Retail Labor and Employment Law - What You Need to Know Now

By Jennifer Nutter

Until recently, California retail employers could leverage the threat that employees suing them for nonpayment of wages (including sales commissions), fringe benefits, or health and welfare or pension fund contributions would have to pay the employer’s attorneys’ fees in the event that the claim was unsuccessful.  Labor Code Section 218.5 provided that the court “shall” award the “prevailing party” its attorneys’ fees in such cases (assuming a request was made at the beginning of the suit).

It had long been argued by attorneys representing employees in these types of cases that Section 218.5 should be interpreted to mean that a prevailing employer would only be entitled to its fees if the employee’s suit was found to be frivolous, unreasonable, or without foundation – a standard announced in Christiansburg Garment Co. v. EEOC (1978) 434 U.S. 412 in connection with Title VII discrimination claims and later applied to claims brought under California’s Fair Employment and Housing Act (FEHA) as well.  However, both Title VII and FEHA give courts discretion to award a prevailing party its attorneys’ fees, whereas Section 218.5, on its face, made the award unconditional if the suit was successfully defended.

 On August 26, 2013, Governor Jerry Brown put an end to the uncertainty by signing SB 462 into law.  The bill amended Section 218.5 to provide that a prevailing employer is only entitled to recover its attorneys’ fees for defending an employee’s lawsuit for nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, if it can show that the action was brought in “bad faith.” 

 It remains to be seen how this new standard will be interpreted by the courts, but because the policy considerations of not chilling meritorious suits brought by employees against their employers are the same as in Title VII and FEHA cases, it is likely to be a similarly high bar.

By Laura A. Stutz

Earlier we posted about the increase in domestic violence and the reauthorization of the Violence Against Women Act, which was extended in February 2013, and expanded to provide coverage to both male and female victims of various types of domestic violence.  (See “With Domestic Violence Increasing, What Should Employers Do?”)  A growing number of states have followed the federal lead and undertaken steps to protect domestic violence victims.  On July 17, 2013, New Jersey joined those states and enacted the New Jersey Security and Financial Empowerment Act (S-2177) (“SAFE Act”) to protect victims of domestic violence and sexual assault (as defined by N.J.S.A. 2C:25-19 and N.J.S.A. 30:4-27.6) from employment discrimination. 

The SAFE Act, effective October 1, 2013, seeks to prevent employment discrimination against employees for taking time off from work to seek treatment or legal assistance or to engage in other activity relating to the offense.  The law also covers employees who are close family members of victims of domestic violence and sexually violent offenses.  The Act defines close family member as a child, parent, spouse, domestic partner, or civil union partner.

The Act applies to New Jersey employers with 25 or more employees and provides 20 days of unpaid job-protected leave to eligible employees in the 12-month period following the incident.  Intermittent leave may be taken in intervals no shorter than a day.  The leave is in addition to any leave the eligible employee may already be entitled to under the Family and Medical Leave Act, 29 U.S.C. §2601 et seq. (“FMLA”), or the New Jersey Family Leave Act (“FLA”), N.J.S.A. 34:11B-1 et seq.  If the domestic violence-related leave request would also be covered under the FMLA or FLA, the leaves will run concurrently.  Employers are permitted to request documentation to support the leave request.  Such documentation is to be maintained strictly confidential unless disclosure is voluntarily authorized in writing by the employee or required by law, rule or regulation. 

The Act requires New Jersey employers to conspicuously display a notice of employees’ rights under the law and to “use other appropriate means to keep its employees informed.”  The form of notice is to be provided by the Department of Labor and Workforce Development; what is necessary for compliance with the “other appropriate means” provision is not yet clear.

Employers should consider federal and state legal requirements when addressing requests for leave or other accommodations for victims of domestic or sexual violence, and should review their leave policies and procedures to ensure compliance.   

by Lisa M. Watanabe

In recent years, retailers, grocery stores and banks have been hit with a wave of lawsuits over California’s suitable seating requirements set forth in §14 of the Industrial Welfare Commission’s Wage Orders.  (See http://www.dir.ca.gov/iwc/wageorderindustries.htm for § 14 in 16 of the 17 industry-specific Wage Orders).  Despite the surge in lawsuits, there continues to be several unanswered questions regarding the interpretation of subsections (A) and (B) to §14 which state the following:

1. All working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.
2. When employees are not engaged in the active duties of their employment and the nature of the work requires standing, an adequate number of suitable seats shall be placed in reasonable proximity to the work area and employees shall be permitted to use such seats when it does not interfere with the performance of their duties.

For example, how does an employer determine when the “nature” of an employee’s work “reasonably permits the use of seats” (in which case §14(A) would apply) or generally “requires standing” (in which case §14(B) would apply)?  Additionally, as is often the case with retail employees such as a cashier or clerk, what if an employee performs a variety of assigned job duties, some of which may permit seating and some which may not? 

A pending case before the Ninth Circuit – Kilby v. CVS Pharmacy, Inc. – should provide answers to courts and litigants to these questions.  Kilby, a former cashier/clerk, filed a representative suit against CVS in 2009 for its alleged failure to provide her with suitable seating under §14(A).  The district court dismissed the lawsuit on the grounds that §14(A) was not applicable to Kilby’s job position.  (See Order Granting CVS’s Motion for Summary Judgment.)  In its decision, the district court interpreted §14(A) as requiring a “holistic” assessment of an employee’s entire range of assigned duties to determine whether the employee’s job “as a whole” reasonably permitted the use of seats (§14(A)) or generally required standing (§14(B)).  The district court also considered CVS’s business judgment in its decision – i.e., CVS expected its clerks/cashiers to perform their work while standing, and trained them to do so (among other things, CVS showed a training video to new hires that reinforced its expectations of them to perform a variety of work while standing). 

On appeal, Kilby contends that the district court misinterpreted §14 and, and in doing so, failed to account for evidence that she spent approximately 90% of her time performing duties that could have been done while seated.  The district court’s interpretation of §14, according to Kilby, allows employers to deprive employees of seats “simply by assigning a handful of tasks that require standing … even if the workers’ other assigned tasks consume a significant portion or even the vast majority of the work day.”  As such, Kilby requests the Ninth Circuit to interpret §14 as guaranteeing employees the right to suitable seating whenever a specific task or duty performed for an appreciable period of time can reasonably be accomplished while seated.  Kilby also challenges the district court’s consideration of CVS’s business judgment in determining the nature of an employee’s work on the grounds that it frustrates the Industrial Welfare Commission’s intent to create an objective standard for determining which duties could be performed while seated.

The Ninth Circuit now has an opportunity to clarify the legal standard for §14 and offer much-needed guidance on the scope of suitable seating requirements for employees, including those individuals with mixed seating and non-seating job tasks.   Moreover, the case will clarify what role, if any, an employer’s business judgment, expectations and training may have in assessing the nature of an employee’s work.  The parties’ briefing has been completed and oral arguments before the Ninth Circuit (which should be scheduled and posted on the Ninth Circuit’s website -- http://www.ca9.uscourts.gov/calendar/ -- in the next few months) will surely keep courts, litigants, and employers on the edge of their seats.

By Amy Messigian

Last month, the California Court of Appeal ruled that a former employee of Forever 21 must try her claims against the retailer in arbitration, enforcing the company’s employment arbitration policy and reversing a lower court decision finding the agreement unconscionable under California law.  The plaintiff, Maribel Baltazar, alleged that she had been discriminated against by the retailer due to her race and sexually harassed by a supervisor and coworker.  She filed a complaint against Forever 21 and several of its employees in the Los Angeles Superior Court and the retailer moved to compel Baltazar to arbitration.

Reversing the lower court, the Court of Appeal found that Baltazar had been given the opportunity to review the arbitration agreement, which was contained in her employment contract, and that the contract’s provision allowing the parties to seek injunctive relief in court did not unduly favor Forever 21.  The panel noted that six of the claims asserted in Baltazar’s suit were brought under the Fair Employment and Housing Act (“FEHA”), which authorizes injunctive relief, and that there was nothing to suggest that the employer would be more likely than the employee to seek provisional remedies.

Injunctive relief provisions have sounded the death knell for many employment arbitration agreements in California of late, with multiple appellate decisions citing an injunctive remedy as unduly favoring the employer.  Ostensibly, these courts are inclined to believe that an employer is more likely than an employee to seek injunctive relief.  The Baltazar court felt otherwise. Until this issue is considered by the California Supreme Court, it remains likely that the luck of the draw will ultimately decide whether an arbitration agreement is enforceable if it contains a provisional remedies provision that allows parties to seek an injunction in court.

By Amy Messigian

On October 11, 2012, the California Supreme Court granted review of Patterson v. Domino's Pizza to address the circumstances in which a defendant franchisor may be held vicariously liable for tortious conduct by a supervising employee of a franchisee. 

Like many fast food chains, Domino’s Pizza (“Domino’s”) is a franchising operation in which individual franchisees operate storefronts under the Domino’s name. 

In Patterson, the plaintiff, a sixteen-year-old employee of a Sui Juris, a Domino’s Pizza franchisee (“Sui Juris”), alleged that she was sexually harassed and assaulted at work by an assistant manager of the store.  She filed a lawsuit against various Domino’s-related entities, including Sui Juris and Domino’s, as well as the assistant manager, alleging causes of action under the California Fair Employment and Housing Act, along with assault, battery and intentional infliction of emotional distress.  She claimed that Domino’s was vicariously liable for the supervisor’s actions. 

Although Sui Juris’ owner testified that he received employment direction from Domino’s and that his operation was monitored by Domino’s inspectors, the trial court granted summary judgment for Domino’s on the grounds that Sui Juris was an independent contract and was not an agent of Domino’s. Particularly, it noted that the franchise agreement between Domino’s and Sui Juris provided that the latter was responsible for supervising and paying store employees. On this basis, the trial court concluded that Domino’s had no role in Sui Juris’ employment decisions.

The plaintiff appealed and the California Court of Appeal reversed the trial court. The appellate court stated that the nature of the franchise relationship will determine whether a franchisor is vicariously liable for injuries to a franchisee’s employee and that while a franchise agreement is relevant, it is not the exclusive evidence of the relationship between a franchisor and a franchisee.

[T]he franchisor may be subject to vicarious liability where it assumes substantial control over the franchisee's local operation, its management-employee relations or employee discipline.

Here, the court determined that Domino’s exercised significant control over Sui Juris’ employees through the franchise agreement, which allows Domino’s to set employee qualifications and standards for their demeanor and appearance. The court also determined that Domino’s asserted control over other areas of the business, such as store hours, pricing, advertising, equipment usage, recordkeeping and Sui Juris’ insurance policies, which required naming Domino’s as an additional insured. Most importantly, the court concluded the Domino’s had instructed Sui Juris to terminate the assistant manager as well as another employee of the store for violating company policy, and that Sui Juris had acted based on these instructions. Accordingly, the court reversed the order of summary judgment.

Domino’s has appealed to the California Supreme Court, which will determine whether a franchisee’s employee may bring an action against the franchisor for harassment or other wrongful acts alleged to have been committed by another employee of the franchisee. The line drawn by the Court will be of interest to any retail establishments operating under franchise agreements. If the appellate court’s decision is affirmed, franchisors that establish employment standards or communicate opinions regarding hiring or firing decisions to their franchisees may risk vicarious liability in actions brought by the franchisee’s employees, even if they do not facilitate operations of the franchisee on a daily or continual basis.

By: Michael S. Kun, as appeared on the Wage & Hour Defense blog

Employers with operations in California have become aware in recent years of an obscure provision in California Wage Orders that requires “suitable seating” for some employees. Not surprisingly, many became aware of this provision through the great many class action lawsuits filed by plaintiffs’ counsel who also just discovered the provision. The law on this issue is scant. However, at least two pending cases should clarify whether and when employers must provide seats – a case against Bank of America that is currently before the Ninth Circuit Court of Appeal, and a case against K-Mart that is now being tried in the United States District Court for the Northern District of California.

The wave of representative and class action lawsuits alleging that employers failed to provide suitable seating in violation of Labor Code § 1198 and Wage Orders was triggered by the Court of Appeal ruling in Bright-v-99Cents-Only, 189 Cal.App.4^th 1472 (2010), permitting “suitable seating” claims to proceed under California Private Attorney General Act (“PAGA”). Prior to that ruling, “suitable seating” lawsuits were few and far between. All it took was a single published opinion to let the plaintiffs’ bar know about this potential claim and to begin to seek plaintiffs to bring these claims against their employers.

Importantly, the seating provisions of the Wage Orders do not require all employers to provide seating to all employees. Instead, the provisions state that “[a]ll working employees shall be provided with suitable seats when the nature of the work reasonably permits the use of seats.”

As the former Chief Deputy Labor Commissioner explained in 1986, these seating provisions were “originally established to cover situations where the work is usually performed in a sitting position with machinery, tools or other equipment. It was not intended to cover those positions where the duties require employees to be on their feet, such as salespersons in the mercantile industry.”

In Green v. Bank of America, the district court relied upon this opinion in dismissing a putative “suitable seating” class action with prejudice, holding that an employer need only give seats to individuals who request them – and there was no allegation in the complaint that any employee had requested a seat. That decision is now on review before the Ninth Circuit, which presumably will determine what “provide” means in the context of the “suitable seating” requirements. The Court may well look to the California Supreme Court’s Brinker v. Superior Court decision for guidance on that issue. There, in the context of requirements that employers “provide” meal and rest periods to employees, the California Supreme Court determined that “provide” means that the employer make the meal and rest periods available, but need not ensure they are taken. That would suggest that, in the “suitable seating” context, an employer must make seats available to appropriate employees, but need not ensure they take them. That, of course, would beg the question of who is entitled to seats in the first place.

The “suitable seating” trial relating to K-Mart’s cashiers that has commenced in San Francisco – Garvey v. Kmart -- promises to look at that and other issues. Among other things, that trial should address the impact employers’ expectations and preferences have upon whether “the nature of the work reasonably permits the use of seats.”

Plaintiffs in “suitable seating” cases normally argue that a seat must be provided if the job “could” be done seated. Of course, that is not what the Wage Orders state. Many jobs “could” be done while seated. Whether they can be done as well while seated is a different issue entirely. (One is reminded of the famous Seinfeld episode where George Costanza insisted on getting a rocking chair for a jewelry store security guard; the guard then fell asleep as the store was robbed right in front of him.)

Among other things, employers in the hospitality and retail industries often wish to have persons in some positions standing in order to make eye contact with customers, establish a relationship with them and be in the best position to assist them. It is too easy for customers to ignore someone who is seated, or not even notice that person. The Kmart trial should provide some guidance as to whether such expectations and preferences are to be given weight.

These two cases should provide some much needed clarity as to whether and when seats must be provided to certain employees. In the meantime, employers would be wise to let employees know whether and why certain jobs are expected to be performed while standing.

by Barry Asen

New York management-side attorneys and their clients were surprised and chagrined when they read Bennett v. Health Management Systems, Inc., a case decided in December 2011 by the New York State Supreme Court, Appellate Division, First Department (“the First Department”), which sits in Manhattan.  Writing for the unanimous five-judge court, Justice Rolando Acosta directed that because the New York City Human Rights Law (“NYCHRL”) explicitly provides that it should be liberally construed, summary judgment motions should only be granted in the employer’s favor in “rare and unusual” circumstances. 

Justice Acosta stated that even if a terminated employee is unable to produce any evidence of discrimination, summary judgment should be denied and a jury trial ordered if the employee can show that the employer’s reason for the termination is “false, misleading or incomplete.”  For example, if an employee with a poor performance record is terminated because of his performance, but his supervisor – to spare his feelings – tells him only that his job was eliminated, a jury trial would be required to determine whether discrimination occurred under the NYCHRL.  Under federal and New York State law (e.g., Title VII of the Civil Rights Act, the Age Discrimination in Employment Act, the New York State Human Rights Law), summary judgment for the employer would likely be granted in such circumstances based on the absence of evidence pointing to discrimination as the reason for the termination.

Recently, however, in Melman v. Montefiore Medical Center, (1^st Dep’t May 29, 2012), a different First Department panel disagreed with the Bennett decision.  In a 4-1 majority opinion, with Justice Acosta as the lone dissenter, the First Department returned to the traditional guiding rule in employment discrimination cases that to defeat an employer’s summary judgment motion, the employee must not only produce some evidence showing that the employer’s reason for its decision was “false, misleading or incomplete,” but also evidence demonstrating that “discrimination was the real reason” for the employer’s decision.

The First Department in Melman explained that when there is no evidence of discrimination, a court “should not sit as a super-personnel department that reexamines an entity’s business decision.”  Referring to one of Justice Acosta’s contrary arguments, the Court stated that his “approach appears quite radical to us.”  And the Court concluded, using language that all employers can appreciate, “we see no justification for allowing a meritless lawsuit to continue to divert Montefiore’s limited resources, and the time attention of its staff, from the hospital’s true mission of advancing medicine, protecting public health, and healing the sick.” 

The First Department’s decision in Melman is consistent with the decisions of other courts construing federal and New York State anti-discrimination laws.  While the NYCHRL will continue to be interpreted liberally by all courts, an employee is still required to come forward with some evidence of discrimination or else summary judgment should be granted.

by Peter M. Panken

The Seventh Circuit Court of Appeals recently held, in a case of first impression, that a manager who was not the actual decision-maker in an employee’s discharge could still be held personally liable under Section 1981 of the Civil Rights Act of 1866 under a “cat’s paw” theory of liability.   

In Smith v. Bray, Darrel Smith claimed that he had been subjected to racial harassment by his immediate supervisor, James Bianchetta, and that he was fired because he reported this harassment to a human resources manager, Denise Bray.  The employer’s liability was discharged after it went bankrupt, but Smith had also sued Bianchetta and Bray individually for their roles in his termination. Bianchetta settled privately, and the District Court found that Bray had no liability and granted her motion for summary judgment. While the Seventh Circuit affirmed, it did so under a different rationale, endorsing the “cat’s paw” theory of liability for individuals who, with an unlawful motive, persuade the decision-maker to terminate an employee—but ultimately finding insufficient evidence against Bray under this theory.

 As Judge Posner of the Seventh Circuit explained:

In the fable of the cat’s paw (a fable offensive to cats and cat lovers, be it noted), a monkey who wants chestnuts that are roasting in a fire persuades an intellectually challenged cat to fetch the chestnuts from the fire for the monkey, and the cat does so but in the process burns its paw. In employment discrimination law the “cat’s paw” metaphor refers to a situation in which an employee is fired or subjected to some other adverse employment action by a supervisor who himself has no discriminatory motive, but who has been manipulated by a subordinate who does have such a motive and intended to bring about the adverse employment action.

The “cat’s paw” doctrine can be thought of as an application of the “motivating factor” doctrine; the monkey’s malevolent intent is imputed to the employer. So if the employer can’t show that the monkey’s supervisor, who did the actual firing (or took some other adverse employment action), had a lawful motive uncontaminated by the monkey that would have led the supervisor to fire the employee even without the monkey’s interference, the employee is entitled to damages.

The Court found that Bray’s liability depended on whether she specifically had a retaliatory animus in her role as the human resources professional who recommended to Smith’s second-level manager that he be discharged. The Court noted that “to meet the causation or motive requirement, Smith must show” by admissible evidence that an unlawful motive was a ‘substantial or motivating factor’ in [Bray’s] decision to recommend his termination.”  

The Court emphasized that the plaintiff has the burden of proving that each individual accused of liability under Section 1981 has an unlawful motive. The Court recognized the “interrelationship and interdependency” between human resources officials and supervisors. Thus, human resources specialists will not automatically be liable for their involvement in such controversies, but they may be more vulnerable to suit as a result of this decision.

How Should Employers Respond?

Employers should establish training and resources to make all employees aware that they can be held individually liable for causing another employee to be terminated based on discriminatory intent. While employers can try to reduce the possibility of improper terminations through independent investigations of claims before taking adverse employment actions, such independent investigations may not fully insulate the employer and its employees from liability.

The Supreme Court in Staub v. Proctor Hospital  held that an independent investigation by the final decision-maker  will not extinguish liability for the entity. Unless the adverse employment action is fully justified, if the final decision-maker takes into account the biased supervisor’s (or human resources specialist) recommendation, both the decision-maker and the biased employees can be held liable. Unfortunately, courts have not been clear on what a sufficient independent investigation entails to shield the employer from liability.

The lesson for Human Resources officials, who deal with these problems every day, is to be sure that the adverse employment action is appropriate and not solely based upon the recommendation of a supervisor who has been accused of illegal discrimination. The red flag should go up when an accused supervisor recommends adverse employment action, and the Human Resource official would be wise to independently verify the grounds for the adverse employment action.

by Frank C. Morris, Jr., and Allen B. Roberts

The U.S. Department of Labor (“DOL”) Administrative Review Board (“ARB”) has sounded an alarm that needs to be heard by accounting firms, law firms, and other consultants, advisors, and providers of services to publicly traded companies.  With its recent decision in Spinner v. David Landau & Associates, LLC, ARB Case Nos. 10-111, 10-115 (May 31, 2012), the ARB continued its expansion of whistleblower protection, holding that Sarbanes-Oxley (“SOX”) whistleblower protections extend to employees of privately held businesses that merely contract with publicly traded companies.  The ARB’s decision significantly expands the number and type of organizations whose employees it says are covered by SOX whistleblower protections.  But the result was accomplished by direct rejection of the opposite conclusion reached by the U.S. Court of Appeals for the First Circuit in its well-reasoned recent decision in Lawson v. FMR LLC, 670 F.3d 61 (1st Cir. 2012).  While this is not the first instance of contrasting administrative and judicial interpretations of the definition and reach of SOX protections, it clearly indicates the current climate in which a wide swath of employers need to reassess their compliance programs, provisions for receipt of whistleblower reports, and procedures for addressing claims and avoiding retaliation.

Read the full advisory online

by James S. Frank, Steven M. Swirsky, Adam C. Abrahms, Donald S. Krueger, and D. Martin Stanberry 

In a sharp setback for the National Labor Relations Board (the "Board"), a federal district court in Washington, D.C. (the "Court"), struck down the Board's election rules, which took effect on April 30, 2012, on technical grounds, holding that the Board did not have a properly constituted quorum of three members when it voted to change its election rules and procedures. See Chamber of Commerce v. NLRB, No. 11-2262 (JEB), Slip Op., 2012 WL 1664028 (D.D.C. May 14, 2012). This decision comes less than a month after a federal appeals court struck down the Board's notice-posting rule that would have required employers to advise employees of their rights under the National Labor Relations Act, and less than two years after the Supreme Court of the United States in New Process Steel LP v. NLRB, 130 S. Ct. 2635, 560 US __ (2010), held that the Board, which is traditionally comprised of five members, must have a quorum of three members to lawfully issue its decisions.

Read the full advisory online

by Jeffrey M. Landes, Susan Gross Sholinsky, and Jennifer A. Goldman, with Teiko Shigezumi

The On April 25, 2012, the U.S. Equal Employment Opportunity Commission ("EEOC") issued an enforcement guidance document titled "Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. § 2000e et. seq." (the "Guidance"), with respect to employers' use of arrest and conviction information in connection with employment decisions.

Disparate Treatment v. Disparate Impact

Although Title VII of the Civil Rights Act of 1964 ("Title VII") does not prohibit employers' use of criminal background checks, the Guidance reaffirms the EEOC's longstanding position that employers may violate Title VII if they use criminal background information improperly. The Guidance, which updates and consolidates existing EEOC guidance documents on the subject that have previously been left unchanged since 1990, focuses on employment discrimination based on race and national origin.

According to the EEOC, there are two ways in which an employer's use of criminal history information may violate Title VII. First, Title VII prohibits employers from engaging in "disparate treatment" discrimination – that is, treating job applicants with the same criminal records differently because of their race, color, religion, sex, or national origin. Second, even where employers apply a criminal record exclusion under a neutral policy (e.g., uniformly excluding applicants based on certain criminal conduct), the exclusion may still operate to disproportionately and unjustifiably keep out people of a particular race or national origin. This is referred to as "disparate impact" discrimination. If the employer does not show that such an exclusion is "job related and consistent with business necessity" for the position in question, the exclusion is unlawful under Title VII.

Read the full advisory online

by Ian Gabriel Nanos

Like it or not, we live in a digital-age, and how people choose to define themselves is often readily showcased on social networking sites such as Facebook.  Given the candid manner many individuals express themselves on their social networking profiles, it's only natural that employers have started to pay attention.  Why wouldn't they? Employers want to pick the right person for the job and that their employees do not disparage the company or act in a manner that threatens workplace security.  But when news spread that a few employers were demanding access to applicants’ on-line profiles, many – including businesses and members of Congress –decried this practice as an unwarranted intrusion of privacy.

Specifically, Facebook stated that this practice "undermines the privacy expectations and the security of both the user and the user's friends," indicating that sharing passwords or granting another individual access would violate Facebook's "Statement of Rights and Responsibilities.”

On Capitol Hill, U.S. Senators Charles Schumer, N.Y., and Richard Blumenthal, CT., wrote a joint letter to the U.S. Department of Justice and to the EEOC, requesting an investigation of the practice.  A bill was also introduced in the House of Representatives aimed at prohibiting the practice.  Other legislation may be in the works at both the federal and state level.  Maryland was the first state to pass legislation banning employers from asking for an employee’s or applicant’s social media site passwords.  Other states may soon follow suit.

Although many users update their privacy settings to limit the content that is publicly available, granting a potential employer access allows them to readily sidestep those controls.  This is cause for concern, but it is not just about privacy.  It is also a question about whether it makes good business sense for an employer.

While employers may gain some benefit from learning additional information that helps guide hiring decisions, employers should weigh those benefits against possible disadvantages.  Clearly, there are circumstances, such as government positions with high-level security concerns, where it may be a "need to know" situation.  In most ordinary cases, however, employers should consider the pitfalls before deciding that Facebook should be part of the applicant review process.

In other words, employers should be cautious about what a social media search might reveal.  Many jurisdictions, including New York, have already enacted statutes that prohibit an employer from making decisions in reliance on certain lawful recreational activities or associations outside of work.  

By looking at an online profile, an employer might learn information regarding an applicant or employee’s protected classification that would not be otherwise revealed on a resume.  Thereafter, the employer could be charged with a discriminatory failure to hire claim based on that newly acquired information.  Similarly, an employer may unwittingly take on a duty that had not previously existed.  For example, the employer may become privy to information suggesting that an employee is unstable and, based on that knowledge, the employer could be charged with having acted unreasonably by subsequently entrusting that individual with certain responsibility. 

Moreover, an employer may face liability if it takes adverse action after happening upon conversations that could be considered union activities or “concerted activities” under the National Labor Relations Act.  The National Labor Relations Board has certainly said a lot about that recently. 

Finally, employers may risk losing out on top-talent that may be discouraged by the policy.

The bottom line is that, in this digital age, employers need to consider the impact of social media on workforce issues.  Employers should review their workforce needs and address social media issues in their internal hiring policies and practices as well as in their handbooks and other policies disseminated to employees and applicants.  This goes beyond merely informing employees that their internet use may be monitored, because a basic technology policy that glosses over social media issues may end up causing problems in the long-run.  The same can be said for an inflexible, uniform policy, because a single policy may not be right for every situation. 

by Peter M. Panken and Jennifer A. Goldman

Gary Ehrhard, an air traffic controller for the Federal Aviation Administration asked for Family Medical Leave Act (“FMLA”) leave to care for his children, 8 and 10 years old. Because they did not suffer from a serious health condition, he was denied FMLA leave, and he claimed that he was later retaliated against for asking for the time off.  He discovered that female air traffic controllers were allowed the kind of leave he sought. He sued the Department of Transportation (”DOT”) for sex discrimination and retaliation for complaining about alleged sex discrimination.  On March 28, 2012, the U.S. District Court for the Eastern District of New York ruled that even though there was no viable FMLA claim, the sex discrimination and retaliation claims had to go to a jury trial because these claims were broader than the FMLA request.  Ehrhard v. LaHood.

Ehrhard claimed that the DOT permitted similarly-situated female air traffic controllers to use employer-provided Leave Without Pay (“LWOP”) in an “open-ended special arrangement,” and that such arrangements were not available to Ehrhard because of his sex.  The DOT contended that the gender discrimination claim should be dismissed because Ehrhard was not entitled to FMLA leave, since his children did not have serious health conditions.  Ehrhard requested the leave because his wife was unavailable that day to care for his children.  The court ruled, however, that Ehrhard’s sex discrimination claim was “broader than an FMLA request” and that “the requirements of the FMLA are not dispositive of this claim.”  The court concluded that Ehrhard raised genuine issues of fact as to whether his request for child care was treated differently than requests by female air traffic controllers.

The DOT conceded that female employees were permitted to submit leave requests under a special procedure but Ehrhard was not, but the DOT argued that the female air traffic controllers were not similarly situated to Ehrhard, because they were previously part-time employees.  The Court reasoned that “[t]he law does not require the employees to be similarly situated in all respects, but rather requires that they be similarly situated in all material respects.”  Accordingly, the court held the jury must decide whether female employees were “similarly situated” and treated more favorably regarding the granting of child care leave.

Ehrhard also claimed that the DOT retaliated against him after he complained that the denial of his leave requests was based on his gender.   The court found that Ehrhard produced sufficient evidence that the DOT took adverse action against him after he complained.  While the DOT argued that Ehrhard’s complaints were not reasonable, good-faith complaints about suspected sex discrimination, the court ruled that the reasonableness of Ehrhard’s belief of sex discrimination as it pertained to retaliation would have to be decided by a jury. 

It may be good practice to help employees who need special privileges, but employers should be aware that a good deed may result in litigation if the favors are not bestowed without regard to protected class status such as sex, or race, or religion or national origin.  To minimize risk and exposure from claims of illegal discrimination, employers who provide leaves of absences for child care must ensure that the leaves are available to all employees regardless of sex.  As a best practice, employers should also ensure that their child care leave of absences policies are drafted in a gender-neutral manner.  

by Michael A. Kalish and Adam Tomiak

Sens. Tom Harkin, D-Iowa, Chuck Grassley, R-Iowa, and Patrick Leahy, D-Vt. recently introduced the Protecting Older Workers Against Discrimination Act, a bill intended to lessen the burden on age discrimination plaintiffs under the Age Discrimination in Employment Act (“ADEA”).  The bill seeks to return age discrimination plaintiffs to the standard the Senators believe they were subject to prior to the Supreme Court’s ruling in Gross v. FBL Financial Services, Inc., 557 U.S. __, 129 S. Ct. 2343 (2009).

In Gross, the Supreme Court held that age discrimination plaintiffs must show, by a preponderance of the evidence, that “but for” their age, they would not have been subjected to the adverse employment action.  This contrasts to the burden of persuasion under Title VII, which allows plaintiffs to state a claim based on race, color, religion, sex, or national origin, by showing this characteristic was “a motivating factor” for the adverse employment action.  The Court concentrated on significant differences in the statutes’ language and the history of amendments to each.  As a result, the Court vacated the Eighth Circuit’s decision to allow a “mixed motive” standard, i.e., that the adverse employment action resulted from both discriminatory and non-discriminatory considerations, to sustain an ADEA claim. 

The bill seeks to amend the ADEA, as well as the Americans with Disabilities Act and Rehabilitation Act of 1973 (statutes to which lower courts have applied the Gross holding’s reach), to specifically allow mixed-motive claims to discrimination plaintiffs.  In addition, the bill would allow claims under these statutes to be interpreted under the McDonnell Douglas burden-shifting framework, which provides that once an employee has satisfied her or his lowered burden of proof, the burden shifts to the defendant to articulate a legitimate nondiscriminatory reason for the challenged  employment actions.

If enacted, this bill would potentially lower the standard of proof for ADEA plaintiffs by allowing them to show only that their age was one of many factors, rather than the dispositive factor, in their employer’s decision to take an adverse employment action against them.  This could result in increased exposure to employers defending against age discrimination claims.

We are pleased to announce that Epstein Becker Green’s first app - Wage & Hour Guide for Employers - is now available for download in the App Store on iTunes, for both iPhones and iPads.  You can find this complimentary app by searching for “Wage Hour” or clicking here.

The Wage & Hour Guide app enables employers to access up-to-date federal wage and hour guidelines as well as various state guidelines, which can differ by jurisdiction. In addition, users can obtain insights and commentary about the latest wage and hour developments and issues by accessing this blog directly through the app. To provide the best user experience possible, the app provides users with the ability to download the guide to their iPhone or iPad for reference anywhere at any time – with or without an Internet connection, all at no cost.

by Allen B. Roberts, Amy J. Traub, and Christina J. Fletcher

Religious organizations and those they employ have anticipated guidance from the U.S. Supreme Court's first opinion addressing the ministerial exception in the employment discrimination context. With its January 11, 2012, decision in Hosanna-Tabor Evangelical Lutheran Church & Sch. v. EEOC, U.S., No. 10-553, the Court clarified that the First Amendment's Establishment and Free Exercise Clauses bar the government from interfering with the "decision of a religious group to fire one of its ministers." The Court recognized the "interest of religious groups in choosing who will preach their beliefs, teach their faith, and carry out their mission." Consequently, the Religion Clauses of the First Amendment give religious organizations the freedom to select their own ministers, and they trump employment discrimination laws.   

Read the full advisory online

by James P. Flynn

On Monday, January 9, 2012, Governor Chris Christie signed into the law the New Jersey Trade Secrets Act (NJTSA), the Garden State’s version of the Uniform Trade Secrets Act (UTSA).  New Jersey, thus, becomes the forty-seventh state to adopt some form of UTSA.  While the New Jersey Act will promote some level of uniformity in the approach to trade secrets issues, New Jersey specific changes to the uniform act promise that this statute will build upon, rather than depart from, New Jersey’s common law tradition of protection of trade secrets and other valuable business information.  

For more on the NJTSA, see the full post at the EBG Trade Secrets & Noncompete Blog, available by clicking here. 

by Peter M. Panken, Michael S. Kun, Douglas Weiner, and Larissa Lalor-Rosado 

Misclassification of employees as exempt from overtime compensation has become a cottage industry for plaintiff’s lawyers and for the United States Department of Labor (“DOL”) in the Obama years.  One of the most difficult issues is whether employees meet the so-called administrative exemption to the Wage Hour laws.  In Hines v. State Room, the United States Circuit Court of Appeals for the First Circuit offered some clarity and help to beleaguered employers holding that former banquet sales managers were exempt from overtime requirements under the Fair Labor Standards Act (“FLSA”).

For more, see the full post at the EBG Wage & Hour Defense Blog, available by clicking here.

by Daniel R. Levy

On December 1, 2011, the Superior Court of New Jersey, Appellate Division, affirmed dismissal of a whistle-blowing and defamation lawsuit based in part on application of the New Jersey Health Care Professional Responsibility and Reporting Enhancement Act. In Senisch v. Carlino, A-6218-09T3 (N.J. App. Div. Dec. 1, 2011), the court held that a health care entity which had reported negative, but truthful, information to another health care entity about a former health care professional’s termination of employment could not be liable for doing so.

In this case, the plaintiff was employed as a physician’s assistant in the cardiology department of Deborah Heart and Lung Center (“Deborah”).  Although the plaintiff had received favorable performance reviews in his first years of employment at Deborah, his 1999 performance evaluation was unfavorable, and Deborah later terminated his employment as a result of specifically stated performance deficiencies.  In 2001, he filed a lawsuit against Deborah alleging violations of New Jersey’s Conscientious Employee Protection Act (“CEPA”) and Law Against Discrimination (“LAD”).  Before trial, the case was settled.

Subsequently, the plaintiff obtained a position with a surgical orthopedic practice.  The position required that plaintiff obtain his credentialing at Underwood Memorial Hospital (“Underwood”).  As part of that credentialing process, Underwood requested information about the plaintiff from Deborah.  A physician at Deborah responded to the information request from Underwood, stating that based on the plaintiff’s documented performance by his supervisor, he “was involuntarily terminated from employment at Deborah following a series of unsuccessful attempts to achieve consistent improvement in his performance.”  The response also listed the performance deficiencies documented in the plaintiff’s personnel file.  Thereafter, the plaintiff withdrew his name from consideration for credentialing with Underwood and also resigned from his employment at the orthopedic practice.

The plaintiff then filed a second lawsuit, this time alleging retaliation by Deborah in violation of CEPA, as well as defamation and tortious interference with prospective economic advantage.  The trial court granted the defendants’ motion for summary judgment, and the plaintiff appealed. 

The Appellate Division affirmed, determining that the Act required the defendants to disclose the information to Underwood.  The court held that the defendants were protected under the civil immunity provision of the Act because there was no evidence that the information provided in response to the request was “in bad faith or with malice.”  As a result, the court held that because the defendants were protected “against civil liability for reporting the circumstances of plaintiff’s termination, plaintiff could not prevail on his claims of tortious interference and defamation, or retaliation under CEPA.” 

Although many states outside New Jersey have enacted legislation granting qualified immunity to employers providing reference information, few have gone as far as New Jersey by requiring health care entities to provide such information in response to a request by another health care entity.  While many states provide immunity to employers who act in good faith, determining whether liability exists varies among jurisdictions.  Most states that have enacted laws that provide immunity to employers which provide truthful information about former employees have limited immunity so that it applies only when the employer provides information directly related to the employee’s job performance, but not for information unrelated to job performance, i.e., that the employee had filed a discrimination charge against the employer.  Moreover, questions may exist as to whether liability may attach for references provided across state lines where the reference laws among those states differ.  Ultimately, health care entities, as well as other employers, should proactively ensure compliance with appropriate state reference laws.

by Jennifer A. Goldman and Peter M. Panken

Since the Wage Theft Prevention Act (“WTPA”) became effective April 9, 2011, New York employers have faced harsher penalties for failing to pay employees minimum wages and overtime.  As reported in two previous Act Now Advisory’s, (December 15, 2010, and April 4, 2011) the WTPA, which amended New York’s Labor Law, significantly increased employers’ penalties for unpaid wage and hour violations, among other things.  

Prior to the effective date of the WTPA, liquidated damages were capped at 25 percent of the unpaid wages due. Under the WPTA, however, employees can recover liquidated damages equal to 100 percent of the total amount of unpaid wages due, in addition to the full amount of any underpayment, all reasonable attorney’s fees and prejudgment interest.  While the WTPA does not expressly provide that it applies retroactively to violations that occurred prior to its effective date, employers should be aware that their potential exposure to the 100 percent liquidated damages provision could extend back in time further than they thought since a New York State Supreme Court decision holding that the liquidated damages provision under the WTPA applies retroactively—although this view has not been adopted uniformly.   

In Ji v. Belle World Beauty, Inc., the plaintiffs worked as nail technicians at a beauty salon. They alleged wage and hour violations, including being paid a fixed amount per day regardless of the amount of time worked, not being permitted to take breaks, and not being compensated for working overtime.  After complaining to management, the plaintiffs were terminated from employment. 

Although the plaintiffs in Ji had last worked for the salon in 2007, they argued that the WTPA should be applied retroactively.  Justice James Solomon agreed, finding that: a) the WTPA was a remedial statute; b) the statute did not impair any vested rights of the employer; and c) the WTPA did not create any new rights of recovery for the plaintiffs.  The court permitted the plaintiffs to amend their complaint to seek liquidated damages of 100% of the unpaid wages prior to April 9, 2011. 

By contrast, a New York federal court decision issued in May 2011 directly conflicts with Ji.  In Wicaksono v. XYZ 48 Corp., four former servers of a New York City sushi restaurant sued their former employer for wage and hour violations under both the federal Fair Labor Standards Act (“FLSA”) and New York Labor Law.  With respect to the state law claim, the court held that the enhanced liquidated damages provision of the WPTA should not be applied retroactively, but rather, the Labor Law applied as it existed at the time of the alleged violations.  The court reasoned that “retroactive operation is not favored by [New York] courts and statutes will not be given such construction unless the language expressly or by necessary implication requires it.  

Because the federal and state courts have split in interpreting the retroactive effect of the WTPA, employers should keep in mind that plaintiffs may choose to file their claims in state court where the liquidated damages may apply retroactively for any violations that have occurred prior to April 9, 2011.  Employers should also remember that the statute of limitations for state law claims is six years as opposed to three years under the FLSA.

by Steven M. Swirsky and Michael F. McGahan

On Thursday, August 18, 2011, the Acting General Counsel of the National Labor Relations Board ("NLRB" or "Board") issued a report on the outcome of 14 cases involving employees' use of social media or social media policies in general. This report follows a more expansive "Survey of Social Media Issues Before the NLRB" issued by the U.S. Chamber of Commerce on August 5, 2011, which addresses 129 cases involving social media reviewed by the NLRB at some level. Further, after these reports were published, an NLRB administrative law judge ("ALJ") issued the first decision of its kind – finding that terminating employees for using social media to express concerns about the workplace violates the National Labor Relations Act ("NLRA" or "Act").

Read together, those two reports and that ALJ decision begin to give employers some guidance on reacting to the use of social media by their employees, and on developing social media policies. Most of the cases covered in the reports are at early stages of investigation or litigation, or were settled. Thus, the NLRB's position may evolve further as cases are decided on fully developed records.

Generally, the cases reported on fall into two categories: (1) claims that employees have been retaliated against in violation of the NLRA as a result of statements made about their employers or working conditions on or in any of the wide variety of social media channels available, such as Twitter, Facebook, YouTube, blogs, podcasts, and the like; and (2) claims that an employer's social media policy violates the NLRA because its prohibitions may "chill" employees in the exercise their rights under the Act. 

Read the full advisory online

By: Michael A. Kalish

The following does not depict an actual interview.  Rather, it is a fictitious illustration (at least for now).

Interviewer:    So tell me why you’re interviewing for the position we’ve advertised.

Interviewee:   That’s an easy one.  Because I’m unemployed and I need a job.

Interviewer:    What happened with your last job?

Interviewee:   I wasn’t very good, and they needed to reduce headcount, and I was an easy place to start.

Interviewer:    There appears to be gaps on your resume between all six of the jobs you’ve had.  Six months here, two years there.  What happened with your leaving those jobs?

Interviewee:   Well, one was excessive absenteeism, another I got caught with my hand in the till if you know what I mean, and the others the same as the recent one – I was a well-deserved casualty of the need to reduce headcount.

Interviewer:    Uhhhh……

Interviewee:   But here’s the interesting part.  Although I’m as litigious as they come, I never really had a shot at suing any of my former employers for my terminations.  Couldn’t be clearer that my so-called protected characteristics had nothing at all to do with my terminations.  But now that I’m unemployed and applying for a job with you, I’ll sue your ass under the Fair Employment Opportunity Act of 2011 for discriminating against me because of my status as unemployed if you fail to hire me. 

Interviewer:    HELP!!!!

The American Jobs Act recently proposed by President Obama in fact includes within it (at Subtitle D) “Prohibition of Discrimination in Employment on the Basis of an Individual’s Status as Unemployed,” cited as the “Fair Employment Opportunity Act of 2011”.  As written, the proposed statute would apply to employers with 15 or more employees, and include the same procedures as applicable to Title VII of the Civil Rights Act of 1964 (“Title VII”), including the U.S. Equal Employment Opportunity Commission’s (“EEOC”) role with respect to administration and enforcement.  (The EEOC’s recent campaign against unemployment discrimination on the basis of an alleged disparate impact on minority, older and disabled workers provides on interesting backdrop to the proposed legislation.)  Title VII’s remedies would be available as well. 

What exactly would the proposed statute prohibit employers from doing?  For starters, employers would be precluded from including in any advertisement for a vacant position that it wouldn’t consider unemployed individuals for the vacancy.  So far, not so difficult to comply with.  The proposed statute would also prohibit employers from directing a headhunter to screen out unemployed candidates.  Again not so tough.  But here’s the kicker:  if enacted, the statute would provide that it is an “unlawful employment practice for an employer to… fail or refuse to consider for employment, or fail or refuse to hire, an individual as an employee because of the individual’s status as unemployed”.  HELP!

Consider the following:

Candidate A is currently employed in the same industry as Company, and is thriving in her role there, having recently survived a significant staff reduction.  Company considers her a perfect candidate.

Candidate B has similar experience to Candidate A, with the same employer, but did not survive the reduction in force and is currently unemployed.  Company might under other circumstances consider Candidate B, but prefers Candidate A and can’t help but notice that their prior employer considered Candidate A the better worker.

Doesn’t Company want to hire the best qualified candidate?  But doesn’t Company also want to avoid litigation?

While aimed, like the remainder of the American Jobs Act, at reducing the much too high unemployment rate plaguing this country, the proposed statute may well not achieve that objective given the disincentive on hiring it may impose on employers such as Company.  What it certainly would do is increase the risk of litigation and place employers in the very difficult (and counterintuitive) position of not necessarily selecting the best qualified candidate. 

Employers have long been prohibited (for good reason) from discriminating in hire decisions based on other protected characteristics such as sex, race, age, disability, etc., but these characteristics have nothing at all to do with an individual’s (relative) capabilities with respect to a particular job opening.  Of course there are many reasons an individual may be unemployed that have nothing to do with qualifications, but an individual’s status as unemployed surely may have at least something to do with his qualifications for a particular vacancy.  This is particularly true if the unemployment is for a significant period of time during which perhaps significant changes in the industry have occurred.  To suggest otherwise is not realistic.

All of which is bound to put employers in a difficult position if the law goes into effect.  But some solace for employers may be found in (i) the proposed statute’s definition of “affected individual” as a person subjected to an unlawful employment practice “solely” because of the person being unemployed; and (ii) the proposed statute’s inclusion of language providing an employer “may” assess “whether an individual’s employment in a similar or related job for a period of time reasonably proximate to the consideration of such individual for employment is job-related or consistent with business necessity.”  Some, but not of whole lot of solace, given that the meaning courts attach to these provisions may take years to come into focus and, in any event, seem written to invite factual disputes.

Employers will need to be on the lookout for the status of the proposed Fair Employment Act of 2011. 

By: John F. Fullerton III and Douglas Weiner

The current prevalence of lawsuits for unpaid overtime compensation under the Fair Labor Standards Act (“FLSA”) by employees who claim they were misclassified by their current or former employer as “exempt” from overtime has been well-documented.  These lawsuits continue to present challenges to employers, not just in terms of the burdens and costs of defending the cases, but in the uncertainty of the potential financial exposure. As our colleagues have previously reported (here and here), there are two methods in which the employees can be compensated for the allegedly unpaid overtime wages in such a case.  Under the FLSA, overtime compensation for non-exempt employees is computed at “a time and half” rate for hours worked in excess of forty in a week.  In appropriate situations, however, when the employees have received a fixed salary for all hours worked (which is frequently what has occurred in a misclassification case because the employer has treated the employees as exempt from overtime), the overtime compensation owed to non-exempt salaried employees can and should be calculated based on the “half-time” or “fluctuating workweek” method.  This method of calculation can dramatically decrease the potential damages in a misclassification case.  Instead of dividing the weekly salary by forty to determine the regular rate of pay and paying 1 ½  times that rate for every hour worked in excess of forty, the weekly salary is instead divided by the actual number of hours the employee worked each week (in other words, the more overtime the employee worked, the lower the regular rate), and then paying an additional ½ of that rate for every hour worked in excess of forty in a week rather than 1 ½ times that rate.  Conceptually, the salary pays straight time for all weekly hours, and only additional half-time is due for weekly hours over 40 to pay the time-and-one-half required by law.

Guidance on the requirements for establishing prospectively a lawful fluctuating workweek overtime compensation system for salaried non-exempt employees is provided by U.S. Department of Labor regulations, 29 C.F.R. § 778.114.  Employers have frequently argued that this regulatory provision should also apply retroactively if it later turns out that a non-exempt employee was misclassified as exempt.  A split in authority has arisen, as some district courts have held that because that regulation requires contemporaneous payment of overtime, and a “clear mutual understanding” of the parties, the fluctuating workweek method cannot be applied retroactively to calculate damages in a misclassification case.  Many other courts have rejected that interpretation and have applied the fluctuating workweek method retroactively.  Even the Department of Labor has in the past endorsed the fluctuating workweek method in satisfying unpaid overtime claims in a misclassification case.   

The dispute over the correct interpretation of the regulations has become increasingly irrelevant as a growing line of cases eschew the regulations in favor of reliance on the Supreme Court itself.  In Overnight Motor Transp. Co. v. Missel, 316 U.S. 572 (1942), the Court held that when an employee and employer have an agreement in which the employee is paid a fixed weekly wage for hours that fluctuate from week to week, the half-time method is the correct way to calculate damages in an unpaid overtime case.  Subsequent lower court decisions and the Department of Labor have made clear that the agreement need not be in writing, but rather, can be demonstrated through the course of conduct between the employer and employee.  In other words, if the employee was treated as exempt, without deduction from the weekly salary for absences from the office, then the requisite mutual understanding has been established.

A few months ago, the Supreme Court denied certiorari (PDF) in a Seventh Circuit case that would likely have presented the opportunity for a definitive ruling on (or reconfirmation of) the use of the half-time method in a misclassification case.  But significantly, five federal circuit courts have now approved the use of the half-time method—the First, Fourth, Fifth, Seventh and Tenth Circuits (All PDFs) —while not a single circuit has rejected this method.  And the more recent decisions (Fourth and Seventh Circuits) have broken away from reliance on the regulations and have, more appropriately, grounded their decisions on the Supreme Court’s decision in Overnight Motor Transportation Co.  Thus, the weight of authority is increasingly coming down on the side of the employers on this issue.

EpsteinBeckerGreen will be continuing to monitor developments on this topic and providing updates as appropriate.  In the mean time, employers who are sued or threatened with legal action for unpaid overtime under the FLSA should continue to push for the half-time method of calculating damages, in litigation or during settlement discussions, in any case in which the employees were clearly paid a fixed salary regardless of the number of hours actually worked each week, as the case law shows strong signs of developing positively in this direction.

The EEOC has reported that it receives more charges of retaliation than any other type of employment discrimination charge, and that there are thousands of cases involving allegations of illegal retaliation filed every year.  Retaliation is often prohibited by statute, but the Supreme Court has expanded the scope of actionable retaliation lately, holding that there was a cause of action for retaliation even though the statute in question did not expressly cover the situation at issue.

The Fair Labor Standards Act (FLSA) prohibits discrimination against an employee “because such employee has filed any complaint” under the Act.  In Kasten v. Saint Gobain Performance Plastics Corp. (PDF), 563 U.S. ___ (2011), the U.S. Supreme Court held that, although there can be no retaliation if the employer is not on fair notice of the initial complaint, a complaint need not necessarily be in writing to trigger protection under the Act.  

Kasten had complained about the placement of the time clocks between the area where required work clothing was donned and doffed and the work area, such that employees were not paid for the time they spent donning and doffing their work clothes.  The employer had a grievance system that allowed for oral complaints of violations of any law.  Kasten testified that he “raised a concern” with his lead operator, his shift supervisor, the human resources manager and the operations manager that  the placement of the time clocks was illegal, but he had not “filed” any sort of written “complaint.”

The District Court and the Seventh Circuit Court of Appeals both held that oral complaints are insufficient to trigger retaliation protection under the FLSA.  The Supreme Court reversed and remanded.  Justice Breyer, writing for the 6-2 majority, held that the Act requires only “fair notice” of a complaint, reasoning that “it is difficult to see how an employer who does not (or should not) know an employee has made a complaint could discriminate because of that complaint,” and left it to lower courts to decide whether “Kasten will be able to satisfy the Act’s notice requirement” based on his oral grievance.

What steps can employers take in response to the Kasten decision?

• Employers are well advised to institute a formal grievance procedure and specify that the procedure is the appropriate way to put the employer on notice of any complaints. Raising grievances orally with low level supervisors then at least arguably may not be enough to trigger retaliation protection.
• Although many formal grievance procedures have an oral first step, employers would be wise to require writing early on in the process.  This has the advantage of identifying exactly what is being complained about so the initial complaint does not become inflated years later once a plaintiff’s lawyer gets involved.
• Employers should train their supervisors and managers to make Human Resources and upper management aware when employees complain about allegedly illegal activities. A complaint may at first appear to be mere griping, but it could be the basis for a lawsuit or even a union organizing campaign.