By Lisa Milam-Perez, J.D.
“It’s been a great year! Thanks for being a part of it.” Facebook’s buzz-worthy algorithm spits out random events from users’ posts over the past 12 months, with decidedly mixed results. Here at Employment Law Daily, we’ve endeavored to present the year’s highlights in a slightly more systematic fashion.
Click here for our Employment Law Daily “2014 in review.”
And do let us know if our “algorithm” has missed a big story. Meanwhile, we’re gearing up for what promises to be a big 2015…
Determined to leave well-enough alone, a federal district court in the District of Columbia quashed the Department of Labor’s attempt to implement changes to the third party domestic service employer regulation that would have ended a 40-year old exemption from minimum wages and overtime pay. “Undaunted by the Supreme Court’s decision in Coke, and the utter lack of Congressional support to withdraw this exemption, the Department of Labor amazingly decided to try to do administratively what others had failed to achieve in either the Judiciary or the Congress,” observed the district court in Home Care Association of America v. Weil.
Following passage of the 1974 Amendments, DOL promulgated implementing regulations. Those regulations focused on the employees and the nature of the employees’ services. The term “domestic service employment” refers to services of a household nature performed by an employee in or about a private home of the person by whom he or she is employed. “Companionship services” means “those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs.” Finally, “live-in” workers are described as “domestic service employees who reside in the household where they are employed.”
The regulations further specify that the exemptions cover companions and live-in domestic service workers who are “employed by an employer or agency other than the family or household using the services.” That provision was upheld by the Supreme Court in Long Island Care at Home, Ltd. v. Coke, with the Court concluding that the third party rule was valid and binding. Subsequent attempts in Congress to overturn Coke and abolish this exemption failed.
Here, the court agreed with the Home Care Association that the exemption enjoyed by third-party employers over the past 40 years is not an open question and the DOL cannot manipulate its definitional authority in such a way as to effectively rewrite the exemption out of the law. If an employee’s work is encompassed within the statutory terms as defined by the regulations, the employer is not obligated to pay overtime and/or minimum wage. This is the natural reading of the statute, and there is no explicit—or implicit—delegation of authority to DOL to parse groups of employees based on the nature of their employer who otherwise fall within those definitions.
This month, the Department of Education and two universities in Ohio reached agreements regarding access to the universities’ websites for individuals with disabilities. According to the Education Department’s Office for Civil Rights (OCR), the University of Cincinnati and Youngstown State University have agreed to ensure their websites comply with federal civil rights laws prohibiting discrimination on the basis of disability.
University of Cincinnati. As part of its proactive investigation, OCR reviewed how accessible the university’s websites were to persons with disabilities, particularly those with sensory impairments who might use assistive technology to access the sites. The university is a public institution with more than 42,000 students.
OCR determined that the university is not in compliance with Section 504 of the Rehabilitation Act and Title II of the Americans with Disabilities Act (laws enforced by the Department of Education) because portions of the university’s websites were not readily accessible to persons with disabilities. The office also found that the university is not in compliance with regulatory requirements concerning publication of a required nondiscrimination notice in relevant publications and the designation of, and contact information for, coordinator(s) designated to ensure compliance with these laws.
In response to these determinations, and prior to OCR’s review of other areas of the university’s websites, the university entered into an agreement to ensure that content on its sites is accessible to individuals with disabilities and that it is providing an equal opportunity for individuals with disabilities to participate in and benefit from its online learning environment. A copy of the resolution letter and the agreement can be found on the Department of Education’s website.
Youngstown State University. The agreement with Youngstown State University ends an OCR investigation which examined the accessibility of the university’s websites to persons with disabilities, particularly those with sensory impairments who may require the use of assistive technology to access the sites. Located in northeast Ohio, Youngstown State University is a 13,000-student public institution.
OCR concluded that the university was not in compliance with Section 504 of the Rehabilitation Act and Title II of the ADA. In the first instance, Youngstown State’s websites were not readily accessible to persons with disabilities. And in the second, OCR found that the university was not fully in compliance with the regulatory requirements regarding the publication of a notice of nondiscrimination in relevant documents.
The university has agreed to ensure that content on its websites is accessible to individuals with disabilities and that it is providing an equal opportunity for individuals with disabilities to participate in and benefit from its online learning environment. A copy of the resolution letter and the agreement can be found on the Department of Education’s website.
The Department of Education’s Office for Civil Rights is responsible for enforcing federal civil rights laws that prohibit discrimination by educational institutions on the bases of disability, race, color, national origin, sex, and age, as well as the Boy Scouts of America Equal Access Act of 2001. More information on these settlements and how OCR handles civil rights cases, is available on the website, www.ed.gov.
DC Circuit rejects construction contractor group’s attempt to block OFCCP’s revised disability affirmative action regulations
Affirming a ruling earlier this year by a federal district court, the DC Circuit rejected an attempt by Associated Builders and Contractors, Inc (ABC) to overturn OFCCP regulatory revisions that require federal contractors and subcontractors to establish a 7 percent utilization goal for the employment of workers with disabilities. Emphasizing that its review of an agency’s exercise of rulemaking authority is narrow, the appellate court upheld the rule’s utilization goal as well its data collection requirements. The court also found that, in promulgating the rule, the OFCCP was justified in not exempting construction contractors. (Associated Builders & Contractors, Inc v Shiu, December 12, 2014, Tatel, D; to be reported at 98 EPD ¶45,216)
New requirements. The final rule containing the revisions at issue was published in the Federal Register on September 24, 2013 (78 FR 58682-58752); the rule revises the OFCCP’s regulations at 41 CFR Part 60-741 that implement the provisions of Section 503 of the Rehabilitation Act of 1973 (Section 503). The OFCCP derived the 7 percent utilization goal primarily from disability data collected as part of the Census Bureau’s American Community Survey (ACS). Contractors must apply the utilization goal to each of their Affirmative Action Plan job groups, with the exception of contractors with 100 or fewer employees, who may apply the go to their entire workforce. In addition, contractors must conduct an annual utilization analysis and assessment of problem areas, and establish specific action-oriented programs to address any identified problems.
In addition to the utilization goal, the rule imposes new data collection and recordkeeping requirements. Among other obligations, contractors are required to invite applicants to self-identify as individuals with disabilities (IWDs) at both the pre-offer and post-offer phases of the application process. It also requires that contractors invite their incumbent employees to self-identify as IWDs every five years.
Plaintiff’s assertions. On November 19, 2013, ABC, a national trade association representing 22,000 members from more than 19,000 construction and industry-related firms, sued the OFCCP and its Director, Patricia Shiu, as well as the Labor Department and Secretary of Labor Thomas Perez (defendants) in the federal district court for the District of Columbia. In its complaint, ABC asserted that the final rule violates not only Section 503, but also the Administrative Procedure Act (APA), and the Regulatory Flexibility Act (RFA), as amended by the Small Business Regulatory Enforcement Fairness Act. On November 25, 2013, the trial court granted the parties joint motion for an expedited briefing schedule for dispositive motions. On March 21, 2014, the district court denied ABC’s motion for summary judgment and granted the defendants’ cross motion for summary judgment, thereby allowing the rule to take effect as scheduled on March 24, 2014.
Agency did not exceed its statutory authority. Applying the Chevron analysis, the appellate court determined that the OFCCP’s interpretation of Section 503 did not exceed its statutory authority and was a permissible construction of the statute. The court determined that ABC failed to meet its burden of showing the statute “unambiguously forecloses” the OFCCP’s interpretation.
Pre-offer invitations to self-identify. The text of Section 503 requires that covered government contractors “take affirmative action to employ and advance in employment qualified individuals with disabilities.” Challenging the pre-offer invitation to self-identify requirement, ABC asserted that the word “qualified” expressly limits affirmative action to individuals already offered jobs. “But that word does no such thing,” the DC Circuit wrote. Rather, the term describes the statute’s beneficiaries —“qualified individuals with disabilities.”
Observing that Congress has repeatedly amended Section 503 without expressing any disapproval of the OFCCP’s previous implementation of the statute, ABC asserted that this history was persuasive evidence that the OFCCP’s interpretation of the statute prior to publishing the challenged rule was the one intended by Congress. However, although this assertion was true in principle, the OFCCP has never issued a limiting interpretation of Section 503 that Congress could have endorsed via silence, the court pointed out. Therefore, even though the agency’s previous regulations included neither a pre-job-offer data-collection requirement nor a utilization goal, the OFCCP never said it lacked authority to include such requirements or that it would not do so in the future. Put another way, the fact that the OFCCP “did not make use of its full panoply of powers with the earlier regulations” does not mean those powers were forfeited, the court said. Indeed, if ABC’s assertion were to be adopted, that would mean that agencies would be unable to strengthen regulations implementing statutes that Congress has amended. “This is simply not how administrative law works,” the court remarked.
Heightened review standard not applicable. Turning to ABC’s assertion that the final rule is arbitrary and capricious, the court first rejected the argument that the revised regulations were subject to heightened review under the Supreme Court’s 2009 decision in FCC v Fox Television Stations, Inc. In that case, the High Court held that when a prior factual finding conflicts with a finding underlying the rule at issue, the agency must provide a “reasoned explanation” for disregarding the facts and circumstances that were the basis for the prior policy.
According to ABC, the OFCCP’s finding “that the ACS survey data was somehow sufficient” to set a utilization goal, conflicts with an earlier finding by the agency that it had insufficient data to set such a goal. The court, however, found that is not what happened here. Prior to the challenged rulemaking, the OFCCP never found that setting a utilization goal was infeasible; indeed, nothing in the administrative record suggests that the OFCCP even considered setting such a goal.
As such, the court proceeded under the normal arbitrary and capricious standard.
Need for rule. ABC first argued that the OFCCP has failed to explain the need for the regulatory revisions, maintaining that in justifying the rule, the OFCCP did not identify a disparity in the employment of IWDs among government contractors in particular, but rather only pointed to the continuing disparity in the workforce population as a whole. Yet, the OFCCP had no obligation to make such a particularized finding, the court stated; rather, the agency was permitted to infer the existence of employment barriers from its analysis of the workforce as a whole.
Applicant data collection. Next, the association challenged the requirement that contractors collect data from all job applicants instead of from just those offered jobs, claiming that the “new data collection on mere job applicants is meaningless, because there is no way to tell whether the applicants measured are qualified or not.” Pointing out that it had already rejected this argument, the court reiterated that the word “qualified” refers to the beneficiaries of affirmative action, rather than limiting the kind of affirmative action the OFCCP can require.
Along similar lines, ABC contended that the OFCCP failed to explain how the new data collection requirements “will enable anyone to better monitor or evaluate contractors’ hiring of qualified individuals with disabilities.” On the contrary, the agency did just that, the court found.
In the preamble to the final rule, the OFCCP explained that “[m]aintaining this information will provide meaningful data to assist the contractor in evaluating and tailoring its recruitment and outreach efforts” and that without this type of data, it would be nearly impossible for the contractor or the agency to perform even rudimentary evaluations of the availability of IWDs in the workforce, or to assess how effective contractor outreach and recruitment efforts have been in attracting IWDs as candidates. Thus, the OFCCP “has more than satisfied its obligation to provide a reasoned explanation and to draw a connection between the problem (the low workforce participation of individuals with disabilities) and the regulatory solution (more refined data collection),” the court wrote.
Utilization goal. Attacking the utilization goal, the association noted that the ACS: (1) does not use the same definition of disabilities as the OFCCP’s rule, (2) does not break down the data by industry or geography, and (3) “could not possibly have surveyed whether the disabled workers in question were ‘qualified’ for jobs in different industries in any particular percentages.”
Noting that the OFCCP was aware of all of these things when it issued to rule, the court first found that the fact that the definition of disability used by the ACS is not as broad as that contained in Section 503 means that this difference, if anything, would result in an underestimate of the size of the population with disabilities. Moreover, the agency’s decision to set a single national goal was based on the fact that the ACS disability data cannot be broken down into as many job titles, or as many geographic areas as the data for race and gender. Even so, based on the geographic data that the OFCCP did have, it observed that there was an almost uniform distribution of IWDs consistent with the use of a single national goal.
Second, the court remarked that it was unsure of how the ACS could measure the number of qualified IWDs in particular industries since job qualifications vary from position to position and industry to industry. But that did not mean the use of the ACS data was inappropriate. “Of course, there may be fewer individuals with disabilities who are qualified to perform certain jobs, just as there are fewer individuals without disabilities who are qualified to fill some positions because skills are unevenly distributed across the labor force,” the court reasoned. Therefore, even though the association and the agency might prefer a utilization goal that accounts for variations in the number of qualified IWDs by industry or job type, the OFCCP has adequately explained why the best available data did not allow it to create a tailored goal and why the uniform goal advances its regulatory objective, the court found.
ABC also objected to the OFCCP’s use of the “discouraged worker effect” in calculating the utilization coal because, according to ABC, the OFCCP failed to consider “the likelihood that a significant number of such workers were unable to work because of the disqualifying nature of their disabilities.” Yet, the OFCCP knew that the underemployment of IWDs could have different causes, and nevertheless, concluded that at least a portion of employment disparity the rule was designed to address was due to discrimination, and although, the goal isn’t perfect, it will “provide a yardstick against which contractors will be able to measure the effectiveness of their equal employment opportunity efforts.”
Construction industry considerations. ABC’s last argument was that the OFCCP acted arbitrarily and capriciously by failing to exempt the construction industry from the final rule because of the unique nature of the construction industry, which has previously been exempt from certain OFCCP regulatory requirements applied to non-construction contractors. Pointing out that the rule does not prohibit employers from making case-by-case hiring decisions based on the qualifications of each individual, and that nothing in the rule requires a contractor to hire an individual who cannot perform the essential functions of a job, the court rejected ABC’s contention that the “uniquely hazardous and physical” nature of the construction industry should justify its exemption from the rule.
In addition, ABC failed to explain its assertion that “the fluidity of the construction industry workforce” makes the job-group analysis required by the rule so burdensome as to require an industry exemption, especially given that the rule exempts small contractors from the job-group requirement.
Finally, the court rejected ABC’s claim that the construction industry should be exempt for the new requirements because it has “no experience” with job-group analysis given that under Executive Order 11246, which requires affirmative action in the hiring of women and minorities, construction contractors are required to perform utilization-goal analysis only on an employer-wide basis. Finding this claim “proves too much,” the court wrote it “would doom virtually any regulation that imposes new obligations on regulated entities.”
By Lisa Milam-Perez, J.D.
Amazon.com warehouse workers who must undergo antitheft security screening before leaving the warehouse each day are not entitled to pay for the time spent waiting to undergo those security checks, or actually undergoing them, a unanimous Supreme Court has ruled. Reversing a Ninth Circuit decision to the contrary—which had erred by fixating on the fact that the employer had required the activity—the High Court, in an opinion authored by Justice Thomas, held the security screenings at issue here are noncompensable “postliminary” activities under the Portal-to-Portal Act and thus not compensable under the FLSA. The High Court took heed of Congress’ underlying purpose in enacting the Portal-to-Portal Act way back in 1947: stemming a tidal wave of wage-hour litigation. The Court’s holding here may well have done the same–thwarting a potential flood of class-action security screening suits that had already begun to rise (Integrity Staffing Solutions, Inc v. Busk, December 9, 2014, Thomas, C.).
Two Nevada warehouse workers employed by an Amazon.com contractor filed a putative class action alleging the employer violated the FLSA and state law by failing to pay them for the 25 minutes or so each day they spent both waiting to undergo security screenings and then actually undergoing the screenings—during which they had to remove wallets, keys, and belts, and pass through metal detectors. Contending that this time was solely for the benefit of the employer, in that its goal was employee theft deterrence, the employees urged that the time was compensable.
The district court held the post-shift screenings were not integral and indispensable to the workers’ principal activities, and thus they were noncompensable postliminary activities. Reversing, the Ninth Circuit ruled the time was compensable. It reasoned that the screenings were “necessary” to the employees’ primary work and were carried out for the benefit of the employer.
Legislative backdrop. Tracing the historical backdrop in which the Portal-to-Portal Act was enacted, the High Court noted that, in its 1944 opinion in Tennessee Coal, Iron & R. Co. v. Muscoda Local No. 123, it applied an “expansive” definition of “work” as the “physical or mental exertion (whether burdensome or not) controlled or required by the employer and pursued necessarily and primarily for the benefit of the employer and his business.” Subsequently, in its 1946 opinion in Anderson v. Mt. Clemens Pottery Co., the Court defined “the statutory workweek” to “includ[e] all time during which an employee is necessarily required to be on the employer’s premises, on duty or at a prescribed workplace” and held that time spent walking from time clocks to work benches was compensable.
The implications of this broad construction were soon made clear: Within six months of the Court’s holding in Anderson, more than 1,500 FLSA lawsuits were filed—seeking nearly $6 billion in back pay and damages for pre- and post-shift activities. Responding “swiftly” to the deluge, Congress declared an emergency at hand; if such a generous interpretation were allowed to stand, “the payment of such liabilities would bring about financial ruin of many employers” Thus, it enacted the Portal-to-Portal Act, creating the exemption for “activities which are preliminary to or postliminary to … [one’s] principal activity or activities.”
Statutory framework.The High Court noted that it has “consistently interpreted” the phrase “principal activity or activities” in accordance with its ordinary meaning, i.e., as those activities which are “integral and indispensable to the principal activities that an employee is employed to perform.” Applying this approach, it has held that time spent by battery-plant employees showering and changing clothes was compensable; because the chemicals they used in the ordinary course of their workday were toxic, these activities were indispensable to their productive work “and integrally related thereto.” Similarly, meatpacking employees had to be paid for the time they spent sharpening their knives, since dull knives would slow down production. On the other hand, poultry workers did not have to be paid for time spent waiting to put on protective gear, as this activity was “two steps removed” from their productive work. This approach comports with the DOL’s regulations, too, the Court pointed out.
It went on to articulate a new test for whether an activity is a principal activity (and thus compensable), rather than a merely preliminary or postliminary function (and thus not compensable): An activity is compensable if it is “an intrinsic element” of one’s principal activities “and one with which the employee cannot dispense if he is to perform his principal activities.”
Security screenings not “intrinsic.” The security screenings challenged in this case were not an “intrinsic element” of the warehouse workers’ primary duty of retrieving products from shelves and packing them for shipment, the Supreme Court found. Indeed, the employer “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work,” the Court reasoned.
And the Solicitor General, weighing in on this case, had agreed, adopting the DOL’s position as first set forth in a 1951 opinion letter. There, the DOL made no distinction between employee searches done for the safety of the employees themselves and those carried out for the purpose of theft prevention. In either case, the security checks were not compensable under the Portal-to-Portal Act.
“Required” is not the test. The Ninth Circuit had gone wrong by focusing on the fact that the security screenings were mandatory, the High Court explained. What matters with the “integral and indispensable” test is not whether the activity is required by the employer, but whether it is “tied to the productive work that the employee is employed to perform.” If the fact that the activity was employer-mandated were enough to satisfy the test, the Court reasoned, “it would sweep into ‘principal activities’ the very activities that the Portal-to-Portal Act was designed to address,” adding too that “[a] test that turns on whether the activity is for the benefit of the employer is similarly overbroad.”
But it could have been de minimis. The warehouse workers had contended that their employer could easily have reduced the time that they had to spend waiting to undergo the screenings by adding more security screeners, or staggering work shifts so that they weren’t all stuck waiting to be screened at the same time. But this argument held little sway with the Court. “The fact that an employer could conceivably reduce the time spent by employees on any preliminary or postliminary activity does not change the nature of the activity or its relationship to the principal activities that an employee is employed to perform,” it wrote. That was an argument to be made to the employer at the bargaining table—not to a court by way of an FLSA claim.
Concurrence. Writing separately to clarify the standards applied here by the Court, as she understood them, Justice Sotomayor (joined by Justice Kagan) agreed that the required security screenings were not “integral and indispensable” to the warehouse employees’ principal activities, as the screenings could be skipped altogether without impairing the safety or effectiveness of those activities. Nor were the screenings themselves “principal activities,” as they did not amount to “work of consequence that the employees performed for their employer.”
And, placing the activities within the context of the Portal-to-Portal-Act’s focus on employee ingress, egress, and related activities, Sotomayor noted that the security searches “were part of the process by which the employees egressed their place of work, akin to checking in and out and waiting in line to do so—activities that Congress clearly deemed to be preliminary or postliminary.”
A “resounding rejection.” The Supreme Court’s decision “is a resounding rejection of the Ninth Circuit’s opinion,” said Jackson Lewis attorneys Jeff Brecher and Eric Magnus. The Ninth Circuit was the first ever to hold that such screenings constituted compensable time, they noted. “Even the DOL rejected it in its amicus brief—one of only a few DOL amicus briefs filed by the Obama administration in support of an employer. It may, in fact, be the only one.”
The Ninth Circuit ruling had triggered a number of copycat lawsuits filed against various retailers nationwide, they added “These cases should now be dismissed in light of Busk.”
A new standard. “The decision also clarified the standard to use when applying the Portal-to-Portal Act, which has not been uniform among the circuit courts, even among circuits that agreed the screenings at issue in Busk, or other portal-to-portal activities, were noncompensable,” Brecher and Magnus continued. “The focus now will be whether the job could be performed safely with or without the duties at issue. If the duties could be eliminated, but the employee is still able to complete the work, the duty is a noncompensable preliminary or postliminary duty under Busk.
“This will cover many duties that may have been in the grey area before. Courts will no longer focus on whether the activities in question are required or whether they are primarily for the benefit of the employer, two factors many courts of appeal had previously considered.”
Of limited reach. Rebekah Bailey, an attorney with plaintiffs’ firm Nichols Kaster, saw the reach of the Supreme Court’s decision as limited—and not unexpected, given the DOL’s position on the matter. “The concurrence does a good job limiting the parameters of the ruling,” she said. “It makes clear that many pre-shift/post-shift duties are still integral and indispensable. A common example used at oral argument was a cashier checking out her drawer at the end of her day.”
“An unfortunate consequence,” though, “may be that employers shift around schedules so that less consequential work falls outside of the continuous workday and thus permits them to ‘stop the time clock’ during its completion,” Bailey theorized. Still, she doubted it would become a “widespread problem,” noting that “very few activities will fall in the ‘Integrity Staffing’ category. It will only impact activities that look more like waiting in line at the time clock (just like the security line time in this case) rather than work consequential to the major job duties. And, it’s important to note that employers have always had the power to do this. [Busk] did not create a new rule.”