Author Archives: smithamundsen

UPDATE: Supreme Court Rules For Workers On FAA “Transportation” Exemption

Contributed by Brian Wacker, January 15, 2019 

Last month, this blog discussed New Prime, Inc. v. Oliveira, a then-pending case before the Supreme Court that presented the question of whether arbitration agreements between trucking companies and independent contractor drivers fall within the “transportation” exemption to the Federal Arbitration Act (“FAA”).   

This morning, the Court unanimously ruled in favor of Mr. Oliveira, affirming the First Circuit and holding that his independent contractor agreement with New Prime is a “contract of employment” under the FAA.  The Court disregarded the characterization of his relationship with New Prime as an independent contractor (as opposed to an “employee”) and found that the FAA’s exemption for “contracts of employment” refers to any “agreements to perform work.” Therefore, Mr. Oliveira’s agreement fell within the FAA’s exemption and his claims were not properly subject to compelled arbitration.  

This is a significant victory for workers, especially considering the unanimity of the Court’s decision, authored by one of its more conservative jurists, Justice Gorsuch. Employers with independent contractors in the transportation field should take note: existing arbitration provisions in independent contractor agreements can no longer be used to shield businesses from the risks, expenses and uncertainty of litigation in court.

Supreme Court May Decide Whether the Equal Pay Act Allows Employers to Consider Prior Salary in Setting Current Salary

Contributed by Allison P. Sues, January 14, 2019  

wage gap concept with blue figure symbolizing men and red pawn women

The Supreme Court may soon answer a question that divides federal courts: may an employer consider an employee’s salary history when setting pay without violating the Equal Pay Act (EPA)? The EPA prohibits employers from paying wages to employees of one sex less than employees of the other sex for equal work. The EPA holds employers strictly liable for differential pay, regardless of whether the employer had a discriminatory intent, unless the employer can show the difference in pay is based on a seniority system, merit system, quality or quantity of production measurements, or a fourth catchall factor.  Federal courts question whether the fourth catchall factor – “a differential based on any other factor other than sex” – allows an employer to set pay based on an employee’s salary history.

The Supreme Court recently announced it will, for the third time, consider a petition for review of the Ninth Circuit’s decision in Rizo v. Yovino, which signals that the Court may take up the case.  In Rizo, the Ninth Circuit held that an employer cannot consider prior salary in setting an employee’s current salary without running afoul of the EPA. Referring to the gender pay gap as an “embarrassing reality of our economy,” the Court noted that allowing employers to refer to prior salaries enabled the marketplace to perpetuate the gender-based wage differential that fueled the enactment of the EPA in the first place. The Court then clarified the meaning of the fourth catchall exception in the EPA, holding that “‘any other factor other than sex’ is limited to legitimate, job-related factors such as a prospective employee’s experience, educational background, ability, or prior job performance.” 

Should the Supreme Court agree to hear the Rizo appeal, the Court’s ruling would offer some much-needed clarity for the various and conflicting opinions of the federal appeals courts on this issue.  For example, while the Eleventh Circuit has held, similar to the Ninth Circuit, that the catchall exception is limited to “job-related factors,” the Second Circuit has held that this same provision applies to an arguably broader category identified as “business-related reasons.” Taking still another approach, the Seventh Circuit has held that employers may consider prior salary history in setting current pay.  In Wernsing v. Department of Human Services, the Seventh Circuit rejected the argument that basing current salaries on prior salaries inherently perpetuates discrimination. While the court conceded that, empirically, women are paid less than men, the court held that it cannot be assumed that a pay differential is the result of discrimination. Instead, plaintiffs must prove the disparity is based on sex for the specific market at issue. 

While courts grapple with whether the EPA prohibits considering prior salaries, many legislatures are addressing the issue from another angle.  Several states (including California, Massachusetts, Delaware, and Oregon) and cities (including New York City, Philadelphia, and New Orleans) have enacted legislation prohibiting employers from asking employees about their prior salaries in an attempt to ameliorate the gender pay gap. Should the Supreme Court review and affirm Rizo, all employers would be well-advised to follow the lead of these states and cities, and refrain from collecting applicants’ salary histories. Stay tuned as we will continue to provide updates as new information on this area of the law emerges.

After Decade of Silence, DOL on Opinion Letter Spree

Contributed by Noah A. Frank, January 8, 2019

We previously reported that in 2018, the U.S. Department of Labor (DOL) began issuing opinion letters again after nearly a decade of silence. While the legislature makes laws, the consequences of presidential elections flow into the executive agencies charged with administering and enforcing the laws. 

As of the close of 2018, the DOL had issued more than 30 new opinion letters involving the Family and Medical Leave Act (FMLA) or Fair Labor Standards Act (FLSA), and those letters addressed a variety of topics including minimum wage and overtime for employees paid varying rates, the compensability of frequent rest breaks required as a reasonable accommodation for a disability, and travel time. The DOL’s opinion letters represent the agency’s official interpretation of how it would enforce the statutes under its jurisdiction. Employers, especially those operating close to the margins of the law, should pay careful attention to these opinions and adjust their practices accordingly. 

Companies with questions or concerns relating to FMLA and FLSA practices may also wish to seek their own opinions letters—which may be submitted anonymously, through counsel—for clarity regarding complicated compliance matters. Additionally, given the substantial risks and liabilities that may arise from medical leave and wage & hour administration, companies should also err on the side of caution by seeking the advice of knowledgeable employment counsel, and regularly undertaking audits of FMLA and FLSA-related policies and practices.

Mandatory Vaccine and Health Screens: Employers Should Ensure that Such Actions are Job-Related and Consistent with Business Necessity

Contributed by Allison P. Sues, January 3, 2018

The words HEALTH SCREENING with stethoscope on wooden background

Flu season is here and offers an opportune time to discuss the tricky intersection between the Americans with Disabilities Act (ADA) and employers’ efforts to require mandatory vaccinations and health screenings for employees.  Some employers, especially those in the healthcare field who provide direct services to patients, require employees to pass a health screening or receive certain vaccinations either upon hire or at other periodic intervals. Employers should ensure that these efforts comply with the ADA. 

The ADA allows certain health screenings and inquiries depending on what point in the stage of employment the screening or inquiry takes place. Per the federal regulations supplementing the ADA, employers are generally prohibited from asking any disability-related questions or requesting any medical exams before a conditional offer of employment is extended to the applicant. Once an offer of employment is made, an employer may require a medical examination if the same examination is used for all entering employees in that job category. If an employer uses certain criteria from these examinations to screen out employees, those criteria must be job-related and consistent with business necessity. As for current employees, the ADA generally prohibits employers from requiring current employees to undergo medical examinations or inquiries unless the employer can show that the exam is job-related and consistent with business necessity.

The Eighth Circuit Court of Appeals recently issued an opinion analyzing these very rules and provided further clarity on what types of exams may be deemed job-related and consistent with business necessity for employers working in the healthcare setting. In Hustvet v. Allina Health System, the appellate court affirmed summary judgment for an employer that required that the plaintiff complete a health assessment tracking whether employees had immunity to certain communicable diseases. The health assessment revealed that the plaintiff, who worked in a patient-centered role within the healthcare system, did not have immunity to rubella. When the plaintiff refused to receive a rubella vaccine, her employer terminated her employment. The court deemed the employer’s medical examination to be job-related and consistent with business necessity and therefore held that the employer did not violate the ADA.

The court found that requiring the plaintiff to receive the rubella vaccine was job-related and consistent with business necessity. In so finding, the court reasoned that the employer selected a class of employees – those who interacted directly with patients – who needed to complete a health assessment because that class of employees posed a genuine safety risk, and that the specific assessment allowed the employer to decrease that risk.   The court confirmed that an employer in the healthcare field may require that employees undergo health assessments or receive mandatory vaccinations in order to ensure employee and patient safety by decreasing the risk of communicable disease exposure and transmission. 

Employers who require mandatory health screens or vaccinations should ensure that the examination measures are supported by a job-related reason, consistent with business necessity, apply similarly to all employees within a job category, and are no more intrusive than necessary.  Any information collected through these medical examinations must be collected and maintained on separate forms and maintained in a separate confidential medical file.   

Ho, Ho, Ho, It’s Restrictive Covenant Season!

Contributed by Jeff Glass, December 28, 2018

Early in the New Year we often see employees switching jobs, which can trigger disputes over restrictive covenants in their employment agreements. As 2018 draws to a close, here are some things to keep in mind to protect your company, its customers, and its information against unfair competition from departing employees:

Assume the worst. We tend to assume people will comply with their contractual obligations. Employers should not assume a departing employee will comply with a restrictive covenant. Some employees forget they even have an employment agreement. Some think the employer won’t enforce the agreement especially if it has not enforced similar agreements in the past.  Some think restrictive covenants are not enforceable. So don’t assume departing employees will comply with their obligations.  

The exit interview is critical. Provide the employee with a copy of the contract during the exit interview, review any post-employment obligations, and explain that the company intends to enforce its rights under the agreement.  Ask each departing employee to return all digital and paper copies of company information. Have them sign a statement that all such information has been returned or destroyed. 

Preserve the laptop. If the employee has a company-issued laptop computer, do not “wipe” the device or put it back into service right away. The employee’s computer may hold a treasure-trove of useful information should litigation result. 

Pay out what you owe. If the employee has earned a bonus based on 2018 performance that would normally be paid out under your policies and procedures, pay it – even if you suspect unfair competition. Otherwise, the employee may argue that the company waived its right to enforce the restrictive covenants by failing to perform its own contractual obligations. 

Send out a cease and desist letter.  As soon as you suspect improper conduct, have legal counsel send a letter demanding that the former employee cease and desist from any improper conduct and preserve all relevant information. Consider sending the new employer a copy of the contract. Sometimes, this is enough to stop the behavior in its tracks.   

Review your restrictive covenants. Does your contract comply with the Federal Defend Trade Secrets Act and applicable state law? Does your contract allow you to recover attorney’s fees in the event of a breach? Are the restrictions no greater than necessary to protect your company? Does it contain an “auto-extender” clause that extends the period of restriction in the event of a breach? Do other provisions need to be updated?

If you don’t have a restrictive covenant agreement, you still have options. In most states employers can require an existing employee to sign a restrictive covenant as a condition of continued employment if adequate consideration is provided. Even companies that elect to operate without restrictive covenants may enjoy some level of protection through state or federal trade secret statutes and fiduciary duty obligations inherent in the employment relationship.    

So enjoy the holidays but remember, come the New Year, it is “restrictive covenant season!”

Happy Holidays from SmithAmundsen!

The Holidays are coming… Make sure you have addressed your wage and hour compliance

Contributed by Sara Zorich, December 20, 2018

Around the holiday season, many employees take time off and businesses close down. Additionally, some businesses pay out bonuses to employees around the holiday season. All of these scenarios can impact overtime pay for non-exempt employees.

CLOSURE OF BUSINESS

Non-Exempt Employees

Non-exempt employees generally (exceptions follow) only need to be paid for hours they actually work – and not for holidays or weather-related office closings and are entitled to overtime for hours worked over 40 in a workweek. For example:

  1. Non-exempt employees do not need to be paid for New Year’s Day if they are given the day off.
  2. If the business is closed during inclement weather (e.g., snow days, burst pipes), non-exempt employees do not need to be paid when the business is closed and they are not working.
  3. If employees report to work and are sent home early (e.g., due to imminent ice storm), then non-exempt employees only need to be paid for the hours they worked, and not for the time that they were sent home early and are not working.

Where non-exempt employees perform work on a holiday (federal, state, etc.), they only need to be paid overtime (time-and-a-half) if they have worked over 40 hours in the workweek (or 8 hours in a day in some states):  For example: An employee who works New Year’s Eve and New Year’s Day does not receive a shift premium (sometimes referred to as “overtime”) merely by virtue of working a holiday, unless the employee has actually worked more than 40 hours – in which case, overtime is paid only for those hours worked over 40 in the week.

Exceptions: Various state wage laws, employer policies (e.g., employee handbooks) and other contracts may obligate an employer to pay employees for certain holidays or business closings, and even pay shift premiums for working on holidays. Further, an employer policy may state that the holiday is counted as “hours worked” for overtime purposes. Make sure to review your policies carefully when administering payroll for holidays and closure.

Exempt Employees

Exempt employees are those who are not covered by the FLSA’s overtime requirements. When paid on a salary basis, these employees’ salaries may not be reduced in any week in which they work, except for limited circumstances (e.g., the employee’s personal absence not for sickness or disability, first/last week of employment). These exceptions do not permit an employer to reduce a salaried, exempt employee’s wages for holiday or inclement weather closures. Thus, these employees must be paid their regular, full salary, even though the business is closed for a holiday or due to weather (assuming the weather closure was for less than a week).

BONUSES

Employers must be careful when paying out bonuses at the end of the year to non-exempt employees. As with other bonuses, a holiday bonus must be included in overtime calculations for nonexempt employees unless it is completely discretionary or is a gift. If a bonus is promised or expected or is dependent on the quality, quantity or efficiency of production or hours worked, it must be included in the regular rate used for determining overtime pay. This becomes even more complicated at the end of the year. For example, if on January 1, the company promised a bonus if the production department made 10,000 widgets by December 15, 2018. If the production department achieved this goal and each non-exempt employee was paid a $100 bonus, that bonus would have to be allocated over the applicable period (50 weeks from 1/1 – 12/15). Then each non-exempt employee would become entitled to additional overtime for each week they worked overtime during that entire 50 week period based on the fact that the$100 bonus payment increased their regular rate and therefore the applicable overtime rate. 

Bottom Line: Employers need to be cognizant of how holiday closures and bonuses may impact their overtime requirements for non-exempt employees.