By Lorene D. Park, J.D.
There are plenty of discussions concerning the costs and benefits of telecommuting (a.k.a. telework, flexiplace, or working remotely) in terms of productivity, communication, and career advancement, as well as discussions on substantive legal issues, such as whether telecommuting is a reasonable accommodation for a disability, or whether taking away permission to telework would be an adverse action. But recent cases suggest that other procedural and substantive questions also should be examined as courts apply existing law to what is still a relatively new work arrangement.
Personal jurisdiction over telecommuters. For example, a Delaware multi-media production service company with its principal office in New York filed suit in New York against its former chief information officer, who left to join a competitor and allegedly misappropriated the employer’s trade secrets in the process. Both the employee and the competitor, which was also a defendant, were New Jersey residents, and the question was whether they could be haled into court in New York. Finding that they could, the federal court explained that even though the employee worked from his home in New Jersey, he traveled to New York frequently, routinely accessed the New York-based employer’s email and web-based software applications remotely, and had continuous communication with his New York colleagues. The court reached a similar conclusion as to the competitor, finding that constitutional due process was satisfied for personal jurisdiction (Peeq Media, LLC v. Buccheri).
Counting employees near “worksite” to reach statutory minimum—which office? Another threshold question that could be impacted by telecommuter status is the number of employees an employer has for purposes of being subject to a particular statute. The FMLA excludes from the definition of “eligible” employees anyone at a “worksite” at which the employer has fewer than 50 employees, also counting employees within a 75-mile radius of the “worksite.” Department of Labor regulations clarify that for employees “who work at home, as under the concept of flexiplace or telecommuting,” the worksite is not their personal residence. Instead, it is “the office to which they report and from which assignments are made.” With this in mind, a federal court in Louisiana found that an employee who reported to a Tampa, Florida, office, which she attested had more than 50 employees, raised a triable issue on whether she was eligible for FMLA protection (Donahoe-Bohne v. Brinkmann Instruments).
Employee versus independent contractor status. Telecommuter status can also affect the analysis of whether someone is an “employee” under the FLSA. In some cases, the refusal to let someone work remotely could weigh in favor of finding that an individual is an “employee” rather than an independent contractor under a right-to-control analysis. For example, a federal court in Florida denied summary judgment on the issue of employee status because it could not answer the question as a matter of law. As to the nature and degree of the defendants’ control over the manner in which he performed his work, the only relevant evidence was the defendants’ statement that he did not have to work a set schedule, and the plaintiff’s opposing statement that he was forbidden from working remotely and had to work during store hours. The record also showed the defendants set his hourly wage and commission, and provided his equipment (Bourhis v. My Trade LLC). (Note the jury later returned a verdict finding the plaintiff was not an employee, so judgment was entered for the defendants.)
Blurring lines between personal and work equipment. What happens if a telecommuting employee is given the choice to use his home computer, which may be a lot nicer than, for example, a cost-effective employer-provided laptop? In such cases, employers need to make it very clear that being able to use your own computer does not mean putting confidential information at risk. For example, a federal court in Michigan recently held that Quicken Loans had a legitimate reason to fire a telecommuting employee who was allowed to work from home using the company’s secure network. He had violated company policy by sending over 900 company emails to personal email accounts, including over 100 containing confidential client information. Though an NLRB law judge had found some of the employer’s confidentiality rules overbroad, the court found that of “no moment” to the question of whether the reason for firing him was discriminatory. Summary judgment was granted against his federal and state-law discrimination claims (MacEachern v. Quicken Loans, Inc.).
Adverse actions and accommodations—the typical cases. Based on the foregoing, it is clear that telecommuting arrangements present a wide variety of legal issues that employers must consider. That said, it bears mentioning that telecommuting is more typically discussed in the context of deciding: (1) in discrimination or retaliation suits, whether an employee suffered an adverse employment action when denied the chance to telecommute; or (2) in an ADA case, if an employer unlawfully failed to accommodate an employee’s disability by denying an employee’s request to work remotely. In both instances, employees are usually on the losing side.
First, denying telecommuting privileges is not usually an adverse employment action. In one case, even under the more lenient pro se plaintiff standard, a federal court in Maryland dismissed an employee’s retaliation claim because suspending a telework arrangement was not a materially adverse action. It noted that other federal courts have concluded that limiting or terminating such an arrangement is not materially adverse unless an employee’s schedule is significantly modified (Dailey v. Lew). In another case, a federal court in the District of Columbia found that the denial of an EPA scientist’s “unusual and extraordinary request” to work remotely for two years to care for his mother was not an adverse action. It noted that the employer’s “Flexiplace Program” only covered certain arrangements, was not an employee “right or entitlement,” and telework had only ever been granted for a maximum of six months at a time (Walker v. McCarthy).
Second, allowing an employee to work from home could be a reasonable accommodation under the ADA, but that does not mean that refusing to allow it would violate the Act. It will depend on the circumstances, including the essential functions of the job, whether there are alternative accommodations, and whether it would be an undue hardship for the employer to allow it. In a case out of Pennsylvania, an employer was denied summary judgment because a federal court found triable questions on whether it was essential for a disabled project attorney to come to the office considering project attorneys usually worked on teams and reviewed documents that were often accessible online, and they rarely had face-to-face contact with clients (Fischer v. Pepper Hamilton LLP). Likewise, a federal court in Massachusetts found triable questions on whether a senior network engineer suffering from severe depression could perform his duties at home and whether that would have been a reasonable accommodation (Moebius v. TharpeRobbins Co.).
A final thought. Having covered the typical bases, here’s a bit of food for thought. What is the effect of having a formal telecommuting policy and/or telecommuter agreement versus informal arrangements? It would seem that having a neutral policy and applying it fairly would make sense, in particular: Having an employee acknowledge that workplace policies apply even when working from home, including those requiring that confidential information be kept secure and private, that the employer’s equipment be used only for work purposes, that working hours be spent actually working, and that hours be accurately reported. But some agreements go further.
Having come across a “telecommuter agreement” that reserved to an employer the right to enter an employee’s house and inspect his or her workspace and equipment, I wondered if that wasn’t a little risky. Would a court, for example, find that employers who require access to the homes of telecommuters find that the employer could be liable, say, for failing to provide a safe working environment if it didn’t inspect for smoke detectors and the equipment (e.g., smart phone or computer) it provided started a fire? Is there an argument in a premises liability scenario that an employer exerted enough control to be liable? And what about privacy considerations? Given that this is still an emerging area of law, employers are well-advised to tread carefully in crafting telecommuter agreements. Seeking the advice of experienced employment lawyers is a good idea.
Late on November 22, a federal district court in Texas enjoined nationwide implementation of the Labor Department’s final overtime rule. The rule was to go into effect on December 1. Judge Amos Mazzant, ruling on a consolidated lawsuit brought by 21 states and a business coalition, concluded that the executive, administrative, or professional employee exemption contained in FLSA Sec. 13(a)(1) does not grant the Department the authority to utilize a salary-level test or an automatic salary updating mechanism under the rule. “With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test. Consequently, the Final Rule does not meet [step one of the] Chevron [deference test] and is unlawful,” the court ruled (State of Nevada, et al v. Dept. of Labor, et al, Dkt. No. 4:16-CV-00731, Nov. 22, 2016).
In 2014, President Obama urged the Labor Department to review severely outdated regulations related to exempt employees. In response, on May 18, 2016, the DOL released the final rule updating overtime eligibility that will automatically extend protection to over four million workers.
Background. The FLSA, passed in 1938, provided equity and fairness to workers by establishing the required minimum wage and overtime regulations. In general, the regulations applied to most employees. However, the FLSA also provided an exemption from these regulations for executives, administrative, and professional employees, commonly referred to as white collar workers. Exempt employees are not entitled to overtime wages. To qualify as exempt, the employees must meet certain tests regarding their job duties (duties test) and must be paid on a salary basis at not less than a “minimum specified amount” (salary level test).
The white-collar exemption was originally intended to apply to highly compensated individuals. But due to inflation, the salary threshold failed to provide protection to an increasing number of workers over the years. In 2004, the weekly salary amount was raised for the first time since the 1970’s, when it was set at $455 ($23,660 annually). The test for exemption was also modified. However, critics argued that even for 2004 standards, the adjustment to the exemption rules remained too low to provide adequate coverage for low-income workers.
Updated rule. The final rule updated the executive, administrative, and professional workers salary and compensation levels as follows:
- The standard salary level was set at the 40th percentile of earnings of full time salaried workers in the lowest-wage Census Region, currently the south ($913 per week; $47,476 annually for a full-time worker).
- The total annual compensation requirement for highly compensated employees subject to the minimal duties test was set to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and
- In order to ensure useful and effective tests for exemption and continued worker protection, the salary and compensation levels were to be updated every three years at the above percentile levels.
The final rule also amended the salary basis test to allow employers to satisfy up to 10 percent of the standard salary level with nondiscretionary bonuses and incentive payments such as commissions.
While the issue of pay equity continues to be a focus of the OFCCP, not to mention the political landscape, what type of pay analysis is actually required under OFCCP regulations and to what extent should a federal contractor conduct any pay analysis outside of the regulatory requirements? Employment law experts John C. Fox, president of Fox, Wang & Morgan P.C. in Los Gatos, California, and Brian W. Bulger, of counsel to Cozen O’Connor in Chicago, Illinois, addressed these topics in separate presentations at the National Employment Law Institute’s (NELI) Thirty-Fourth Annual Affirmative Action Briefing in Chicago, Illinois.
What do OFCCP regulations require? The OFCCP’s regulations at 41 CFR §60-2.17(b)(3) require contractors, as an element of their Affirmative Action Programs (AAPs), to conduct a self-evaluation of their compensation systems “to determine whether there are sex-, race-, or ethnicity-based disparities.” Bulger and Fox both pointed out that the regulations do not specify how contractors must analyze their systems. Bulger further noted that, in the preamble to the OFCCP’s new sex discrimination regulations at 41 CFR Section 60-20 (which took effect on August 15, 2016), the agency states that contractors are allowed “substantial discretion” in determining their own evaluation process for complying with Section 60–2.17(b)(3) (See, 81 FR 39125-39126).
Very little is required of contractors to meet the Section 60–2.17(b)(3) requirement, Fox said. Contractors can meet the requirement via a qualitative narrative that does not contain any statistical analysis. Even a statement as simple as “we investigate any complaints about pay of our employees,” has been found in recent administrations to be compliant with the regulation, he noted.
Should contractors do anything beyond the regulatory requirement? Aside from the regulatory requirement, contractors may exercise their discretion to conduct a substantive analysis of their compensation systems, Fox said. They may decide to do so as a means to reduce litigation risk and/or prepare to defend against any OFCCP analysis of their compensation systems in an audit. Still, Fox points out that contractors really cannot accurately anticipate what type and extent of compensation analysis the OFCCP will actually undertake in any given audit.
Privilege. Both Bulger and Fox emphasized that when contractors do any pay analysis beyond the very minimal requirements of the regulations, they should do so under attorney-client privilege. Actions done pursuant to regulation or statute are not protected by attorney-client privilege, they cautioned, and information not protected by attorney-client privilege is subject to discovery in litigation. Therefore, contractors must be clear in their documentation and file-keeping whether a given action has been done voluntarily or pursuant to legal requirements, they advised. Contractors should very specifically identify what they are doing to meet the requirements of Section 60–2.17(b)(3), and label all else attorney-client privilege, Fox said.
Diagnostic tools. The two major compensation diagnostic tools are: (1) cohort analyses, and (2) multiple regression analysis, Fox noted. Cohort analyses simply compares the factors which affect pay as applied to any two given similarly situated employees to determine what legitimate non-discriminatory reasons, if any, explain a pay gap between the two.
Multiple regression analysis (MRA) is a statistical tool for understanding the relationship between two or more variables. In evaluating compensation, an MRA measures the impact of each potential explanatory variable — such as experience, time in grade, shift, education, gender, race, or ethnicity — on the dependent variable — compensation — by holding all other explanatory variables constant among similarly situated employees. The analyses creates figures demonstrating how much, if any, of an observed disparity in compensation can be traced to a given protected category (i.e. gender, race, or ethnicity), as opposed to any other potentially explanatory variable. Put another way, the purpose of an MRA is to determine whether there are any significant differences in compensation among similarly situated employees by gender, race or ethnicity that are not explained by legitimate factors.
Statistical significance. Under the applicable legal standards, a finding of systemic compensation discrimination must be based on disparities that are “statistically significant,” i.e., those that could not be expected to have occurred by chance. The OFCCP has said that a statistically significant disparity occurs at a level of two or more standard deviations, based on measures of statistical significance that are generally accepted in the statistics profession. Size matters in putting together groups of similarly situated employees, Fox explained, and any group of less than 30 employees is too small of a sample for statistical analysis. For groups under 30 employees, cohort analysis can be used.
Bulger pointed out that the OFCCP’s new sex discrimination regulations at 41 CFR 60–20.4(a) contain a very broad, flexible definition of “similarly situated” for the purposes of evaluating compensation differences. This section of the regulations states that “[r]elevant factors in determining similarity may include tasks performed, skills, effort, levels of responsibility, working conditions, job difficulty, minimum qualifications, and other objective factors. In some cases, employees are similarly situated where they are comparable on some of these factors, even if they are not similar on others.”
Courts will likely take a narrower view on this definition than the agency, Bulger predicts. Nevertheless, given that the OFCCP indicates it will apply this broad definition in audits, a contractor should include disclaimers in its AAPs and other documentation to the effect that the contractor’s AAP job groups and pay grade groups do not mean that these groups should be considered as similar for the purposes of compensation discrimination analysis, he recommended.
What factors must be included in a MRA? Pursuant to the U.S. Supreme Court’s 1986 decision in Bazemore v Friday and other federal court precedent, a proper MRA requires a plaintiff (i.e. employee/applicant, OFCCP or EEOC) to analyze all the “major” factors which affect pay, Fox instructed. Thus, MRAs that fail to analyze all of the major factors affecting pay are a legal nullity. For example, if only four of the five major factors which affect pay are used in the regression, that MRA is useless for proving (or disproving) unlawful compensation discrimination.
“Major” factor.” Accordingly, a point of contention in OFCCP compensation audits may be whether a factor which affects pay is a “major” factor. So, what constitutes a “major” factor? The term is not well defined in applicable federal case law, Fox said. The courts generally define the term as any “influential” variable affecting pay. Thus, to be “major,” the factor affecting pay has to make a noticeable difference, one way or the other, to the pay in question.
Consistent application. A contractor may have a policy to apply legitimate, non-discriminatory factors such as skill, education, work experience, position, level of function, tenure in a position and performance ratings in setting compensation, but if that contractor does not apply such factors consistently, the OFCCP may consider them to be “tainted” by discrimination, Bulger noted. “Companies get tripped up here by bad record keeping,” he said.
Pay systems. Further, the relevant major factors must be applied in terms of each pay system examined, and this is a factual question, where one size does not fit all, the attorneys explained. It is a “huge mistake” for a contractor to think it has only one pay system, Fox warned. Any contractor that allows its supervisors discretion to adjust pay has more than one pay system, he pointed out. Likewise, Bulger noted the “wunderkind” scenario where an executive will bring in extraordinary talent at a higher pay rate than an “ordinary” hire would receive.
Digitizing data. Both attorneys pointed out that few federal contractors are in a position to do a true multi-variant regression analysis because their data is not complete, accurate, or sufficiently digitized. Only about one out of 100 federal contractors have data sufficiently digitized to undertake a MRA of their compensation systems, Fox estimated.
Most employers need to clean up their data so that it is free of things such as typos and spaces that don’t belong, and they need to update their data as to employee name changes and other developments that may have occurred since an employee was first hired, Fox observed.
Furthermore, the majority of contractors have not digitized many of the majors factors that affect pay, he points out. He listed some examples of major pay factors including: job title, related education, time in related service, related training, time in grade, location of work, work shift, performance, premium pay, such as overtime, merger or acquisition, productivity. “How many of you have digitized job history or prior job level?” Fox asked the audience.
Still, Fox points out that even if a contractor’s data were digitized, typically, 95 percent of that contractor’s work force is probably not even susceptible to MRA for two reasons. First, in most companies, there are not many jobs of 30 or more similarly situated employees that will allow for a statistically significant analysis. Second, the pay of unionized employees, which is driven by seniority, is legally immune from the laws regarding pay equity.
OFCCP compensation analysis in audits. There is not any regulatory obligation to digitize pay data, Fox advised, and thus, the OFCCP cannot force a contractor to digitize its data. Accordingly, contractors cannot be sanctioned if they advise the agency that they do not have all the major factors that affect pay digitized. Nevertheless, the OFCCP may still conduct an incomplete analysis using only a few factors.
Moreover, even though the applicable law requires the OFCCP to analyze discrete pay decisions, the agency wrongly focuses on current pay, both attorneys pointed out. This flawed focus is also one of several deficiencies with the EEOC’s finalized changes that will add the collection of summary pay data to the EEO-1 Report, Fox noted. For further insight into those changes, he referred to the audience to a recent Employment Law Daily story on this topic at https://shar.es/1EkPEp, which includes his commentary, among that of other experts.
Vendors. If a vendor sells you a big ticket MRA, and you do not have your data sufficiently clean or digitized for a proper analysis—i.e. one that includes all major factors that affect pay—that analysis will be useless, Fox cautioned the audience. A computerized MRA will only be as good as the data put into the program; “junk in, junk out,” he stated.
A regression analyses itself is relatively inexpensive, ranging from about $10,000 to $20,000, Fox said, explaining that the expensive part of the process is cleansing and digitizing the raw HR data. Contractors should not pay a law firm, HR vendor, or labor economist hundreds of dollars an hour to do the tasks of data cleanup and digitization that can be performed by HR personnel at significantly less cost, he cautioned.
Importantly, Fox points out that actual compensation disparities due to discrimination are rare in federal contractor workplaces, as evidenced by the OFCCP’s own enforcement data. Most contractors should ignore the “siren calls” of some vendors trying to sell MRA products and services because most contractors do not have a discriminatory compensation problem to fix and most are not yet in a position to properly analyze compensation even if they wanted to do so, he said.
Actions to consider. Given that most contractors are not ready to conduct a MRA, and there is no legal requirement to do so, what might contractors pro-actively do aside from the very minimal requirements of 41 CFR §60–2.17(b)(3)? Fox suggests contractors consider the following actions:
(1) Conduct cohort analyses of selected similarly situated employees in jobs where HR has some concern that the pay disparities there could be problematic. HR often has a “gut feeling” about which supervisors merit concern in how they make pay decisions, he observed. Keep in mind that because cohort analysis is not required by OFCCP regulations, it should be done under the protections of attorney-client privilege (as explained above).
(2) If you have decided to eventually undertake a MRA, set as an annual “good faith effort” a project to catalogue all the “major” factors which affect pay at least in those job titles with 30 or more employees that have five or more men or women and/or employees of color. Fox points out that such a project will probably take at least five years for most contractors.
(3) Set as an “action-oriented” program under an Executive Order 11246 AAP a project to clean-up HR compensation data over the next several years.
(4) Another “action-oriented” program could be a project to digitize HR compensation data in those, likely few, jobs susceptible to regression analysis. This project will take about 3-5 years for most contractors, he said.
NELI’s Thirty-Fourth Annual Affirmative Action Briefing was held in Chicago on October 20-21, 2016. For more information on NELI, including its publications and future programs, call (303) 861-5600 or go to NELI’s website at: www.neli.org.
DOT, Southwest Airlines reach agreement to improve kiosk accessibility for persons with disabilities
The U.S. Department of Transportation (DOT) recently announced an agreement with Southwest Airlines that will ensure that at least 50 percent of the airline’s U.S. airport kiosks are accessible to passengers with disabilities by September 30, 2017. In addition, any automated kiosk that the airline installs after that date will also be an accessible model, so that in the future, 100 percent of Southwest’s kiosks will be accessible to passengers with disabilities. Kiosks installed at U.S. airports are used for a variety of functions, such as printing boarding passes and baggage tags, scanning passports to check-in, and canceling or rebooking tickets.
U.S. Transportation Secretary Anthony Foxx said the agreement will “enable people with disabilities to travel more independently by ensuring that there are significantly more accessible airport kiosks available for their use.” Foxx said the DOT is committed to ensuring the air transportation system is accessible for everyone and commended the efforts of all airlines that are actively working to ensure they meet DOT’s accessibility requirements of automated kiosks. He credited Southwest for “instituting additional measures under this agreement to improve accessibility for its passengers.”
Under DOT rules, airlines are required to ensure that any automated kiosk that they install after December 12, 2016 at U.S. airports that have annual enplanements of 10,000 or more is an accessible model, until at least 25 percent of the kiosks in each airport location are accessible. DOT mandates that 25 percent of kiosks must be accessible by December 12, 2023.
Under the agreement, Southwest will adopt measures to provide greater accessibility to individuals with disabilities, and in return, the Department will not take enforcement action against Southwest for failing to install accessible kiosks between December 12, 2016 and September 30, 2017. Southwest self-reported its anticipated future noncompliance with the Department’s kiosk accessibility rule in April 2016 and offered to institute measures to increase the availability of accessible kiosks for persons with disabilities beyond the DOT requirements.
Kathleen Blank-Riether, Senior Attorney at DOT’s Office of Aviation Enforcement and Proceedings, handled this matter. The agreement is available at www.regulations.gov, docket DOT-OST-2016-0202.
Under Section 207 of the FLSA, employers are generally required to pay their employees one and one-half times their regular pay rate for any hours worked in excess of forty per week. But what about those instances in which the employer defines a full-time work week as less than 40 hours per week. In a recent case, England v. Administrators of the Tulane Educational Fund dba Tulane University, a tutor employed by Tulane University argued that where the university defined a full-time work week as 37.5 hours per seven days, it was required to provide employees overtime for any hours exceeding 37.5 in any given week.
According to the employee, he routinely worked overtime hours, but that the university denied him the benefits paid to other full-time employees. For its part, the university contended that the court should dismiss the employee’s complaint, because he did not adequately plead that he worked more than 40 hours in a specific work week without being compensated for overtime hours during that particular week.
Gap time claim. Claims for uncompensated overtime wages when the employee has worked less than 40 hours in a week are referred to as “gap time” claims. Here, the court agreed with the employer that the complaint attempted to improperly invoke the FLSA where the employee claimed that he was owed the overtime rate for all hours worked in excess of 37.5 hours per week, since the FLSA only provides recourse for hours worked in excess of 40 per week.
The FLSA’s overtime provisions generally do not provide a remedy if the employee has been paid at least minimum wage and has not worked more than 40 hours in a week. To adequately state a claim for unpaid overtime under the FLSA, a plaintiff must plead: “(1) that there existed an employer-employee relationship during the unpaid . . . periods claimed; (2) that the employee engaged in activities within the coverage of the FLSA; (3) that the employer violated the FLSA’s overtime . . . wage requirements; and (4) the amount of overtime . . . compensation due.”
In this instance, the employee’s complaint failed to adequately allege that the university violated the FLSA’s overtime wage requirements. Rather, his complaint raised a gap time cause of action. Because the employee’s gap time claims were for hours worked in excess of 37.5 per week but less than 40 hours per week, his claim failed as a matter of law. Accordingly, his complaint was properly dismissed for failure to state a claim.