Massachusetts Law To Prohibit Inquiries Regarding Prior Salary at Interview

In keeping with actions taken by other states, such as California and New York, Massachusetts is poised to pass an updated equal pay law that will greatly expand the ability of individuals to bring claims for violations of equal pay. The proposed law also puts limits on an employer’s effort to seek information about an applicant’s salary history during the interview process. The current proposal recently passed unanimously in the state Senate, and is now before the House of Representatives.

Under the proposed bill, it would be unlawful to:

  • Prevent employees from inquiring about or discussing their wages with other employees or other individuals;
  • Require that an applicant for employment disclose prior wages or salary history during the application process; and,
  • Obtain the salary history of an applicant from a current or former employer, unless the employee provides written authorization to confirm prior wages or salary history after an offer of employment has been made.

Jackson Lewis attorneys will continue to monitor this proposed law and provide updates as necessary.

Fifth Circuit: Employer Has Right to Mandate Employee Compliance with Overtime Reporting Procedures And Is Not Liable When Employee Fails to Follow Procedures

Overtime claims based on alleged “off the clock” work often turn on the question of whether the employer has “suffered or permitted” the employee to work uncompensated hours in excess of forty in the workweek. The Court of Appeals for the Fifth Circuit has affirmed a Mississippi district court’s finding that an employer did not violate the FLSA where the Plaintiff failed to record overtime hours in contravention of employer’s timekeeping policy.   Fairchild v. All Am. Check Cashing, 2016 U.S. App. LEXIS 1298 (5th Cir. Jan. 27, 2016).

Defendant’s “overtime policy prohibited hourly employees from working overtime without prior approval from a manager or supervisor. Further, its policy required that all employees accurately report their hours in its designated timekeeping system.” The Plaintiff acknowledged the Defendant paid her for reported overtime in conformity with the policy, but “testified that she also worked additional overtime that she did not report through the specified timekeeping system and for which she was not paid.”

The Court rejected Plaintiff’s claim that this testimony entitled her to payment for the additional overtime: “To hold that she is entitled to deliberately evade All American’s policy would improperly deny All American’s right to require an employee to adhere to its procedures for claiming overtime.”     The Court also rejected her claim that computer usage reports maintained by Defendant established “constructive knowledge” that she was working outside of the time reported on her timesheets. The Court held that while the employer “could have potentially discovered that she was working overtime based on the usage reports, “the question here is whether [the employer] should have known” and that “mere access” to this information “is insufficient for imputing constructive knowledge.”

This case reaffirms what should be self-evident: if an employer has an appropriately worded, properly communicated timekeeping policy, and employees fail to comply with it, employers are not liable to those employees absent proof that they had knowledge of the work the employees failed to report. Mere access to computer records that might, upon investigation, reveal the employee worked overtime, is insufficient to establish that knowledge. An employer need not become a detective to determine whether overtime has been worked when it has an established procedure for reporting the time; reliance on that procedure is permissible, as it must be for businesses to operate.

SCOTUS to Resolve Circuit Split Regarding Whether “Service Advisors” Are Exempt From Overtime and Consider Deference Owed to USDOL

On Friday, the United States Supreme Court agreed to resolve the current split among the Circuit Courts regarding whether “service advisors” are exempt from overtime under the 213(b)(10) exemption, an exemption applicable to any “salesman, partsman, or mechanic” who is primarily engaged in “selling or servicing automobiles.” Both the Fourth and Fifth Circuits have held service advisors are exempt as a “salesman” engaged in “servicing” automobiles. But in Navarro v. Encino Motorcars, LLC, 780 F.3d 1267 (9th Cir. Cal. 2015) the Ninth Circuit disagreed, finding the exemption inapplicable, and siding with the USDOL’s most current position. The USDOL has not been consistent on the issue, flip-flopping over the years, by first stating in 1970, in its interpretive regulations, that service advisors are not covered by the exemption, but then issuing an opinion letter in 1978 and revising its Field Operations Handbook in 1987 to state they are covered by the exemption. In 2008, the USDOL issued a Notice of Proposed Rulemaking to conform its regulations with the Fourth and Fifth Circuit Court decisions applying the exemption to service advisors, and its prior opinion letter and guidance, but in 2011, the USDOL reversed its position again, declining to make the change and explaining that it had reconsidered the issue and concluded that the exemption did not apply.

While the Navarro case is limited to the narrow question above – are dealership service advisors “salesmen” within the meaning of the exemption – because the answer turns on interpretation of USDOL regulation, and the USDOL’s inconsistent positions over the years, the Court will again be called upon to opine on the degree of deference owed to USDOL interpretations, a ruling with broader ramifications. The Court may also address the propriety of the “narrow construction” principle that some courts, including the Ninth Circuit, have applied to exemptions, which ruling would potentially have even broader impact.

The case has been assigned Supreme Court Case Number 15-415. Watch this space for further developments and broad coverage of appeals decisions impacting wage/hour law.

Second Circuit Affirms: Business Not Obligated to Pay $350,000 “Performance” Bonus to Prospective Employee Who Never Worked A Day

Last year, a Manhattan federal district judge reviewed a decision of a federal bankruptcy court and held that Lehman Brothers was not required to pay a $350,000 performance bonus referenced in the offer letter of a prospective employee who never provided services. In doing so, the Court observed that the Firm terminated the contractual relationship prior to the prospective employee performing work contemplated by the offer letter contract and prior to her official start date, and that there was no evidence that the bonus was intended as a “sign on” bonus to be paid prior to the performance of her duties. The Court of Appeals for the Second Circuit has now affirmed the District Court.  Ortegon v. Giddens, 2016 U.S. App. LEXIS 404 (2d Cir. Jan. 12, 2016).

Analyzing the language of the offer letter signed by the prospective employee, the Second Circuit observed that the offer letter, which it found to be a binding contract, provided that the bonus was part of the prospective employee’s compensation for her anticipated performance, not a sign-on bonus. The plaintiff-appellant conceded that she never commenced any duties related to the offered position and that her formal start date was revoked prior to her starting work. As such, she had not commenced performance under the contract and therefore was not entitled to the bonus. The Court further found that she never became an “employee” for purposes of the contract; instead, her employment was to commence on her start date, which would have been the beginning of her performance.

The decision highlights the importance of clarity in offer letters and other documents addressing incentive compensation, aided by counsel as appropriate.

Caretakers’ Own Homes Were “Private Homes,” Rendering Them Exempt Companions

Though the USDOL’s new rule regarding overtime-eligibility for home care workers is currently in force, pending appeal, litigation continues over the prior rule. A new appellate ruling addresses the scope of the term “private home” for purposes of the prior rule, clarifying that the former exemption applies to caregiver work in the private homes of those providing care, not just those receiving it. Fezard v. United Cerebral Palsy of Cent. Ark., 2016 U.S. App. LEXIS 27 (8th Cir. 2016).

Fezard concerned companion services provided by employees of United Cerebral Palsy (UCP) typically provided “at each client’s place of residence,” i.e. in the client’s private home. Plaintiffs’ clients “instead of living on their own or with family members . . . live[d] with the UCP employees who provide their care . . . [who had] opened their homes and invited their clients to live as roommates or surrogate family members.” Observing that most prior cases adjudicating the “private home” inquiry were inapplicable insofar as they mostly addressed a “comparison . . . between the employer and the client—the employer’s commercial care facility or the client’s traditional single-family residence,” the court in Fezard reduced the legal inquiry to a single question: Does the employer own or control the home?

Answering that question as applied to the case at bar, the Court noted that:

[E]very client lived in a dwelling that was private in relation to UCP. UCP did not exert control over the room in which a client lived, the rent paid, or any other term or condition of the living arrangement. UCP did not require a client to live in a specific dwelling unit in order to receive services. Further, while UCP may have acted to facilitate a connection between a client and the caregiver, UCP’s involvement was limited to making the connection. Finally, UCP had no ability to evict any client if the client ceased to use UCP’s services.

Given these factors demonstrating the absence of UCP’s control over the living arrangement, the Court concluded the private home prong of the exemption test was satisfied.

Industry employers must review the new rule’s definitions of companion and domestic service, and analyze their workforces and compliance accordingly.

Contract Attorney “Practiced Law,” Not Entitled To Overtime

In the latest chapter in the ongoing saga regarding contract attorneys claiming to be overtime eligible, Judge Ronnie Abrams of the Southern District of New York ruled that a contract attorney reviewing documents for litigation firm Quinn Emanuel was “practicing law” and thus exempt from overtime pursuant to 29 C.F.R. § 541.304(a)(1). Henig v. Quinn Emanuel Urquhart & Sullivan, LLP, S.D.N.Y., No. 1:13-cv-01432, 12/30/15.

Describing the detailed, multi-leveled, often “rote” document review process utilized in high stakes litigation, Judge Abrams observed that “[n]ot all of it is law at its grandest,” but concluded that “all of it is the practice of law.” Because Plaintiff Henig’s role in that document review process “involved the type of professional judgment necessary to be engaged in the practice of law” as defined in the state of New York, the Court concluded he was engaged in the practice of law within the meaning of the FLSA regulation, and thus exempt.

Utilizers of contract attorney labor can take heart in Henig, recognizing that the door remains open to similar claims absent controlling appellate authority.

NYSDOL Issues Guidance on Fast Food Wage Order and Increased State Cash Minimum Wage For Hospitality Workers

The New York State Department of Labor (NYSDOL) recently posted answers to Frequently Asked Questions related to the new Fast Food Wage Order and increased state minimum wage for hospitality workers, both of which take effect on December 31, 2015.  As previously covered here, the state minimum wage in New York will increase to $9.00 for all hospitality-based employees not covered by the Fast Food Wage Order.  The maximum tip credit available for such workers will be reduced to $1.50, from the current amount of $3.75, requiring a minimum cash wage of $7.50.  Of note, the Fast Food Wage Order FAQ clarifies the NYSDOL’s view that no tip credit is available for employees covered by the Order, including delivery employees.

The legality of the Fast Food Wage Order is currently being challenged in court by the National Restaurant Association.  Watch this space for further developments.

Ohio Federal Court Rules Home Care Agency Not Required To Pay Overtime To “Companions” During Temporary Vacatur Of New Federal Rules

Providing much needed guidance to industry employers still wrestling with fallout from the United States Department of Labor’s drastic reduction to the scope of the companionship exemption, District Court Judge Sandra S. Beckwith held this week that a home care agency properly relied on the temporary vacatur of the DOL’s new federal regulations in electing not to pay overtime to its home healthcare employees during the period while the vacatur was in effect.   Bangoy, et al. v. Total Homecare Solutions, LLC, S.D. Ohio No. 1:15-CV-573 12/21/15.

In October 2013, the United States Department of Labor issued proposed regulations drastically curtailing the scope of the “companion exemption” by, in part, providing that agencies which employ home companion workers may no longer avail themselves of the exemption and by redefining “companionship services.” In December 2014, the District Court for the District of Columbia held in Home Care Association of America, et al. v. Weil, that the DOL exceeded its rule-making authority in eliminating this FLSA exemption for home health workers employed by home care agencies, and vacated the rule. It likewise vacated the new definition of “companionship services” in January 2015. However, in August 2015, the D.C. Circuit Court of Appeals reversed the lower court, holding that the new rules constituted a valid exercise of DOL’s rulemaking authority. The employer in Total Homecare Solutions, LLC, relying on the lower court’s vacatur of the regulations, allegedly did not pay overtime to its home healthcare employees during the interim eight month period between the trial court and appellate court decisions.

In granting Total Homecare Solutions’ motion to dismiss in Bangoy, the Court rejected plaintiffs’ “heads I win, tails you lose” argument that the defendant-employer should be held liable for overtime during the period of vacatur of the DOL rule. Any other conclusion, Judge Beckwith explained, would have placed the defendant-employer in an “untenable position.” The Court held that the vacatur of a federal rule renders it “a nullity and unenforceable” and stated that allowing plaintiffs to recover during the period of vacatur would have an “impermissible retroactive effect.” The Court also noted that DOL’s non-enforcement of the rule until 30 days after the D.C. Circuit’s decision upholding it “strongly suggests that the rule should not be given retroactive effect in cases between private parties” because public enforcement actions and actions for determining private rights should generally not be at variance.

The Total Homecare Solutions decision provides a strong defense for industry employers faced with FLSA litigation over the period prior to DOL’s enforcement the new rule. Note that the DOL has now taken the position that the rule is now effective, pending the Home Care Association of America’s petition for review by the U.S. Supreme Court.

Illinois Judge Holds that Individual Liability Under FLSA Requires Both Ownership and Operational Control

The definition of an “employer” under the FLSA is, like a number of FLSA provisions, not well defined, as set forth in a long and thoughtful opinion from Judge Manish S. Shah of the Northern District of Illinois. Schneider v. Cornerstone Pints, Inc., 2015 U.S. Dist. LEXIS 166993 (N.D. Ill. Dec. 1, 2015). However, it is not limitless, nor is it designed to create personal individual liability for individuals involved with businesses who have no ownership stake or are passive investors.

In Schneider, the allegations concerned wage violations occurring at a single restaurant operated by the corporate defendant and one individual defendant, Lewis. After these two defendants admitted liability,t he court conducted a limited bench trial to determine whether two additional individual defendants, Lewis’ brothers in-law and investors in the business, were jointly liable as “employers.”  In finding they were not joint employers, the Court made the following observations and conclusions:

  • “First, although a person must act in the interests of an employer in relation to an employee, more than supervision of an employee is required.
  • Second, all relevant facts should be considered, including the four commonly bundled [economic realities factors]. These four factors, however, are neither dispositive nor necessarily weightier than any others.
  • Third, to be an employer, the defendant’s conduct must have caused, in whole or in part, the alleged violation. While this particular factor is a necessary condition to liability, it alone is not sufficient. For example, if one employee were to somehow delete his co-worker’s hours from the company’s system, he would not thereby necessarily be an “employer,” even though he caused the violation. Other factors would still have to be examined to see if he could be held liable under the FLSA.
  • Fourth, and this follows from the previous point, the defendant must have actually exercised his authority, at least enough to have caused the violation in whole or in part. If a defendant does not exercise any authority, it cannot be that he is responsible for the violation. Nor does it suffice for the defendant to have exercised some arbitrary authority (e.g., sign a few checks). The authority exercised must be related to the violation.”

Because the brothers “did not control the company’s operations, whether considered day-to-day or big picture, and in particular . . . the work issues for the employees,” and because they were not aware of Lewis’ unlawful wage practices, they were not “employers” under this test. They “at most acted as sounding boards for Lewis and his ideas, and occasionally injected more money into the project,” the Court held.

While the language of the Schneider decision is clear, FLSA doctrine on these issues across the nation is less so. Individuals involved in businesses – be it as an investor, owner or executive with impact on Human Resources and compensation decisions – must be aware of this doctrine and take steps to minimize liability. Of course, substantive FLSA compliance is the best risk management tool.

Ohio Federal Court Rejects Challenge to Application of Companionship Exemption to Home Health Aide

Last week, an Ohio, a federal judge held that a home health aide failed to demonstrate that she performed general housework unrelated to the care of her patients, and therefore qualified as a provider of companionship services under the Fair Labor Standards Act’s previous formulation of the “companion” exemption. As such, the home health aide was not entitled to the minimum wage or overtime. Foster v. Americare Healthcare Servs., Inc., 2015 U.S. Dist. LEXIS 166550 (S.D. Ohio Dec. 11, 2015).

In Foster, the plaintiff agreed that home health aides who perform companionship services are exempt from the FLSA’s minimum wage and overtime provisions. However, the plaintiff claimed that she qualified for one of the exceptions to the companionship exemption because she performed “general household” work unrelated to the care of the patient or client in excess of twenty percent of the total weekly hours she worked. Specifically, the plaintiff claimed that when she performed services such as laundering clothes, preparing meals, or removing trash, such services also benefitted the client’s family members.

The district court granted summary judgment to the employer, finding that the plaintiff remained exempt despite the work performed. The court found that the type of work the plaintiff performed which included “meal preparation, bed making, washing of clothes, picking up medicine, and other similar services” was household work related to the care of the aged or infirm person. These services did not render her a “maid” or “housekeeper” to “the entire household.” As a result, the court found there was no evidence from which a reasonable jury could find that the plaintiff’s work fit within the exception to the companionship services exemption. Of course, the companionship exemption as applied in Foster no longer applies to most agency-employed home health aides (though that change, while already effective, remains subject to an ongoing appeal).

FLSA overtime exemptions continue to be a source of wage-and-hour litigation, as does the Department’s new companionship rule. Employers should continue to be vigilant in reviewing their classifications of employees for FLSA purposes.