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Employers face prospect of paying more overtime under Obama directive

March 25th, 2014  |  Lisa Milam-Perez  |  Add a Comment

By Lisa Milam-Perez, J.D.

Earlier this month, President Obama issued an Executive Memorandum directing the Secretary of Labor to amend the Fair Labor Standards Act (FLSA) regulations regarding overtime pay — in particular, the “white-collar” exemption provisions that outline which employees are not entitled to such pay. In the President’s view, these exemptions reach too broadly, and more American workers should be entitled to compensation for the excess time they put in over the standard 40-hour workweek. “Today, only 12 percent of salaried workers fall below the threshold that would guarantee them overtime and minimum wage protections (compared with 18 percent in 2004 and 65 percent in 1975),” notes a White House fact sheet on the initiative. “Many of the remaining 88 percent of salaried workers are ineligible for these protections because they fall within the white collar exemptions.”

FLSA Section 201 requires covered employees to be compensated at a rate of 1.5 times their regular hourly rate for hours worked above 40 in a week. However, “executive,” “administrative,” and “professional” employees are exempt from this requirement, as are “computer professionals,” pursuant to the statute’s enabling regulations (29 C.F.R. Part 541), first issued long ago. These rules identifying which employees are “exempt” and “nonexempt” were most recently updated in 2004, under the Bush administration.

“Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage,” Obama wrote in his March 13 memo. Thus his directive to the Department of Labor (DOL) to issue revised rules “to modernize and streamline” the overtime regulations currently in effect. The President instructed the agency to propose revisions that are “consistent with the intent of the Act” (the depression-era statute was aimed at both improving workers’ pay and working conditions and expanding employment by making it more expensive for employers to over-work their existing workforce) and that respond to the “changing nature of the workplace” as well. (Both management and labor-side advocates have observed that some of the statute’s old-timey provisions are unworkable today.) Obama also said the DOL must make the rules easier for both employers and employees to understand and apply.

What changes can we expect? The Obama memorandum itself was light on details, and the fact sheet issued by the White House offered only a slightly clearer picture of what changes to the white-collar exemption rules lay ahead. It still left much room to speculate as to what regulatory amendments are in store:

• A likely increase in the minimum salary floor under which employees are deemed non-exempt. Currently, employees must earn at least $455 per week in order to fall within one of the white-collar exemptions from overtime; before the 2004 rule changes, it was a mere $250. The left-leaning Economic Policy Institute noted that the value of the salary threshold has eroded considerably and now falls below the poverty level for a family of four. At its peak in 1970, the minimum salary requirement amounted to $1,071 per week in 2013 dollars, or $55,692 a year. It’s 57.5 percent lower now, at just $23,660 a year.

• Some practitioners speculate too that the minimum salary requirement might be linked to inflation or adjusted annually based on the cost of living index. It’s also been predicted that the DOL may drop the “highly compensated employee” test first adopted in 2004. That “shortcut” test assumes that employees earning at least $100,000 annually are exempt as long as they regularly perform “exempt” duties.

• Another likely fix will be to the “duties” tests. For example, currently under the rules, as long as managerial employees spend at least 50 percent of their time performing exempt duties, they could spend significant portions of their workdays doing “concurrent” non-exempt work — the same work their subordinates perform — while still falling within the executive exemption, as long as they are supervising employees and overseeing operations at the same time. This “concurrent duties” concept has been particularly troubling to employee advocates, especially as courts have come to construe the 50-percent provision as a “rule of thumb” rather than a hard and fast requirement. Plaintiff’s attorneys have challenged the provision aggressively (albeit with only modest success) as it applies to dollar store and other retail managers, who often report working 60-80 hours a week without overtime pay as they run the store while simultaneously stocking its shelves. Under these circumstances, the store manager’s “primary duty” is still managing the store’s operations, so the executive exemption applies.

• Of course, the DOL may think outside the “white-collar rules” box in current form, crafting new hurdles altogether for employers to jump before classifying an employee as overtime-exempt. In 2010, for example, the agency briefly floated the prospect of a new “right to know” rule that would require employers to disclose to their workers whether they were “employees” or “independent contractors,” and explain how that conclusion was reached. Observers surmised at the time that the DOL might also compel employers to expressly disclose to employees their status as exempt or non-exempt, and to provide the basis for that determination. Federal Register issuances in recent months have suggested that the DOL has an information collection request in the works seeking to find out “employees’ experiences with worker misclassification,” inviting speculation about whether the aborted 2010 rule proposal may be resurrected. Such a provision would tie nicely into Obama’s plans for tightening the overtime exemptions so that a larger percentage of the workforce would be entitled to premium pay for excess hours.

• The White House fact sheet expressly referenced New York and California, and the heightened salary thresholds those states impose for their exemptions. These and other states have other exemption requirements that are more stringent than the FLSA as well. The DOL may well look to the exemption provisions in these employee-friendly states when rethinking the federal white-collar rules.

A larger agenda. The President’s overtime directive is part of a broader Obama administration agenda to “give America a raise,” as he stated in urging Congress to raise the federal minimum wage. And while the President is powerless to implement a general minimum wage hike without legislative action, he was able to single-handedly raise the pay floor to $10.10 an hour for private employees of federal government contractors in an executive order issued last month. That’s not small change, given the number of the nation’s employers with U.S. government contracts.

Aside from these initiatives, a number of federal agencies have set their sights on independent contractor misclassification — another practice that keeps American workers’ wages artificially deflated, according to the federal government. (This issue has preoccupied state agencies and legislatures in recent years as well.)

Waiting game. For now, employers must sit tight as the DOL takes up the President’s directive with pen in hand — a process that should take months to play out — and be poised to review and offer public comments once a proposed rule is issued. Notably, when the last white-collar rule changes were proposed in 2004, the DOL received 75,000 comments, and the final rule revision differed materially than the rewrite first proposed. Sifting through a similar deluge and redrafting the rules accordingly — amidst what will surely be a contentious process — will slow the course of final rulemaking considerably. That means employers have a fair amount of breathing room before any final rule takes effect. That time can be used to ensure your exempt classifications currently in place are legally sound and to confer with counsel about your organization’s potential vulnerabilities in light of ongoing, informed speculation as to the DOL’s plans.

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“Childbearing capacity” discrimination

March 20th, 2014  |  Kathy Kapusta  |  Add a Comment

While, as the saying goes, you can’t be “just a little bit pregnant,” a federal district court in Michigan recently stated that adverse employment actions taken on account of “childbearing capacity,” are valid claims under Title VII. Although the court was not willing “to go as far as to conclude that a non-pregnant plaintiff” could bring a Pregnancy Discrimination Act claim if in-vitro fertilization was being used, it refused to dismiss an employee’s allegations that she was targeted for her intent to become pregnant after announcing that she would be undergoing IVF. In the court’s opinion, the employee properly characterized her claim as one for “childbearing capacity” discrimination.

In this case, the employee, a lead dental instructor, told her supervisor that she would be undergoing IVF in an effort to become pregnant. While receiving the treatment, her supervisor allegedly told her she had to work as a “teaching assistant” instead of a lead instructor to accommodate the procedure and allow her to sit and told her to work sitting down “because you are being pumped with so many hormones.” After completing the procedure, the employee took a week off. On the day she returned to work, she suffered a miscarriage.

Too focused on babies. The employee alleged that she was demoted the next day, her job title was officially changed the next week, and her job status changed from full-time to part-time. She claimed that her supervisor told her shortly thereafter that she was “not a good cheerleader in the classroom” and was “more focused on babies.” The supervisor also allegedly asked her if she intended to have additional medical procedures “regarding her desire to bear children.” Not surprisingly, the employee sued, asserting gender discrimination claims under Title VII, Michigan’s Elliot-Larsen Civil Rights Act, and the PDA.

Use of IVF. The court initially observed that the majority of lower courts agree with the Sixth Circuit that pregnancy is a necessary prerequisite to a PDA claim. As to the specific issue of whether the PDA applies to women who are receiving IVF, however, the court pointed out that only the Seventh Circuit has ruled that it does. Unwilling to find that a non-pregnant plaintiff who is using IVF falls under the PDA’s protections, the court agreed that adverse employment actions taken on account of childbearing capacity affect only women and are therefore valid claims under Title VII.

PDA claim. As to her PDA claim, the court noted that she alleged that she was pregnant and suffered a miscarriage; that she was qualified for the lead dental instructor position; and that she was an excellent employee who received good performance reviews and merit increases. Although the employer argued that she was demoted because she had not yet received a required certification, the court found that her allegations were sufficient to make an initial showing that she was qualified for her job.

Moreover, her allegation that she had a miscarriage implied that she was pregnant; thus, she suffered a pregnancy-related condition. Because she alleged that she was demoted the day after her miscarriage, there was a sufficient inference that her demotion was caused by her miscarriage. Thus, she stated a plausible claim under the PDA.

Gender discrimination. The employee also alleged that she was demoted and phased out of a job for which she was qualified because of gender discrimination based on her desire and ability to become pregnant. Here, the court observed that the U.S. Supreme Court, in Int’l Union v Johnson, has held that gender discrimination claims based on childbearing capacity fall under Title VII’s protection. Noting that the employee’s particular method of trying to become pregnant was through IVF, the court pointed out that courts are split as to whether firing an employee who has taken time off to undergo IVF is permissible under Title VII.

Childbearing capacity discrimination. Declining to reach this issue, the court stated that the employee did not claim that was why she was fired. Rather, she contended that she was specifically targeted because of her desire to become pregnant and bear children. Childbearing capacity discrimination, which is gender-based, is exactly the type of discrimination that Title VII was designed to cover in order to combat the view of women as marginal workers, the court stated.

Noting that the reasoning behind Title VII supports the employee’s claim, the court observed that she was a member of a protected class by virtue of being a woman. She also alleged that she was qualified for her job, that she was an excellent employee who received good performance reviews and merit increases, and that other similarly situated employees who were not seeking to become pregnant were treated more favorably.

In addition, she alleged that after she made it known that she was attempting to become pregnant through the use of IVF, and after her miscarriage, her employer became concerned about “future endeavors into child bearing.” Moreover, other similarly-situated employees, who were not seeking to become pregnant and had similar records and positions, were not demoted or terminated. Further, the employee contended that her employer’s reasons for demoting her and terminating her were pretextual. Although the employer disputed the employee’s qualifications for the position, the court pointed out that factual disputes were not before it on a motion to dismiss. Accordingly, the employee was able to advance her claim.

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Blogs identify legal gaps and foster a sense of community

March 13th, 2014  |  Lorene Park  |  Add a Comment

By Lorene D. Park, J.D.

Okay, I admit it, when I first started writing blogs for Employment Law Daily I thought that most blogs are only written for two reasons: marketing and pumping up one’s ego. No doubt marketing actually is one main reason, as evidenced by the proliferation of ghostwriting bloggers who post for firms. And there is a certain ego boost when a blog you have written is well received. But what has truly surprised me is the other value I have seen in both reading and writing legal blogs, including the comment section.

Blogs identify trends and gaps in the law for the unwary. Bloggers hale from all over the U.S. and when a similarity of headlines crops up, it signals that either the issue is just emerging (making it interesting fodder for discussion) or that it is something the legal community is struggling with. For example, there were a slew of blogs on:

  • The EEOC’s questionable litigation tactics and its overstepping during the conciliation process.
  • Ownership of social media accounts given the lack of precedent and legislation on the issue.
  • Whether obesity should be a disability under the ADA.

This list could go on and on. Plus, if you want a big picture of main trends, just take a look at the many “top ten” (or “recap”) blogs for the year. The point is this: Blogs have real substantive value. Good blogs can provide legal summaries on key issues, links to primary sources, and practical advice. In many ways, there is as much value to be gained from reading blogs as there is by attending continuing education, though you won’t get course credit for it.

If you are lucky, someone will disagree. For many years my Dad wrote a column for a local newspaper in a small community. He was always tickled when a column sparked a debate among neighbors and he loved getting responses from those who strongly disagreed because it gave him new ways of looking at an issue. To me, legal blogging and commenting also foster the exchange of ideas. For the blogger, instead of discussing an issue with a coworker who has a reason to not offend you, you are putting your thoughts to a large professional community. If you are lucky, someone will disagree with you.

Blogs foster a sense of community. Let’s assume for a moment that: not everyone enjoys “networking” with total strangers at conferences or professional events; many professionals are too busy to regularly attend such functions; and many do most communicating electronically, perhaps because it saves time, avoids “telephone tag,” or because they are telecommuting from a remote location. From my point of view, blogs enable such individuals to more fully enjoy the exchange of ideas and the sense of society that they might otherwise miss. Even for individuals who do regularly make time for conferences, social sites with their blogs and comments provide a way to glean additional insight on issues of particular interest. For my part, I have found a few blogs and comments intriguing enough to reach out and ask the writer to consider submitting an article for the daily news report published by my employer.

Free advertising, but only if you are good. The question of whether a blog is free advertising turns on who your readers are. For example, I doubt a potential client is going to do an Internet search and choose an attorney based on a blog. It would have to be a blog on the individual’s legal issue, written by an attorney in the same geographic area, and the client would have to be a layperson with enough legal knowledge to understand the substance of the blog. That said, I do believe blogs are free advertising – but only if they are good. Good blogs will be noticed by others in the legal community and it is from them that an attorney might possibly garner a referral. And posting good blogs on a regular basis can help distinguish one professional from the rest.

Blogs are fun. The last thing I will say about blogs is that they are fun both to read and write. Blogs are where attorneys and other professional often go beyond plain old analysis and say what they really think about a particular court decision, agency action, or proposed legislation. That sense of irreverence is just the kind of fun you get at happy hour with coworkers – but who has much time for that?

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Employees find Facebook postings not entirely their own

March 11th, 2014  |  Ron Miller  |  Add a Comment

It’s an open secret that human resource professional regularly examine the Facebook and other Internet postings of job applicants to determine if an individual has some issue that make him or her an unsuitable job candidate. It has been suggested that younger generations even have a diminished expectation of privacy in their personal lives than past generations came to expect. Facebook and other forms of social media have become ubiquitous in the lives of a large segment of our population. For some individuals such postings provide not only a means of keeping in touch with friends, but also offer an outlet for frustrations. However, recent cases once again illustrate that in the employment context employee Facebook postings are not just their own.

Confidentiality agreement breach. A discharged headmaster violated the confidentiality clause in his age discrimination settlement agreement by telling his daughter his case had settled, which she then trumpeted to approximately 1200 Facebook friends, many of whom were either current or past students at the school. As a consequence, the headmaster was precluded from enforcing the settlement agreement, ruled a Florida state court of appeal in Gulliver Schools Inc v Snay.

The parties signed the agreement to settle the age discrimination and retaliation claims of the school’s former headmaster based on the nonrenewal of his contract. Only four days after the agreement was signed, the school contacted its former employee to let him know that he had breached the confidentiality clause of the agreement based on the Facebook posting of his college-age daughter, which said “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

“Before the ink was dry,” commented the court, the headmaster “violated the agreement by doing exactly what he had promised not to do.” Moreover, his daughter then did precisely what the confidentiality agreement was designed to avoid, broadcasting to the school community that the headmaster had been successful in his age discrimination and retaliation case.

Confederate flag posted. A deputy police chief at a public university, who was demoted after posting the image of a Confederate flag on his Facebook page was barred from proceeding with his First Amendment retaliation claims, a federal district court in Georgia ruled in Duke v Hamil.

Days after the 2012 presidential election, the officer posted on Facebook an image of the Confederate flag with an accompanying phrase, “It’s time for the second revolution.” Although he intended the image only to be shared with those people with direct access to his Facebook page, someone provided the image to a local television station, which ran a story on the evening news. The story identified his position as a deputy chief with the university police department. Thereafter, the police department received anonymous complaints, and a subsequent investigation by the university resulted in his demotion, and a $15,000 pay cut.

The officer claimed he was expressing his dissatisfaction with Washington politicians. However, the court noted that employers deserved wide latitude in management and needed to be able to take action against employees who disrupted the efficient operation of government. This interest in efficient public service was particularly strong in the context of police departments, which have a particular need to maintain a favorable public reputation. Here, the court determined that the employer had an interest in maintaining its reputation, and good working relationships outweighed the officer’s First Amendment interest.

Facebook rant. Facebook comments by a child protective services caseworker that disparaged clients irreparably impaired her workplace effectiveness, her credibility, and her impartiality as a witness and provided a legitimate basis for her termination, a federal court in Oregon in Shephard v McGee. Applying the five-part Pickering balancing test, the court determined that the employer had a legitimate administrative interest in terminating the employee that outweighed her First Amendment rights.

As a child protective services caseworker who worked closely with attorneys from the district attorney’s office, the employee acknowledged that every case had the potential to end up in court. Her job was “to be a neutral appraiser of the settings in which the children live.” On her Facebook page, she identified her job and her employer, and she had hundreds of friends — including a judge, several district attorneys and defense attorneys, and over a dozen law enforcement officers. She posted Facebook comments complaining about clients with expensive cars, flat screen TVs, etc., who were receiving public assistance. In addition, she posted her own rules for society. Someone forwarded her comments to the department’s HR manager and after an investigation she was fired.

According to her own testimony, the employee had to testify in juvenile court hearing six to eight times per month. Moreover, the attorneys with whom she worked most closely agreed that the caseworker’s bias would have to be disclosed to opposing counsel in all cases. Because the attorneys relied heavily on her ability to present her information in a clear and impartial manner; they feared that as a result of the content of the Facebook posts, they would never be able to call her to the stand due to her credibility being terminally and irrevocably compromised. That these attorneys doubted her was itself a disruption to working relationships and evidence that her ability to perform her job already was impaired, said the court.

Internet posts a “gamble.” Even though these Facebook postings were intended to be viewed by close friends and family, they illustrate the “gamble individuals take in posting content on the Internet.” As the cases illustrate, it is not necessary that the employee’s comments directly impugn an employer to be regarded as against the employer’s interest so as to justify action on its part.

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Bill requiring employers to accommodate pregnant workers passed by West Virginia Senate

March 7th, 2014  |  Deborah Hammonds  |  Add a Comment

The West Virginia Senate has passed legislation requiring employers to provide reasonable accommodations related to pregnancy and childbirth. The Pregnant Workers Fairness Act, HB 4284, was overwhelmingly approved on March 6.

Introduced in the House on January 24, 2014, by Delegate Don Perdue, HB 4284 would amend the Code of West Virginia to make it an unlawful employment practice for covered entities to:

  • Fail to make reasonable accommodations to an applicant’s or employee’s known limitations related to pregnancy, childbirth, or related medical conditions, following written documentation from a health care provider specifying the limitations and suggesting what accommodations would address those limitations, unless the covered entity can demonstrate the accommodation would impose an undue hardship on the operation of the business;
  • Deny employment opportunities, if the denial is based on the covered entity’s refusal to make reasonable accommodations to known limitations related to the pregnancy, childbirth, or related medical conditions of an employee or applicant;
  • Require a job applicant or employee affected by pregnancy, childbirth, or related medical conditions to accept an accommodation that the applicant or employee chooses not to accept; or
  • Require an employee to take leave under any leave law or covered entity policy if another reasonable accommodation can be provided for the employee’s known limitations related to the pregnancy, childbirth, or related medical conditions.

“Reasonable accommodation” and “undue hardship” would have the same meaning and be construed in the same manner as in Section 101 of the ADA.

HB 4284 also includes protections against retaliation for those who exercise their rights under the new law.

The legislation now moves to the Governor’s desk.

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