage, a relatively unknown provision under Section 14(e) that allows employers to pay disabled workers sub-minimum wages as long as the wages are commensurate with the disabled worker’s productivity. The prerequisites to paying sub-minimum wage to the disabled are stringent and include:

• Preparing a job description for the employee that identifies duties and responsibilities, skills required, and specifies the days and hours of work;
• Identifying the prevailing wage for the position compiled internally or, if necessary, from similar businesses in the area;
• Determining the productivity level of the disabled employee compared to non-disabled workers (e.g., through time/motion studies); and
• Submitting the information on an application to the Secretary of Labor for a special wage permit allowing for the payment of sub-minimum wages.

On October 3, 2011, the U.S. Supreme Court vacated the Ninth Circuit’s decision in Wang v. Chinese Daily News, Inc., 623 F.3d 743 (9th Cir. 2010), and remanded it “for further consideration in light of Wal-Mart Stores, Inc. v. Dukes, 564 U.S. ___ (2011).” The Supreme Court did not provide any further analysis of the Wang decision in its granting of the petition for a writ of certiorari.

The Fair Labor Standards Act, 29 U.S.C. 215(a)(3) ("FLSA") forbids an employer from retaliating against an employee for making prior FLSA complaints.  Simple concept, one would think.  But with most employment related legal issues, the "devil" is often in the details.  What is an "employee," exactly, under the FLSA?  Does it include an applicant for employment, who is retaliated against by a prospective employer?  A divided panel of the U.S. Court of Appeals for the Fourth Circuit recently ruled that the answer is "no," rejecting a claim that a prospective employer violated the FLSA by rescinding an employment offer to an applicant after learning about a FLSA lawsuit the applicant filed against her prior employer.  Dellinger v. Sci. Applications Int'l Corp., 2011 U.S. App. LEXIS 16635 (4th Cir. Aug. 12, 2011).

On August 9, 2011, the Ninth Circuit Court of Appeals ruled that a putative class action cannot be rendered moot by a defendant’s Rule 68 offer of judgment to the named plaintiff, even when the offer of judgment fully satisfies the named plaintiffs claim.  In doing so, the Ninth Circuit joined the other three circuits that have considered the pre-certification effect of an offer of judgment on the mootness of a class action.  The other three circuits (Second, Third, and Fifth) have similarly held that a defendant cannot “pick off” lead plaintiffs with an offer of judgment in order to avoid a class action.

The class action under the Fair Labor Standards Act arguably is the employer’s most dreaded legal claim.  In April 2011, the United States Supreme Court provided a potential escape hatch for employers.  In AT&T Mobility v. Concepcion, the Supreme Court seemed to signal -- “seemed” being the operative word -- that employers need only enter into arbitration agreements in which employees disclaim their ability to file an FLSA class action (or, as it’s actually called in the FLSA, a “collective” action).

The United States Department of Labor (“DOL”) has announced the launch of its first application, or “app,” for smartphones to “help employees independently track the hours they work and determine the wages they are owed” in accordance with the Fair Labor Standards Act (“FLSA”). The application is available in both English and Spanish and allows employees to privately record regular work hours, break and meal times, and any overtime hours. The free app is currently compatible only with iPhone and iPod Touch; however, the DOL is exploring updates for compatibility with other smart phones such as Android and Blackberry phones.

The Obama Administration has addressed labor and employment issues aggressively over the past two years.  The Department of Labor, under President Obama’s direction, has articulated its “Plan/Prevent/Protect” agenda and its focus on openness and transparency in labor practices.  As a result of the steps taken by the Obama Administration in 2010, the new Republican-dominated Congress may have to decide a number of regulatory and legislative measures that will directly affect labor and employment law in 2011. The following is a list of proposed regulations and legislation that employers and their attorneys should watch this year:

Employers who hold their breath and declare an employment position as “exempt” from the Fair Labor Standards Act’s overtime previsions − all the while knowing that the exempt v. non-exempt question is a close call − should take a simple step to save themselves substantial damages should a court later rule the position non-exempt.

When entering into an employment arrangement with the employee, the employer should obtain the employee’s acknowledgement in writing that the employee’s weekly hours may fluctuate, and that each weekly portion of the employee’s annual salary will constitute payment for all hours worked during that week.

Our prior posts have chronicled recent attempts by Congress and state legislatures to crack down on employers who misclassify employees as independent contractors, the most notable of which was the Employee Misclassification Prevention Act that, among other things, seeks to create a cause of action under the FLSA for misclassification and to require employers to keep records of hours worked by independent contractors.  On September 15, Congress took yet another step in the enforcement direction when Senator John Kerry (D-Mass.) and Representative Jim McDermott (D-Wash.) introduced The Fair Playing Field Act of 2010 (S. 3786, H. 6128), which seeks to close a so-called “loophole” under the current tax regime.

The U.S. District Court for the Eastern District of Pennsylvania recently decertified a wage and hour collective action against Pennsylvania poultry processor Farmers Pride, ruling that a collective action is not an appropriate mechanism for resolving claims that the employer failed to fully compensate employees for time spent engaged in donning- and doffing-related activities.  The Court’s 47-page opinion reflects a thorough analysis that will serve as guidance to employers and courts around the country faced with similar collective action claims.

According to recent federal court decisions, a shareholder, director, or other individual holding a similar position in a corporation may find his or her job status disqualifies him or her from legal relief under many state and federal anti-discrimination laws should such individual believe that he or she has been the subject of unfair treatment in the workplace. In Kirleis v. Dickie, McCamey & Chilcote, P.C., No. 09-4498 (3rd Circuit July 14, 2010), the U.S. Court of Appeals for the Third Circuit affirmed a district court’s ruling that a law firm shareholder was not an “employee” of the professional corporation protected by federal and state anti-discrimination laws.

The Department of Labor’s Wage and Hour Division recently issued a fact sheet explaining employers’ obligations under the break time requirement for nursing mothers found in the Patient Protection and Affordable Care Act, which amends Section 7 of the Fair Labor Standards Act (“FLSA”).

In a recent decision, a federal district court judge held that Abbott Laboratories, Inc.’s pharmaceutical sales representatives do not qualify for either the outside sales or administrative exemptions of the Fair Labor Standards Act (“FLSA”).  Under the FLSA, employers are required to pay overtime for hours worked over 40 in a week, unless an employee qualifies for an exemption under the Act. While the FLSA contains many such exemptions, the most commonly used exemptions are the executive, outside sales, and administrative exemptions.  Each exemption has specific requirements that must be met.

For years, employers wrestling with thorny wage and hour issues under the Fair Labor Standards Act (“FLSA”) have used the Wage & Hour Division’s (“WHD”) opinion letters for fact-specific guidance.  To the extent a particular issue was not addressed by a current opinion letter, the employer could submit a request for an opinion letter and obtain definitive guidance from WHD.  Employers who relied on opinion letters were immune from FLSA liability under the Portal Act’s safeharbor provision, which allows an employer to avoid liability for FLSA violations if the employer relied on a written interpretation of the WHD.

Continuing a trend in Congress to limit employers’ use of independent contractors, on April 22, 2010, Rep. Lynn Woolsey (CA) and Senator Sherrod Williams (OH) introduced the Employee Misclassification Prevention Act (H.R. 5107, S. 3254) (“EMPA”) in the House and Senate respectively.  The EMPA would amend the Fair Labor Standards Act (“FLSA”) and render worker misclassifications a violation of federal law.  Employers would be required to maintain records reflecting hours worked and wages paid for employees and non-employee workers.  They also would be required to provide workers a “notice” that identifies: the worker’s classification, a yet to be created Department of Labor website (containing an on-line complaint link), contact information for the applicable Department of Labor office, and other additional information as prescribed by regulation.  For workers classified as non-employees, the Notice would be required to state: “Your rights to wage, hour, and other labor protections depend upon your proper classification as an employee or non-employee. If you have any questions or concerns about how you have been classified or suspect that you may have been misclassified, contact the U.S. Department of Labor.”

In its recently published Spring 2010 Regulatory Agenda, the Department of Labor (“DOL”) announced that it plans to propose a rule that would amend the current recordkeeping regulations under the Fair Labor Standards Act (“FLSA”).  Under the proposed rule, any employers seeking to exclude workers from the FLSA’s coverage will be required to perform a classification analysis, disclose that analysis to the worker, and retain that analysis to provide to Wage and Hour Division (“WHD”) enforcement personnel upon request.  The proposal will also address burdens of proof when employers fail to comply with records and notice requirements.

With a dearth of job openings for recent college graduates, many have pursued unpaid internships while continuing to search for fulltime employment.  A 2008 survey found that half of all college students hold at least one internship before graduating.  In light of the 18.8% March unemployment rate for American workers aged 16-24—nearly double the 9.7% unemployment rate for the workforce at large—this practice can be beneficial for interns, who gain experience and contacts, as well as for employers, who can benefit from having eager interns ready to learn and contribute.

The much-publicized health care reform act contains a particular provision that has not received much media exposure, but which may require employers to take immediate action.  The 2010 Patient Protection and Affordable Care Act (“PPACA”), signed into law by President Obama on March 23, amends the Fair Labor Standards Act (“FLSA”) to require employers to provide “reasonable break time” for nursing mothers to express breast milk.

On April 1, Secretary of Labor Hilda Solis announced a new campaign aimed at enforcing federal wage and hour laws on behalf of low-wage and immigrant workers and warned employers, “A new sheriff is in town.”

Both the Third and the Seventh Circuits are set to address the issue of whether collective actions under the Fair Labor Standards Act are compatible with class actions under state wage and hour laws.  In the Third Circuit, briefing is underway in Parker v. NutriSystem, Inc., No. 09-3545.  And argument is set in the Seventh Circuit for April 2, 2010 in Ervin v. OS Restaurant Servs., Inc., No. 09-3029.  Both courts will address what some have called the “inherent incompatibility” of FLSA collective actions and state law wage and hour class actions that are pursued in the same case.

In a short and simple opinion by Judge Morton Greenberg, the U.S Court of Appeals for the Third Circuit affirmed summary judgment in favor of Johnson & Johnson against pharmaceutical sales representative Patti Lee Smith, finding that the FLSA’s administrative employee exemption applied to her.  The Third Circuit is the first court of appeals to examine the FLSA exempt status of pharmaceutical sales representatives.  The ruling in favor of the employer represents a significant development for pharmaceutical companies around the country, many of whom are facing similar FLSA lawsuits brought by their pharmaceutical sales representatives.

Companies doing business in California should note that, on November 23, 2009, the Chief Counsel of the California Division of Labor Standards Enforcement (“DLSE”) issued an Opinion Letter on behalf of Labor Commissioner Angela Bradstreet, in which the DLSE modified its position on the issue of making deductions from vacation and sick leave balances accrued by exempt employees for the purpose of covering partial-day absences.  The Opinion Letter brings California law more in line with the federal Fair Labor Standards Act regarding the “salary basis test” and deductions from exempt employee paid time-off accounts for partial-day absences.

Last week, Secretary of Labor Hilda Solis announced the Department of Labor's planned launch of an ambitious new public awareness campaign called "We Can Help."  The campaign, set to debut in early 2010, is designed to help inform workers about their rights under federal wage and hour laws.

Many employers recognize the advantages of “alternative” work arrangements with independent contractors, consultants, freelancers, temporary staffers, and “as needed” workers.  Generally, employers utilize these arrangements because they hope to obtain cost savings and increased flexibility, particularly in an uncertain business climate.  In some companies, use of a contingent worker expands working capacity without increasing employee headcount, which can be particularly attractive during a hiring freeze.

Previously we have discussed the risks associated with contingent worker arrangements (engagements of independent contractors, consultants, freelancers, temporary staffers, and “as needed” workers, etc.).  These risks will continue to grow in the coming months, as more claimants emerge seeking damages, government agencies increase their enforcement efforts, and state and federal legislators create new restrictions and penalties associated with classifying workers as independent contractors.

Government agencies are being urged to step up their efforts to address the potentially widespread problem of improper classification of workers as independent contractors, according to a recent study by the United States Government Accountability Office (GAO).  In a 70-page document, the GAO concluded that the U.S. Department of Labor (DOL) and the Internal Revenue Service (IRS) have not sufficiently focused on misclassification in the past, and that they have not consistently assessed penalties against companies found to have improperly classified workers.