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Top labor and employment developments in March 2018

April 6th, 2018  |  Lorene Park

By Lorene D. Park, J.D.

In case you missed Employment Law Daily’s in-depth coverage, here’s a brief recap of some of the key developments in the L&E community for March.

Some transgender individuals see gains in fighting discrimination:

First up, some in the transgender community may have cause to celebrate after a March 23 press release announced that President Trump has reversed course on his ban on transgender people serving in the U.S. military. After federal courts blocked the ban as unconstitutional, and following a memo and report by the Defense Secretary in consultation with the Homeland Security Secretary (as to the U.S. Coast Guard), which apparently fell short of fully supporting the ban, Trump revoked his August 25, 2017, Presidential Memorandum, “Military Service by Transgender Individuals.”

However, under the newly announced policy, there is a distinction between persons who are transgender and those diagnosed with gender dysphoria. Transgender persons are individuals whose gender identity differs from their biological sex. Gender dysphoria is a mental condition defined in the American Psychiatric Association’s Diagnostic and Statistical Manual of Mental Disorders that affects some transgender individuals. People with gender dysphoria are said to experience significant mental anxiety and distress because their gender identity differs from their biological sex. For those with a history or diagnosis gender dysphoria, the new policy disqualifies them from both entry and retention in the military.

The new policy also disqualifies transgender persons who require or who have undergone gender transition. However, transgender persons with no history or diagnosis of gender dysphoria, who are otherwise qualified for military service, “may serve, like all other Service members, in their biological sex.”

Senior staff attorney for the ACLU, Joshua Block characterized the policy as “transphobia masquerading as policy.”

Also in March, the Sixth Circuit affirmed that transgender individuals are protected by Title VII. The court found it “analytically impossible to fire an employee based on that employee’s status as a transgender person without being motivated, at least in part, by the employee’s sex.” The employer, a funeral home, fired its funeral director after she disclosed she was going to have sex-reassignment surgery and would no longer dress like a man under its dress code, which required public-facing male employees to wear suits and ties and public-facing female employees to wear skirts. The court also held that the Religious Freedom Restoration Act provided no relief to the company owner as continuing to employ the funeral director would not substantially burden his religious exercise (EEOC v. R.G. & G.R. Harris Funeral Homes, Inc.).

The Sixth Circuit now joins the Second and Seventh Circuits in holding that LGBTQ individuals may be protected by Title VII. The Eleventh Circuit has ruled that sexual orientation discrimination per se is not covered under Title VII, however.

Other significant federal appellate decisions this month included . . .

2d Cir.: NLRB’s bargaining order inappropriate given changed circumstances. Granting review of an NLRB order, the Second Circuit held that substantial evidence supported the Board’s findings that the manner in which an employer tried to dissuade employees from voting to unionize, including its reinstatement of holiday pay and demotion of a pro-union employee, violated the NLRA. Though most components of the Board’s order of remedial relief were enforced, the appeals court refused to enforce the bargaining order because the Board failed to properly account for changed circumstances during the two-year period between the unfair labor practices and its decision, particularly given the significant employee and management turnover and the importance of employees’ free choice (Novelis Corp. v. NLRB).

5th Cir.: DOL’s ‘Fiduciary Rule’ vacated. A final rule (the Fiduciary Rule) promulgated by the Department of Labor in April 2016 expanding the definition of “investment advice fiduciary” conflicts with the text of ERISA and the Internal Revenue Code and is unreasonable under Chevron and the APA, the Fifth Circuit has held. It not only departs from the common law definition without good reason, said the appeals court, but it also breaks with 40 years of established regulatory interpretation. Because its provisions are not severable, the rule was vacated in its entirety. Chief Judge Stewart dissented (Chamber of Commerce v. U.S. Department of Labor).

7th Cir.: Successor liability claim revived under ERISA. A successor may be liable for a predecessor employer’s withdrawal from a multiemployer pension plan under ERISA, as amended by the Multiemployer Pension Plan Amendments Act, ruled the Seventh Circuit, remanding for further consideration. The successor’s use of the employer’s intangible assets—its name, goodwill, trademarks, customer data, trade secrets, phone numbers, and websites—plus its retention of principals to promote the successor to customers, weighed heavily in favor of successor liability (Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc.).

8th Cir.: NLRB determination that union ran exclusive hiring hall stands. The appeals court granted the Board’s application to enforce its ruling that a union furnishing labor for entertainment-venue employers ran an exclusive hiring hall in violation of the NLRA by, among other things, granting priority to its own members for job referrals and failing to remit certain bonuses for improper reasons (International Alliance of Theatrical Stage Employees, Moving Picture Technicians, Artists and Allied Crafts, Local 151 v. NLRB).

10th Cir: Pecan ranch violated injunction against oppressive child labor. Children who gathered fallen pecans, ostensibly to donate to their church, were employees and not volunteers. The Tenth Circuit found that instead of working for their own personal reasons, they were coerced. Also, they were employees of a company that contracted with the grove owner, not of the church or an “independent contractor” hired to fulfill the contract. The court affirmed a ruling that the company and its president violated a 2007 injunction against oppressive child labor and an order to pay $200,000 to compensate the children (Acosta v. Paragon Contractors Corp.).

D.C. Cir.: Using election observer fired for brandishing toy gun didn’t taint election. The NLRB did not unreasonably discount two threats that an employer claimed tainted a union election—an alleged threat to call ICE if the union lost, and the union’s use of an election observer who had been fired four days earlier for threatening conduct involving an “airsoft” gun. Denying a petition to review the Board’s determination that the employer violated the NLRA by refusing to recognize the union, the D.C. Circuit held that absent evidence connecting the fired employee’s behavior to the election or to the union, or evidence that the union was responsible for ICE threats that could potentially coerce employees to vote for it, the Board did not abuse its substantial discretion in certifying the election results (Equinox Holdings, Inc. v. NLRB).

D.C. Cir.: T-Mobile violated NLRA by selectively bargaining on matters of its choosing. The D.C. Circuit in an unpublished opinion denied T-Mobile’s petition to review the NLRB’s decision that T-Mobile violated the NLRA, after receiving a decertification petition, by refusing to bargain with a union over a successor CBA but continuing to bargain on other matters of T-Mobile’s own choosing. Judge Sentelle dissented (T-Mobile USA, Inc. v. NLRB).

Sexual harassment cases continue to dominate headlines, including:

Trump not ‘above the law’: Defamation suit by sexual misconduct accuser proceeds. A New York state judge denied President Trump’s motion to dismiss or hold in abeyance (until the end of his term) a defamation suit by a woman who accused him of sexual misconduct in 2007, when she met with him seeking advice and employment opportunities after she was “fired” from The Apprentice. The court found no reason to delay a civil case concerning Trump’s purely private conduct just because he is president (Zervos v. Trump).

No sanctions claiming surveillance by Fox News in reprisal for harassment complaint. A federal court in New York refused to sanction a former Fox News commentator for a suit claiming federal wiretap and Stored Communications Act violations based on acts allegedly meant to punish her for filing a sexual harassment suit. The defense argued real individuals were behind the social media accounts she claimed were “sockpuppet” fronts by Fox, but the court refused to find her suit frivolous or in bad faith (Tantaros v. Fox News Network LLC).

$350K awarded to sergeant transferred 180 miles away after reporting sexual harassment. Applying a cat’s paw analysis, the Sixth Circuit held that ample evidence supported a jury’s finding that the Michigan Department of State Police was liable for the retaliatory transfer of a female police sergeant, sending her 180 miles from home after she reported sexual harassment by her supervisor (Mys v. Michigan Department of State Police).

Single same-sex incident of verbal threat, physical contact enough to survive dismissal. A male corrections officer’s claim that his male supervisor once massaged his shoulders and made sexually explicit and aggressive comments while doing so was enough to plausibly allege a Section 1983 harassment claim, given the coupling of unwanted physical contact with threatening verbal conduct (Perry v. Slensby).

Other noteworthy March decisions were off the beaten path:

Advertising ‘Lots of Mexicans’ ran afoul of Title VII. An employment agency violated Title VII by placing ads in a Chinese-language newspaper touting that it had “Lots of Mexicans,” since the ads unlawfully expressed a “preference” or “specification” for Mexicans or persons of Latino origin, a federal court in Illinois ruled, granting partial summary judgment to the state (State of Illinois v. Xing Ying Employment Agency).

Chinese parent company’s ‘pop-up’ screen may bind subsidiary. A user agreement with a noncompete, which appeared as a pop-up screen when a U.S. subsidiary’s employee used the Chinese parent’s IP platform, contained ambiguities in whether it applied to him or only to the parent’s Hong Kong employees, ruled a federal court in Michigan, allowing him to proceed on his claim that subsidiary breached the pop-up agreement by refusing to pay him for 24 months after his employment ended (Grant v. Johnson Electric North America, Inc.).

Employer may be liable for falling prey to W-2 phishing email. Refusing to dismiss negligence and breach of contract claims against an employer that provided confidential employee information in response to a phishing email, a federal court in North Carolina found the employees sufficiently alleged a duty to safeguard the information and a breach. Identity theft and deceptive trade practices claims also advanced (Curry v. Schletter, Inc.).

Fear that obesity could lead to other conditions supports regarded-as ADA claim. Under the majority view that obesity is an ADA impairment only if caused by an underlying physiological condition, a federal court in Illinois found that an applicant rejected for a safety-sensitive job due to obesity could not show an actual disability—but he could proceed on his ADA regarded-as claim because BNSF admitted it rejected him for fear that he would develop sleep apnea, diabetes, or heart disease, and suddenly become incapacitated (Shell v. Burlington Northern Santa Fe Railway Co.).

Putative class plaintiffs cite online employer reviews to show similarly situated others. Though a “close call,” a federal court in Louisiana conditionally certified an FLSA collective action by employees seeking unpaid wages and overtime from a labor contractor. They satisfied the limited preliminary burden of showing similarly situated employees by pointing to online reviews with similar complaints (Horton v. Global Staffing Solutions LLC).

Exotic dancers’ antitrust claims against strip club trade groups survive. Exotic dancers’ claims that industry trade groups for Ohio adult entertainment clubs unlawfully conspired to impose a “tenant system” on dancers survived a motion to dismiss antitrust and civil conspiracy claims. The claims are part of the dancers’ wage suit under the FLSA and Ohio law challenging their status as independent contractors and the club’s use of “lease agreements,” under which they have to pay $50 per night in “rent” to the clubs as purported “lessees” in order to perform there (Hogan v. Cleveland Avenue Restaurant, Inc. dba Sirens).

Agency enforcement actions that came to fruition in March included:

Motel managers go to prison for exploiting alien labor. Two motel managers were sentenced to a year and a day in prison for alien harboring for financial gain. The DOJ reported that they harbored an undocumented Indian national at a Super 8 Motel for over a year, during which he worked long hours performing manual labor. They promised to pay him but instead claimed to apply his pay to a debt he owed.

$1M in penalties after severe injuries at auto parts plant. OSHA announced that auto parts manufacturer Sunfield Inc. agreed to a settlement that includes a $1 million penalty and to hiring a safety and health coordinator to resolve violations found at an Ohio plant after two employees were severely injured by moving machine parts. The plant lacked adequate power press guarding and hazardous energy control procedures, said the agency.

Two years in prison and $749K in restitution for wage fraud. After a DOL investigation, a federal court in New Jersey sentenced a member of the International Longshoremen’s Association to prison time and ordered him to pay restitution for fraudulently collecting nearly $500,000 a year in pay. False timesheets credited him up to 16 hours of overtime each day when he actually spent as little as eight hours per week at the job site.

Pharmaceutical CEO gets a year and a day in prison over kickbacks. A federal court in Texas sentenced a former CEO of Pharmaceutical Technologies, Inc. (PTI), to one year and one day in prison for paying illegal kickbacks in an effort to steer pharmacy benefit plans to the company, the DOL announced. PTI agreed to pay over $8.5 million to avoid prosecution.

And finally, a couple of big settlements:

$45M settlement of equal pay suit against Family Dollar Stores. In a long-running and hard-fought class action alleging female Family Dollar Store managers were paid less than their male counterparts for the same work, a federal court granted final approval of a $45 million settlement (Scott v. Family Dollar Stores, Inc.).

$16.75M settlement preliminarily approved in FLSA suit against Kellogg. A federal court in Washington preliminarily approved a $16.75 million settlement in a suit by former territory managers and sales reps claiming Kellogg misclassified them as exempt and denied overtime in violation of the FLSA (Thomas v. Kellogg Co.).

Top labor and employment developments in February 2018

March 10th, 2018  |  Joy Waltemath

By Joy P. Waltemath, J.D.

In case you missed Employment Law Daily’s in-depth coverage, here’s a recap of some of the key developments in the L&E community for the short month of February 2018. Below are highlights, but you can access the full recap here:

At the Supreme Court

  • Janus argument reveals deep split among Justices. Will public-sector unions will be permitted to collect so-called “agency” or “fair-share” fees going forward?
  • SCOTUS denies Dodd-Frank protections to internal whistleblowers. Only whistleblowers who report to the SEC are protected against employment retaliation under Dodd-Frank, the U.S. Supreme Court unanimously ruled.
  • Yard-Man inferences can’t create ambiguity in CBA to find lifetime health benefits vesting. Responding to a certiorari petition, the Supreme Court reversed and remanded a Sixth Circuit decision that had held that the same Yard-Man inferences it once used to presume lifetime vesting of retiree health benefits could be used “to render a collective bargaining agreement ambiguous … allowing courts to consult extrinsic evidence about lifetime vesting.”
  • Justices take a pass on DACA injunction for now. The Supreme Court has declined the Trump Administration’s invitation to weigh in on its now-blocked revocation of the Deferred Action for Childhood Arrival (DACA) program before a final judgment.
  • Nationwide travel ban injunction to stand pending SCOTUS review. Dealing the latest blow to the Trump administration’s efforts to impose a travel ban, primarily on Muslim-majority countries, a divided en banc Fourth Circuit upheld a district court’s order imposing a nationwide preliminary injunction on the administration’s third iteration of the ban.”

At the DOL:

  • Amid proposed rescission, DOL again seeks more time on tip pool petition. The Department of Labor is seeking its seventh extension of time to file its response to the National Restaurant Association’s petition for certiorari, challenging a divided Ninth Circuit decision finding that the agency had acted within its authority when it promulgated the 2011 changes to its tip pool regulation. The DOL, meanwhile, had already published its new proposed rule that would allow employers to utilize mandatory tip-pools that include employees who do not traditionally receive direct tips (it would apply) only to employers that pay a full minimum wage and do not take a tip credit. If a tip credit is taken, then the sharing of tips between tipped and non-tipped employees is still prohibited. A firestorm erupted (and shows no signs of waning) when Bloomberg Law reported that the DOL purportedly intentionally omitted key data from its new rulemaking on tip pools.
  • Full Ninth Circuit to revisit DOL’s interpretation in dual jobs tip credit case. The Ninth Circuit has agreed to revisit the contentions of former servers and bartenders in a consolidated appeal that their employers improperly claimed the tip credit and failed to pay the required minimum wage.

In NLRB news:

  • Because Emanuel should have recused himself, NLRB vacates Hy-Brand. On February 26, the NLRB vacated its decision in Hy-Brand Industrial Contractors, Ltd., in which a 3-2 Board overturned the agency’s controversial “joint employer” ruling in Browning-Ferris Industries. The move came after the NLRB inspector general determined that new Board member William Emanuel was disqualified from participating in the case and should have recused himself from the proceeding.
  • Division of Advice finds no NLRA breach in high-profile Google firing. The NLRB General Counsel’s Division of Advice released an advice memorandum on February 15 regarding the much-publicized discharge of a Google software engineer following his invective about women in tech. In Google, Inc., the Division of Advice concluded that a Google software engineer was not engaged in protected activity when he wrote a memo questioning the tech giant’s diversity and inclusion initiatives.
  • NLRB soliciting briefs on whether misclassifying employees as independent contractors violates Section 8.


  • EEOC’s criminal background check guidance a substantive rule, APA notice-and-comment procedures apply. The Northern District of Texas denied a request from the state of Texas for a declaration that the state has the right to impose a categorical ban on hiring individuals with criminal felony convictions for certain state jobs. But it barred the EEOC from enforcing the guidance against the state of Texas until the Commission complies with the APA’s notice and comment rulemaking requirements.
  • EEOC ‘regarded as’ disability claims fail for therapist fired over concern she might contract Ebola. Declining to expand the ADA’s “regarded as” disabled definition to cover cases in which an employer perceives an employee to be presently healthy, with only the potential to become disabled in the future due to voluntary conduct, a federal court for the Middle District of Florida dismissed the EEOC’s claim that the employer unlawfully fired a massage therapist days before her trip to Ghana because she might become infected with Ebola.

In the Courts of Appeals

  • First Circuit: OSHA properly held general contractor liable for sole proprietor subcontractor’s safety breach
  • Second Circuit, en banc, says sexual orientation discrimination is ‘because of’ sex under Title VII
  • Sixth Circuit: Telecommuting for 10 weeks was reasonable accommodation for in-house attorney
  • Seventh Circuit: Jewish day school teacher was ministerial employee
  • Ninth Circuit: Officer’s claim she was terminated in part for extramarital affair revived
  • Tenth Circuit: Forced labor claims by immigration detainees may proceed as class

Sexual harassment roundtable slated for March 1 with complimentary CLE

February 23rd, 2018  |  Pamela Wolf

I am very pleased to be moderating a webinar, Sexual Harassment Roundtable: Practical Guidance for Employers, on Thursday, March 1, 2018 at 1:00 – 2:00 p.m. EST. Participants will be eligible for one complimentary CLE credit.

As most Labor and Employment practitioners know, sexual harassment continues to be a substantial and sticky workplace problem that has moved front and center with the rise of the “MeToo” movement. This one-hour webinar will focus on practical guidance for employers (and their inside counsel and outside attorneys). We have assembled an all-star panel of legal experts who will walk through the current landscape and discuss a wide range of topics, including:

  • Why sexual harassment remains a persistent workplace problem
  • The types of sexual harassment allegations that can be trickiest for employers
  • Pros and cons of using nondisclosure clauses in settlement agreements
  • How mandatory arbitration impacts sexual harassment claims
  • Best practices for preventing sexual harassment and handling allegations when they do arise

Please join me and our distinguished panel of attorneys as we discuss these issues and sort through real-life scenarios:

  • Brooke Colaizzi, Principal, Jackson Lewis, PC
  • Chris Bourgeacq, The Chris Bourgeacq Law Firm, PC
  • Brooke Colaizzi, Member, Sherman & Howard L.L.C.
  • Eric B. Meyer, Partner, Dilworth Paxson LLP

Click here to learn more about the panel and to register.

Top labor and employment developments in January 2018

February 8th, 2018  |  Kathy Kapusta

In case you missed Employment Law Daily’s in-depth coverage, here’s a recap of some of the key developments in the L&E community for January 2018.

Supreme Court:

“Tolled” means “stop the clock.” It was a slow month for the Supreme Court, which issued only one employment-related case in January, a procedural decision arising out of dismissed federal and state employment discrimination claims. In that case, the 5-4 Court held that 28 U.S.C. §1367(d), which says that the period of limitations for refiling state claims after they have been dismissed in a federal court action “shall be tolled while the claim is pending [in federal court],” stops the clock while the claim is in federal court, and it starts running again when the tolling period ends. Accordingly, an employee’s state-law claims that were dismissed from federal court after two and a half years and were refiled in state court 59 days later were timely, because the applicable statute of limitations for her D.C. law claims was suspended while her federal suit was pending. Employment lawyers see this decision benefitting plaintiffs. Notably, Chief Justice Roberts joined the liberal wing of the court in the majority opinion authored by Justice Ginsburg; Justice Gorsuch dissented (Artis v. District of Columbia, January 22, 2018, Ginsburg, R.).

Justices opt to stay out of joint-employer battle… The Court, however, was busy deciding what not to decide. On January 8, in an order issued without explanation, it denied the petition for certiorari filed in DirectTV, LLC v. Hall (16-1449), which sought review of a Fourth Circuit joint-employer ruling that the petitioners contend departed from every other circuit to have considered the issue.

… and will not scrutinize Mississippi’s controversial ‘religious freedom’ law. The Court also declined to take up challenges to Mississippi’s “Protecting Freedom of Conscience from Government Discrimination Act.” Signed into law in April 2016, H.B. 1523 was part of a trend of laws passed to insulate from liability religious organizations and persons not inclined to accept same-sex marriage as legitimate, even in the wake of the U.S. Supreme Court’s 2015 edict in Obergefell v. Hodges. The law goes a bit further than other state laws of its genre ostensibly to protect from “discriminatory action” by the government religious organizations and individuals who refuse to solemnize, celebrate, recognize, accommodate, or provide goods or services for a same-sex marriage or to same-sex-oriented individuals because of a sincerely held religious belief, or even a moral conviction, that marriage should be limited to the union of one man and one woman and sexual relations are properly reserved to such a marriage.

But will take up travel ban. The Court did, however, agree to review a Ninth Circuit ruling partially blocking the implementation of version three of the Trump Administration’s beleaguered “travel ban.” The Justices will resolve three questions presented in the administration’s petition for certiorari, as well as the question of whether the travel ban violates the Establishment Clause, a query posed in the State of Hawaii’s (and other respondents’) brief in opposition. This is the administration’s third try on a travel ban against foreign nationals from Muslim-majority countries.

Direct Supreme Court review of DACA injunction sought. Also in January, the Trump Administration asked the High Court to directly review a California district court’s preliminary injunction issued by a federal district court in California preventing the administration from ending the Deferred Action for Childhood Arrivals program. If granted, the Ninth Circuit would lose its chance to weigh in on interlocutory appeal before the Justices resolve questions at the heart of the case. The administration has already filed a notice of appeal asking the Ninth Circuit to review the January 9 ruling in Regents of the University of California v. U.S. Department of Homeland Security.

Federal Courts of Appeal:

First Circuit: $545K award stands for female firefighter’s sex-plus claim. Refusing to impose a more stringent standard for sex-plus claims (here sex plus sexual orientation) than required for traditional sex discrimination claims, the First Circuit affirmed a jury’s verdict and a judge’s front pay award in favor of a female firefighter who was subjected to “vile verbal assaults” and even had blood and brain matter flung at her by a coworker before she retired on disability due to post-traumatic stress disorder. Rejecting the employer’s contention that a more stringent evidentiary standard should have been applied (it allowed evidence regarding coworkers’ behavior at a union hall outside of work) and that the employee should have been required to identify a comparative class of homosexual male firefighters who had not been discriminated against, the court found this approach not only had “some rather obvious flaws,” but it has not been endorsed by the First Circuit and was in direct conflict with the text and jurisprudence of Title VII (Franchina v. City of Providence, January 25, 2018, Thompson, O.).

Fourth Circuit: EEOC’s EPA suit revived. Agreeing with the Third and Tenth Circuits, a divided Fourth Circuit found that the Equal Pay Act requires that an employer submit evidence from which a reasonable factfinder could conclude, not simply that its proffered reasons could explain the wage disparity, but that the proffered reasons do in fact explain the wage disparity. Further, observed the court, because the employer in an EPA action bears the burden of ultimate persuasion, once the plaintiff has established a prima facie case, the employer will not prevail at summary judgment unless it proves its affirmative defense “so convincingly that a rational jury could not have reached a contrary conclusion.” Turning to the case at hand, which was brought by the EEOC on behalf of three female employees alleging salary discrimination, the appeals court vacated summary judgment in favor of a Maryland state agency, finding that the EEOC established a prima facie violation of the EPA and that genuine fact issues existed regarding whether the pay disparity was due to factors other than gender (EEOC v. Maryland Insurance Administration, January 5, 2018, Keenan, B.).

B&B could not set in-kind value of employee’s housing at what guests pay. Reversing a grant of summary judgment against the FLSA claims of a bed and breakfast (B&B) employee who alleged she was not paid for all time worked or for all overtime owed, the Fourth Circuit explained that the lower court erred in finding that the parties’ agreement on hours worked exempted the employer from the FLSA’s other requirements for calculating the value of in-kind compensation. The case was remanded for the lower court to assess all “pertinent facts” and determine if the parties’ agreement was reasonable, and to make a finding on the reasonable cost of lodging and other in-kind benefits provided to the employee (Balbed v. Eden Park Guest House, LLC, January 25, 2018, Motz, D.).

Eighth Circuit: Panera can’t cap substantial bonus after performance had begun. Affirming a decision in favor of a group of Panera managers who sued their employer based on its attempt to cap the amount of the five-year bonuses they already had been promised, the Eighth Circuit found Panera could not modify its bonus offer in this way after performance had begun. As had the district court before it, the appeals court concluded that Panera’s promise to pay the bonus, which it put in writing when it asked managers to sign an employment agreement with a compensation plan that provided for the one-time bonus to be paid five years after execution, was an offer for a unilateral contract. Thus, imposition of the cap was an ineffective attempt to modify its unilateral contract offer (Boswell v. Panera Bread Company, January 5, 2018, Arnold, M.).

Tenth Circuit: Requiring use of vacation or swapping of days for Sabbath may violate Title VII. In a Title VII suit by two Seventh Day Adventists, who were fired for excessive absences after Kellogg’s new scheduling policy required they work every other Saturday, the Tenth Circuit refused the employees’ and amicus EEOC’s invitation to adopt a per se rule that a “reasonable” accommodation must completely eliminate the conflict between an employee’s religious practice and work requirements. Reversing the grant of summary judgment against their failure-to-accommodate claim, the court found a triable question on whether Kellogg reasonably accommodated them by requiring that, to avoid working on the Sabbath, they use vacation or other accrued time off or find a qualified coworker to swap schedules (Tabura v. Kellogg USA, January 17, 2018, Ebel, D.).

Other notable developments:

Sessions turns back clock on marijuana enforcement. In a January 4 memorandum, which he characterized as “a return to the rule of law,” Attorney General Jeff Sessions reversed course on federal marijuana enforcement policy, instead directing all U.S. Attorneys to enforce the laws enacted by Congress and to follow well-established principles when pursuing prosecutions related to marijuana activities, including the Controlled Substances Act. The memo wipes out earlier guidance, including a 2013 memorandum issued by then-Deputy Attorney General James M. Cole, which backed off of marijuana prosecutions—except in certain priority instances—in light of state ballot initiatives legalizing the substance for personal use in small amounts and providing for regulation of production, processing, and sale of marijuana. It also acknowledged, that outside those priority areas, the federal government has left it to state and local law enforcement to address marijuana activity via their own narcotics laws. Some 29 states and the District of Columbia have enacted laws governing the medical use of marijuana, and several states and the District of Columbia have enacted laws permitting personal consumption, several predating the Cole memorandum. Sessions’ new guidance casts doubt on the status of those laws in light of its reversal of federal enforcement policy and complicates matters for employers, who are already experiencing significant challenges managing employees who legally use marijuana for medical or recreational purposes under state laws.

NLRB GC wants to stay McDonald’s case. Following its upheaval on the joint-employer scene and a substantial tilt toward employers, the NLRB is asking an administrative law judge to stay proceedings in the high-profile McDonald’s USA, LLC, case in which the Obama-era Board had asserted that the fast-food giant is a joint employer of certain franchise employees. The new Republican General Counsel also cited his Board’s reversal of precedent on facially neutral workplace rules, policies, and employee handbook provisions.

DOL to use primary beneficiary test to decide when interns working at for-profit employers are subject to FLSA. In an announcement on January 5, citing the Ninth Circuit’s December 19, 2017, opinion in Benjamin v. B & H Education, Inc. expressly rejecting the DOL’s six-part test for determining whether interns and students are employees under the FLSA, the Labor Department clarified that going forward it would use the “primary beneficiary” test. The Ninth Circuit was the fourth federal appellate court to expressly reject the DOL’s six-part test. In its announcement, the DOL said that the agency will conform to these appellate court rulings by using the same “primary beneficiary” test that these appellate courts use to determine whether interns are employees under the FLSA. “The Wage and Hour Division will update its enforcement policies to align with recent case law, eliminate unnecessary confusion among the regulated community, and provide the Division’s investigators with increased flexibility to holistically analyze internships on a case-by-case basis.”

Read this if you hire student interns and you want to avoid FLSA claims

January 19th, 2018  |  Lorene Park

The Department of Labor, apparently recognizing the trend among federal appellate courts in addressing whether interns should be considered “employees” for purposes of the FLSA’s wage and hour requirements, has now updated its Fact Sheet #71 and adopted the “primary beneficiary” test first set forth by the Second Circuit in Glatt v. Fox Searchlight Pictures, Inc. and subsequently adopted by the Ninth and Eleventh Circuits.

The “primary beneficiary” test. In determining whether an intern/trainee is an “employee,” the “non-exhaustive” factors considered under the Glatt test include:

  1. whether it is clearly understood there is no expectation of pay;
  2. whether the internship provides formal training similar to that provided in an educational environment;
  3. whether it is tied to a formal educational program or earns academic credit;
  4. whether the internship corresponds to the academic calendar, accommodates academic commitments;
  5. whether it is limited in duration to the period it provides beneficial learning;
  6. whether the intern’s work complements, rather than displaces, work by paid employees and simultaneously provides a significant educational benefit to the intern; and
  7. whether it is clearly understood that the intern is not entitled to a paid position after the internship. Courts are to take a “totality of the circumstances” approach.

No factor is dispositive. The Second Circuit recently explained in Wang v. The Hearst Corp. that the Glatt factors intentionally omitted the DOL’s original requirement that an employer “derive no immediate advantage from the activities of the intern.” For an employer, “[i]t is no longer a problem that an intern was useful or productive,” explained the court.

The Eleventh Circuit in Schumann v. Collier Anesthesia agreed with the Second Circuit that the focus should be “on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes an unfair advantage of or is otherwise abusive towards the student.” The Ninth Circuit in Benjamin v. B & H Education, Inc. also followed the primary beneficiary analysis, finding that it best captures the Supreme Court’s economic realities test in the student/employee context. Under this approach, the court found that students at beauty schools in California and Nevada were not statutory employees and affirmed summary judgment against their FLSA claims.

The Seventh Circuit in Hollins v. Regency Corp. cited both Glatt and Schumann but did not expressly adopt the seven-factor test, focusing instead on the economic realities as considered in the Supreme Court’s 1947 decision in Walling v. Portland Terminal Co. It concluded that cosmetology students were not employees during their time working on the “performance floor” because state law required that the students perform “hands-on” work and the accrediting commission required the use of “practical learning methods.” Thus, the incidental tasks they performed, such as acting as receptionists, stocking products, and cleaning the floor, did not make them “employees.”

A few pointers. Lisa Milam-Perez, a senior employment law analyst at Wolters Kluwer, suggests that employers consider the following pointers if interns are a regular fixture in their organization:

  • Create a formal internship program, working in close conjunction with a local college or university, so that interns earn college credit for their efforts pursuant to an academic program. Set a clear start and end date, perhaps tied to a school semester or break.
  • Ensure the university plays a meaningful oversight role; such scrutiny helps to show that the intern’s duties are educational, not merely operational, and that the internship is primarily academic in nature.
  • Structure tasks around the intern’s academic goals, not the employer’s operations. “Grunt work” should only rarely be assigned.
  • Provide the intern with opportunities to develop skills that are readily transferable to other employers within the industry, rather than know-how on procedures that are unique to your organization.
  • Establish the duration before the internship begins, and don’t schedule it around the organization’s busy season or an employee downsizing.
  • Don’t schedule your interns based on your busy season or your productivity needs, but in accordance with their academic goals. (As a practical matter, if you’re reliant on interns to get the work done, then they are probably employees.)
  • Heed federal tests for “trainee” status under the FLSA, but note that state wage and hour laws apply too.

In the end, concludes Milam-Perez, “it might just pay to pay.”

Special briefing. For a more in-depth analysis of the Glatt test and other contexts in courts may find an employment relationship for purposes of liability under federal labor and employment laws (e.g., franchisors, successor owners, and companies that use gig workers), see Employment Law Daily’s special briefing, L&E Evolution Part I: Redefining Employment Relationships, written by Senior Employment Law Analyst Lorene D. Park.