Do wage and hour laws apply to independent contractors?

Every once in a while I'll answer a question that comes from my readers. Sometimes a question comes by email. Other times (to break down the 4th wall) they come from a search someone ran to find the blog.

Last week, someone asked, "Do minimum wage laws apply to 1099 independent contractors?" The answer is no. The FLSA (and Ohio's parallel wage and hour laws) only apply to employees.

But, companies should tread very carefully before classifying a worker as an independent contractor. Among the factors that the Department of Labor will examine in determining whether one is an employee or a contractor are:

1. The extent to which the services rendered are an integral part of the principal's business.
2. The permanency of the relationship.
3. The amount of the alleged contractor's investment in facilities and equipment.
4. The nature and degree of control by the principal.
5. The alleged contractor's opportunities for profit and loss.
6. The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
7. The degree of independent business organization and operation.

If a company errs by misclassifying an employee as a contractor, it would be liable for back wages (up to the minimum wage if the hourly rate is less) and unpaid overtime for two years, or even three years if employer was trying to willfully avoid the FLSA.

In other words, I would think long and hard before paying a worker like a contractor, and would not do so without some input from an employment lawyer and a written agreement setting forth the terms of the relationship.

To whoever typed that search into Google, thanks for the question. If anyone has any topics they'd like to see covered, email me and I'll do my best to accommodate.

House overwhelmingly votes in favor of ADA Amendments Act of 2008

By a margin of 402-17, the House yesterday voted in favor of the ADA Amendments Act of 2008. The New York Times is reporting that the Senate is expected to take similar action soon, but that President Bush is concerned that "it 'could unduly expand' coverage and significantly increase litigation."

The highlights of the bill (the full text of which is available here) are several. It defines "substantially limits" to mean "materially restricts," it specifies examples of major life activities, and expands upon them to include major bodily functions, and helps employers by exempting from "regarded as" claims transitory or minor impairments that last or are expected to last for 6 months or less.

The biggest changes, however, come to the definition of "disability" itself. In Sutton v. United Airlines, the Supreme Court held that whether an impairment substantially limits a major life activity is to be determined with reference to the effects of mitigating measures on the impairment. For example, a diabetic who has the condition under control with insulin might not meet the definition of "disability." These amendments expressly reverse that ruling:

• An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.
• The determination of whether an impairment substantially limits a major life activity is to be made without regard to the ameliorative effects of mitigating measures, such as medications, equipment, assistive technology, auxiliary devices, learned behavioral, or adaptive neurological modifications.
• Eyeglasses or contact lenses, however, can still be considered in determining whether an impairment substantially limits a major life activity.

All in all, the goal of this legislation is to be lauded: "To carry out the ADA's objectives of providing 'a clear and comprehensive national mandate for the elimination of discrimination' and 'clear, strong, consistent, enforceable standards addressing discrimination' by reinstating a broad scope of protection to be available under the ADA." These amendments may not necessarily increase litigation, but they will certainly make it more difficult for employers to get ADA cases dismissed on summary judgment.

Delay in reporting harassment dooms employee's claim

Federal Express terminated the employment of Deborah Thornton after she failed to return to work from a 16-month leave of absence taken because of alleged stress stemming from sexual harassment by her immediate supervisor, David Bragorgos. She did not report the retaliation to FedEx until two months after her leave of absence began, claiming that she feared retaliation from Bragorgos and others if she reported it. In Thornton v. Federal Express, decided early this week, the 6th Circuit rejected that argument and upheld summary judgment entered in the employer's favor.

An employee’s subjective fears of confrontation, unpleasantness or retaliation do not alleviate the employee’s duty under Ellerth to alert the employer to the allegedly hostile environment.

In other words, employees have an affirmative obligation to report harassment. In return, the employer has an affirmative to ensure that the employee can do so free from retaliation. The employee is not excused from her responsibilities out of a fear that the employer will not live up to its end of the bargain.

Is the FLSA anachronistic?

Earlier this week I wrote about whether employees are entitled to overtime pay for reading emails. Michael Moore (the author of the Pennsylvania Labor & Employment Blog, not the director of Roger & Me) posted a comment to my post that is so wonderful that I'm reprinting it to make sure that all of my readers see it:

The only area immune from technology is the FLSA which is stuck in the year 1938, when it was enacted. Incidentally, this is the same year that the ball point pen was invented by the Argentine-Hungarian journalist László Bíró. I wonder if the DOL sat around in 1938 wondering if employees who wrote themselves work-related “To Do” list at home might actually be engaged in compensable work time activities entitling them to overtime?... or if the invention of the ball point pen (as opposed to the clunky fountain pen) would have so dramatically reduced these efforts that it would make the time de minimis?

Michael is dead on. As our employment laws move forward, the FLSA remains stuck in the past. The FLSA was enacted in 1938 to the curb worker exploitation, boost job creation, and bring the country out of the Great Depression. Last year, I asked if the 40-hour work week is still relevant in the modern world.  Michael's comment really drives home the point that a law enacted to address workplace conditions that existed during the Depression may need to be seriously reworked to address the realities of the modern workplace.

Protected activity does not protect theft of confidential information

Let's suppose an employee opts-in to a class action lawsuit against your company. Let's also suppose after she opts-in to the class action, she believes that her supervisor begins retaliating against her by treating her poorly. As part of discovery in the class action, she provides documents to her attorneys. Those documents not only include documents that might relate to the class action and potential retaliation claim, but also confidential customer files that she believes will jog her memory about specific instances of retaliation. The employer has a Privacy Policy, a Code of Conduct, and a Conflict of Interest Policy, all of which expressly prohibit the disclosure of confidential information, including customer information. When the employer learns of the delivery of the confidential customer files, it terminates her for violating company policy.

Does the delivery of the confidential files constitute protected activity for which the employee cannot be terminated? According to the 6th Circuit in Niswander v. Cincinnati Insurance, decided yesterday, the answer is it depends, but in this case no.

First, the Court analyze the dissemination for whether it constituted "participation" in protected activity. Because the confidential documents were not relevant to her claim, the Court concluded it did not:

This is not a case of an employee mistakenly or inadvertently delivering confidential information out of a belief that the documents provided direct proof of discrimination. Instead, Niswander delivered numerous documents, some of which were copies of e-mails from her supervisors related to her job performance, but some of which were claim-file documents that included confidential personal information of insured individuals....

Our analysis would be different if the documents that Niswander had given to her lawyers, and that they in turn produced to CIC, had reasonably supported her claim of gender-based pay discrimination—or if she reasonably believed that they did.

[C]oncluding that Niswander’s conduct here is protected participation ... would provide employees with near-immunity for their actions in connection with antidiscrimination lawsuits, protecting them from disciplinary action even when they knowingly provide irrelevant, confidential information solely to jog their memory regarding instances of alleged retaliation.

The Court also analyzed whether the dissemination qualified as "opposition" to an unlawful employment practice. The Court laid out 6 factors critical to its determination as to whether the dissemination of the documents was "reasonable" and therefore worthy of protection:

1. How the documents were obtained.
2. To whom the documents were produced.
3. The content of the documents.
4. Why the documents were produced, including whether the production was in direct response to a discovery request.
5. The scope of the employer’s privacy policy.
6. The ability of the employee to preserve the evidence in a manner that does not violate the employer’s privacy policy.

The Court found that the factors generally weighed against Niswander:

Although employees deserve protection when they make reasonable attempts to preserve evidence of illegal employment practices, including discrimination and retaliation, “we are loathe [sic] to provide employees an incentive to rifle through confidential files looking for evidence that might come in handy in later litigation.” To hold in favor of Niswander would turn the opposition clause into “a license to flaunt [sic] company rules or an invitation to dishonest behavior.” (quoting O’Day v. McDonnell Douglas Helicopter Co. (9th Cir. 1996)).

This case underscores the importance for employers to have clearly written confidentiality and other policies to govern employee ethics. The disclosure of confidential materials could very well be transformed into protected activity if the employer does not take active steps to protect the documents' confidentiality.

Moreover, businesses must also act swiftly and decisively when discovering a breach of confidentiality by any employee. Separate from being smart business, consistent enforcement diffuses any claim by an employee like Niswander of pretext - that she was treated differently than employees who breached policy but who had not filed a lawsuit.

What would President Obama look like to employers?

Yesterday, Senator Barack Obama gave some insight into employment policy in his administration. RealClearPolitics has his words from a speech given in Albuquerque. The highlights:

• He will push for the passage of the Lilly Ledbetter Fair Pay Restoration Act, which will overturn Ledbetter v. Goodyear Tire & Rubber. Recall that Ledbetter held that the statute of limitations for a pay discrimination claim under Title VII begins to run when the pay-setting decision is made, and not when the employee learns of the discrimination. The Ledbetter Fair Pay Act would start the statute of limitations when the employee learns of the pay discrimination. In my view, this law would create a floating statute of limitations for pay discrimination claims, which severely undermines the important aspect of certainty that statutes of limitations provide for businesses.

• To assist working parents, he would expand the Child and Dependent Care tax credit to 50%.

• He would expand the FMLA to cover employers as small as 25 employees, to permit leave for the care of elderly parents, to allow parents 24 hours of annual leave to join school activities with their kids, and to cover employees who are victims of domestic violence or sexual assault.

• Finally, he would require employers to provide all workers with seven paid sick days a year.

It's clear from Senator Obama's words that family responsibility will be a driving force in his administration:

As the son of a single mother, I also don't accept an America that makes women choose between their kids and their careers. It's not acceptable that women are denied jobs or promotions because they've got kids at home. It's not acceptable that forty percent of working women don't have a single paid sick day. That's wrong for working parents, it's wrong for America's children, and it's not who we are as a country.

It's hard to argue against greater family leave benefits on a national scale (The Ohio Healthy Families Act is an entirely different story). As I've said before, this country lags behind most of the civilized world, and even some of the third world, in family leave benefits. Until we solve this problem legislatively, aggressive plaintiffs will continue to push for judicial solutions - such as the $2.1 million verdict against Kohl's Department Stores in Cuyahoga County last year.

Overtime pay for reading emails

More than a year ago I asked the question, "Is time spent outside the office e-mailing from a Blackberry compensable under the Fair Labor Standards Act?" According to yesterday's New York Times, writers for ABC News are asking the same question.

BlackBerrys blur the lines between work and play. A recent dispute at ABC News asked: at what point does checking e-mail after hours constitute working overtime?

Several weeks ago, ABC’s news division presented three new writers with a waiver stating that they would not be compensated for checking their company-issued BlackBerrys after office hours. The waiver prompted some concern, leading ABC to take the BlackBerrys away from the three writers the week of June 9.

Before deciding whether time spent checking emails off-hours is compensable, several questions must be answered:

1. How much time is spent? The FLSA permits employers to disregard and not pay employees for off-hours de minimis time. Time is considered de minimis if it is insubstantial or insignificant, cannot as a practical administrative matter be precisely recorded for payroll purposes, is no more than a few minutes in duration, and where the failure to count such time is justified by industrial realities.
2. Is the employee checking emails of his or her choice, or is the employee essentially expected to be on-call 24/7?
3. Does the employer require the employee to carry a PDA or Blackberry, or does the employee choose to do so as a matter of personal convenience?

The safest course of action for employers is to provide PDAs only to exempt employees. But, if companies are going to provide PDAs to non-exempt employees, they should have a policy in place stating that employees who check emails off-the-clock do so of their own choice, and that the time spent will not be compensated. Of course, such a policy is not foolproof, and businesses who make it possible for employees to remain connected off-duty will have to take the risk that the time might count as hours worked.

My take is that most emailing should meet the test for de minimis time. Checking an email takes at most only a few moments, and it would create an administrative nightmare for companies to have to track this time for pay purposes. While I am not aware of any cases discussing this issue, it is only a matter of time before we get some judicial guidance for companies that provide PDAs to non-exempt workers. In the meantime, this debate remains academic, albeit with significant real-world implications.

Two new ways to search the blogosphere go live

It's easy to get lost in the blogosphere. There are thousands of lawyers publishing blogs, and new blawgs launch everyday, each elbowing each other for room in an increasingly more crowded market.

Two services have recently launched to help keep it all straight. LexMonitor strives to be a comprehensive database of every blawg. It's organized by category, author, and tags, and is updated as frequently as blogs update their feeds. It touts itself as "a free daily review of law blogs and journals highlighting prominent legal discussion and the lawyers and other professionals participating in this conversation." It launched last Friday, and on my initial review over the weekend, I have to say I'm impressed so far, in its organization, scope, and what it hopes to achieve.

Law.alltop.com has been around a little longer. It thinks of itself as the “digital magazine rack” of the Internet. It imports the last five posts from the blogs it lists. It is not trying to catalogue every piece of information out there, but to provide a representative sample of the best of the blogosphere.

Because alltop.com is more selective in its listings than LexMonitor, it may be a less intimidating starting point for those starting out searching legal blogs. LexMonitor, however, is an ambitious project, and has real potential to become the portal for those searching for up to the minute legal information.

Because I'm listed on both services, I'm happy to plug them both. It's because I think that they each offer something of real value that I'm also happy to recommend them.

Court limits employers' access to employee text-messages

It is generally understood that employers have the right to read employees' emails sent and received through the corporate email system. The system is owned and operated by the employer, and employees should have no expectation that such communications are private.

What about electronic communications that are not stored on an employer's server - for example, text messages from mobile devices? Can an employer legitimately intercept those communications without the employee's consent? According to the 9th Circuit in Quon v. Arch Wireless, the answer might be no. For those who want more information, Workplace Privacy Counsel has the details.

The bottom line for companies is that Internet Service Providers, text messages services, and online email services (such as Yahoo or Gmail) are prohibited from disclosing stored messages without the consent of the sender or the recipient. This ruling, however, should not affect an employer's ability to control its own property, such as cell phones or computers that it owns and provides to employees to use. The key is for companies to have clearly written electronic communications policies that spell out the expectations, and make it clear to employees that they have no expectation of privacy in the use of any corporate-issued equipment.

What I'm reading this week #36

We'll start this week's review with a couple of posts on firing employees. The Business of Management asks - is there ever a good time to fire someone? Meanwhile, The HR Capitalist gives us some tips on what to say to an employee after you make the termination decision.

Workplace Horizons gives us another update on the revamped ADA Restoration Act, and reports that a compromise is closer to being worked out.

The Word on Employment Law reminds us that fairness definitely matters when dealing with employees.

The Delaware Employment Law Blog (with a spiffy new design) talks about respectful workplace policies.

Finally, the Pennsylvania Labor & Employment Blog, as part of its series on resources for HR generalists, advises that it's a good idea to pay employees' final paychecks on time to avoid legal trouble.

Employers go 2 out of 4 at the Supreme Court today

The Supreme Court this morning released a quartet of opinions that impact employers. Continuing this Court's somewhat surprising trend, the employer came out on the winning end of only half of these cases.

In MetLife v. Glenn, the Court ruled that the fact that a claim administrator of an ERISA plan also funds the plan benefits is a "conflict of interest" that must be weighed in a judicial review of the administrator's benefit determination. I have always been troubled by benefit plans that both pay benefits and make the decision whether to pay. To the extent that such plans will no longer have the protection of the arbitrary and capricious standard upon judicial review of their decisions, I applaud the Court's decision.

In Kentucky Retirement Systems v. EEOC, the Court ruled that a benefit plan's use of age as a potential factor in the distribution of retirement benefits to disabled workers does not establish a prima facie case of age discrimination. For the background on this case, see Supreme Court considers use of age as factor in disability retirement benefits. I think the Court got it partially right. It seems to me that retirement eligibility is a proxy for age, but the employer in this case did not use the factor arbitrarily or discriminatorily.

In Meacham v. Knolls Atomic Power Laboratory, the Court ruled that when an employee alleges disparate impact under the ADEA, the employer bears the burden of persuasion on the "reasonable factors other than age" defense. Again, I think the Court got this right. If the employer is raising the defense, the employer should have the burden of proving it.

Finally, in Chamber of Commerce v. Brown, the Court ruled that federal labor law prohibits state from regulating or limiting an employer's right to speak out about labor union organizing by their employees.

[Hat-tip: SCOTUSblog]

Giving "high in the sky" a whole new meaning

There are certain thinks you just don't want to think about while your sitting at the gate waiting to board a flight. One of them is the pilot in the bathroom of the 737 you are about to board doing a few lines of coke. This morning, in Gabbard v. FAA, the 6th Circuit made the friendly skies a little bit safer by affirming an arbitrator's decision that had approved the FAA's revocation of a pilot's license after he had failed a drug test.

The take-away from this case has nothing to do with airlines, drug tests, or arbitrations. Instead, this case serves as another reminder that employees can sue for any reason at any time. Gabbard could not possibly have thought he was going to have his license reinstated, especially after an arbitrator had ruled against him. Yet, he had no shame in parading his shameful conduct before the second highest court in the land. Even the most rock solid termination can end in a lawsuit. That risk, however, should not hamstring employers from taking necessary actions to rid their workplaces of bad employees, especially when good cause exists.

Clearing up some wage and hour misconceptions

The Fair Labor Standards Act has two basic requirements for non-exempt employees 18 years old and over: the payment of a minimum wage (which is currently $7 an hour in Ohio), and the payment of one and one-half times the regular rate of pay for any hours worked in excess of 40 in any work week. What's missing from this list are typical payroll practices such as vacation, holiday, severance, or sick pay; meal or rest periods; premium pay for weekend, holiday, or off-shift work; pay raises or benefits; the payment of final wages to terminated employees; and pay stubs or W-2s.
Some of these payroll practices have no provision whatsoever in any federal or state law. For example, no law requires the payment of vacation, holiday, severance, or sick pay, premium pay (except for the over-40 requirements of the FLSA), pay raises, or benefits (although ERISA regulates the latter if benefits are provided). Of course, many of these are typical in virtually all businesses. Good luck hiring or retaining any decent employees if you don't offer paid holidays and annual raises, for example.
Ohio law regulates the handling of employees final paychecks. In Ohio, paychecks must be provided no less often than semi-monthly, which means that a severed employee must be paid no later than either the 15th or the last day of the month, depending on whether the employee's last day of employment falls within the 1st half of 2nd half of the month.
The Internal Revenue Code governs the handling of W-2s. Suffice it to say that if you are paying an employee any wages during the year, you must provide that employee with a W-2, and make all the applicable withholdings on that employee's behalf.
Meal and rest periods are not required by any law. Neither federal law or Ohio law requires employers to provided employees with any breaks during the work day. Federal law, however, does provide for whether meal and rest breaks are counted as "hours worked." This distinction is important. If time is counted as "hours worked," it goes into the calculation of time worked during the work week for consideration of whether the employee has crossed the 40-hour threshold for overtime pay.
Rest periods, which are considered breaks of 20 minutes or less, are counted as hours worked whether or not the break is paid. Rest breaks are customarily paid, and if they must be counted as work hours, they might as well be paid for.
A bona fide meal period, however, is not considered hours worked. To be a bona fide meal period the employee must be totally relieved of his or her work duties. According to the Department of Labor: "The employee is not relieved if he is required to perform any duties, whether active or inactive, while eating."
Next week, we'll delve into the mistakes employers make in the handing of rest and meal periods, which has led to a lot of wage and hour class action litigation and some huge judgments against unwary employers.

Color-blind employment practices

The Word on Employment Law has an interesting post this morning about the effect of color on the Presidential election. Note that I said color, and not race. Under Title VII (and Ohio's parallel employment discrimination statute) it is illegal to make an employment decision because of "color." How, exactly, is color different than race?

The EEOC gives us some guidance in its Compliance Manual on Race and Color Discrimination. "Color" means:

pigmentation, complexion, or skin shade or tone. Thus, color discrimination occurs when a person is discriminated against based on the lightness, darkness, or other color characteristic of the person. Even though race and color clearly overlap, they are not synonymous. Thus, color discrimination can occur between persons of different races or ethnicities, or between persons of the same race or ethnicity.

The EEOC also provides some hypothetical examples of color discrimination:

• An African American employer violates Title VII if she refuses to hire other African Americans whose skin is either darker or lighter than her own. For example, it would be an act of unlawful color discrimination for an employer to refuse to hire a dark-skinned person to work at a cosmetics counter because the vendor prefers a "light skinned representative."
• A dark-complexioned African American manager violates Title VII if he frequently makes offensive jokes and comments about the skin color of a light-complexioned subordinate. This example is based on the EEOC's settlement of a claim against Applebee's.

Moreover, the EEOC's E-RACE Initiative is targeting these types of claims for special enforcement efforts:

Color discrimination in employment seems to be on the rise. In Fiscal Year 1992, EEOC received 374 charges alleging color-based discrimination. By Fiscal Year 2006, charge-filings alleging color discrimination increased to 1,241. A recent study conducted by a Vanderbilt University professor "found that those with lighter skin earn on average 8 to 15 percent more than immigrants with the darkest skin tone -- even when taking into account education and language proficiency. This trend continued even when comparing people of the same race or ethnicity." Similarly, a 2006 University of Georgia survey revealed that a light-skinned Black male with only a Bachelor's degree and basic work experience would be preferred over a dark-skinned Black male with an MBA and past managerial positions. However, in the case of Black female applicants seeking a job, "the more qualified or experienced darker-skinned woman got it, but if the qualifications were identical, the lighter-skinned woman was preferred."

While these claims are still rare, it is significant that EEOC charges of color discrimination have risen more than 330% since 1992. Moreover, the EEOC's E-RACE initiative calls for stepped up enforcement in this area.

It may not be a defense to a discrimination claim that two African American employees were treated differently if one is light complexioned and the other is dark complexioned. For employers, it's important to keep in mind that color discrimination is illegal, and is different than race discrimination.

It's a Discriminatory World After All - Sikh sues Disney for banning his turban

I am a Sikh man and the turban that I wear is a religiously-mandated article of clothing. My supervisor tells me that my turban makes my coworkers "uncomfortable," and has asked me to remove it. What should I do?

If a turban is religiously-mandated, you should ask your employer for a religious accommodation to wear it at work. Your employer has a legal obligation to grant your request if it does not impose a burden, or an "undue hardship," under Title VII. Claiming that your coworkers might be "upset" or "uncomfortable" when they see your turban is not an undue hardship.

The above is the EEOC's position on the accommodation of religious articles of clothing. I bring this up because Disney has been sued by a practitioner of the Sikh religion, who claims he was denied a job because of his turban. According to a press release by the Sikh American Legal Defense and Education Fund:

Mr. Channa applied for a job as a musician with Disney in the Fall of 2006 but was told that he would not be hired because he lacked "the Disney look" - a negative reference to his religiously-mandated dastaar (Sikh turban).

This lawsuit will most likely be decided on one question - does it pose an undue hardship on Disney for one of its performers to wear a turban? This question is not as easy to answer as it might appear. Disney World might be the most controlled environment on the planet. Employees are not called employees, but cast members. Every worker is considered integral to the suspension of disbelief that Disney is trying to create. Thus, if Mr. Channa is going to be performing, shouldn't he be required to wear the uniform, even if it means not wearing his turban?

On the flip side, Disney permitted Mr. Channa to interview and rehearse with his turban. If the specific uniform was a requirement for the job, why lead him along only to pull the rug out from under him at the last minute. Plus, I'd image that a company as large as Disney has had cast members in the past who have not been able to match the uniform exactly. For example, would Disney refuse to hire a disabled musician if he had to perform in a wheelchair?

It seems to me that Disney dropped the ball on this one. Can there really be an undue hardship on Disney by allowing Mr. Channa to wear his turban? The EEOC defines undue hardship as an accommodation that "requires more than ordinary administrative costs, diminishes efficiency in other jobs, infringes on other employees' job rights or benefits, impairs workplace safety, or causes co-workers to carry the accommodated employee's share of potentially hazardous or burdensome work." Religious head wear does not impact any of these factors. This is a lawsuit that Disney should settle and settle quickly, if for no other reason that to avoid the bad press that its small world apparently does not include Sikhs.

Is this the beginning of the end for the Ohio Healthy Families Act?

The Cleveland Plain Dealer is reporting that Governor Strickland has publicly come out against the Healthy Families Act:

Strickland, a Democrat, began speaking out publicly against the so-called Healthy Families Act last week, urging business and labor to get together and work out a compromise that would keep it off the ballot.

His motivations are both practical and political.... From a practical standpoint, Strickland clearly is concerned about the measure's economic costs. Like the coalition of business interests that is opposing the issue, he has noted how expensive it would be for companies to provide such a benefit.... Despite the concerns of employers, voters love the idea. Therein lies Strickland's political headache.

Voters of both parties support the proposal, but it is especially popular among Strickland's fellow Democrats. It has been predicted to drive Democratic turnout in this fall's presidential race in much the same way a proposed gay marriage ban did with Republican turnout in 2004. As with that issue, the sick-day proposal has national scope: it has been proposed in a dozen states and two cities, and is supported by presumptive Democratic nominee Barack Obama.

Because 70% of Ohioans support this measure, it will be very difficult to keep if off November's ballot, despite Governor Strickland's efforts. In the meantime, if you want more information on the likely harm the Health Families Act will cause to Ohio's already fragile business climate, visit the Ohio Chamber of Commerce's website about the OHFA, Ohio Business Votes.

The intersection of techology and labor law: new website for posting of compensation information raises concerns

George's Employment Blog reminds us that an employer cannot ban its employees from discussing wage and benefits without violating the National Labor Relations Act. According the NLRB's recent decision in Windstream Corp.:

[A]n employer rule which regards employee compensation and benefit information as confidential and prohibits employees from discussing such information with one another violates Section 8(a)(1) of the Act.... In examining whether a particular rule so violates Section 8(a)(1), the Board's analysis requires that the rule be such that "Employees would reasonably construe the language to prohibit Section 7 activity."

Windstream's challenged policy stated:

Employee compensation, benefits, and personnel records and information are confidential.

Only employees who need to know such information in the course of employment should access such employee information.

You should not disclose this information to any other Windstream employee unless that employee has a need to know such information in the course of employment.

Except as required to comply with law, you should never disclose this information to any party other than the employee or individual whose access has been authorized by the employee.

This does not prohibit you from disclosing or discussing personal, confidential information with others, so long as you did not come into possession of such information through access which you have as part of your formal Company duties.

(Winstream added the last sentence after the filing of the unfair labor practice charge). The NLRB found that the language violated Section 8(a)(1) because it was "so broadly stated that employees could and will construe them to prohibit discussions of wages and working conditions with others."

I was again reminded of this line of cases when I read an article in Business Week magazine this week touting the launch of Glassdoor.com. According to Glassdoor.com's press release, it will make available user-submitted, anonymous compensation information organized by company:

Compensation information by company and position. Unlike most salary services that only report aggregated data by generic position type and industry, Glassdoor provides details of salary, bonuses, and other compensation for actual positions and titles at specific companies. For example, users can see exactly what a software engineer at Google makes, along with bonuses and types of equity grants, in comparison to a software development engineer at Microsoft.

If employees have a statutory right to discuss compensation and benefit information, but lack the same right to use an employer's e-mail system for Section 7 purposes, can a company prohibit its employees from accessing Glassdoor.com without violating the National Labor Relations Act? The answer seems to be yes, as long as the prohibition only extends to company time and company equipment. A more broadly draft ban that applies to what employees do on their personal time very well might run afoul of the Windstream line of cases.

What I'm reading this week #35

While I recognize that the next statement might alienate some of my readers, I have to admit that I'm not the biggest NASCAR fan. That fact, however, does not stop me from reporting that a former NASCAR official has sued the racing league for sexual harassment, seeking an astounding $225 million in damages (which makes NASCAR a whole lot more interesting to me). For an HR perspective on this issue, click on over to The HR Capitalist. Meanwhile, the Connecticut Employment Law Blog has some insightful thoughts on companies being fairly stereotyped by their public image.

Rush on Business advises that companies should "build an Ark" to avoid employment lawsuit. What does Rush mean? Like Noah, businesses should be proactive in attacking issues before they become a problem that can swamp the company. Some examples include having an effective harassment policy, promptly and accurately documenting performance problems, and reviewing wage and hour compliance.

Recall that in Thompson v. North Am. Stainless, the 6th Circuit went beyond the plain language of Title VII to find a claim for associational retaliation. Jottings by an Employer's Lawyer, the granddaddy of employment law blogs, reports on a case out of the 5th Circuit that came to the exact opposite conclusion under the FMLA.

The Delaware Employment Law Blog observes that in employment disputes, simply providing an employees a forum to air their grievances can often stave off a lawsuit.

The Pennsylvania Labor & Employment Blog reports on Klopfenstein v. National Sales & Supply, in which a Pennsylvania federal court found that the act of getting coffee is not gender specific and therefore cannot form the basis for a sexual harassment claim.

Finally, this week brings us a trio of thoughful articles on preventing and avoiding retaliation claims: the Labor & Employment Law Blog on training supervisors to avoid retaliation claims; BLR's HR Daily Advisor on how not to be blindsided by a retaliation claim, and BLR's HR Daily Advisor on rules to prevent retaliation.

Defining the proper "decisional unit" is key in legitimacy of RIFs

Today, we'll finish up our series on releases and waivers of age discrimination claims by looking at how courts examine the scope of the decisional unit for purposes of making the requisite disclosures under the Older Workers Benefits Protection Act ("OWBPA") for a group reduction. For the previous two posts, see Offering of severance package found to be evidence of a constructive discharge, and Refresher on age discrimination waivers.

According to the 6th Circuit in Raczak v. Ameritech Corp., the purpose of OWBPA is to ensure that "workers who signed a waiver had a clear idea of what they were giving up, particularly that they had the ability to assess the value of the right to sue for a possibly valid discrimination claim." Thus, a valid waiver under the OWBPA in a group reduction must include information - ages and job titles - of everyone in the decisional unit, whatever that decisional unit may be, and the status of each individual with respect to whether the employee was selected for termination or retention. The law requires employers engaging in a group layoff to give employees need data to conduct a meaningful analyses to determine whether an employer engaged in age discrimination before agreeing to sign a severance agreement. They key in determining whether employees are truly comparing apples to apples is the scope of the "decisional unit" the employer uses to compile is list of affected and unaffected employees.

The OWBPA's regulations (29 C.F.R. § 1625.22) define the term "decisional unit" as follows:

[D]ecisional unit is that portion of the employer's organizational structure from which the employer chose the persons who would be offered consideration for the signing of a waiver and those who would not be offered consideration for the signing of a waiver. The term "decisional unit" has been developed to reflect the process by which an employer chose certain employees for a program and ruled out others from that program.

The regulations offer several examples to assist companies in selecting the proper decisional unit:

• If an employer is attempting to reduce its workforce at a particular facility and undertakes a decision-making process by which some of the employees at the facility are selected for a program and others are not, then the facility will be the decisional unit.
• If the employer seeks to reduce the number of employees at a facility by exclusively considering a particular portion or sub-group of its operations at a facility, then the decisional unit would be that sub-group or portion of the workforce at the facility.
• The decisional unit may be larger than one facility if an employer is attempting to combine operations from several facilities and considers employees in several facilities for termination.

Thus, they key factors for deciding the proper scope of the decisional unit include the identity of the decision maker and the employees actually considered for the RIF. Several cases provide additional examples of these principles in action:

Burlison v. McDonald's Corp.

McDonald's engaged in a nationwide corporate reorganization. It charged each regional manager with the task of determining which employees to keep for each new region. McDonald's offered each RIFed employee a severance package in exchange for a release of all claims. In its effort to comply with the OWBPA, McDonald's provided with each severance agreement a region-specific information sheet. Each of the 5 plaintiffs (all of whom were over 40) signed the releases and accepted the severance packages. Two years later, however, they sued for age discrimination, claiming that the releases were void because McDonald's had engaged in a nationwide RIF, for which the OWBPA required that it provide them nationwide information, and not just information limited to their region. The 11th Circuit found that because the decisions as to who to terminate were made on the regional level, the region was the proper decisional unit. Because the local managers made the decision, the nationwide unit had no relevance to the plaintiffs.

Kruchowski v. Weyerhaeuser Co.

While the employees in Burlison were rebuked for arguing for an overly broad decisional unit, the employer in Kruchowski v. Weyerhaeuser Co. was punished for selecting a unit that was too wide for the actual scope of the RIF. The plaintiffs were 16 of the 31 employees selected for a RIF at the defendant's mill. The OWBPA notice advised the RIFed employees that the "decisional unit" was all salaried employees at the mill. The court of appeals found that the waivers were invalid because the Notice misidentified the decisional unit as all salaried employees. The actual unit was all salaried employees who directly reported to the mill manager. 15 salaried employees did not report to the mill manager, yet were included in the Notice. According to the court: "Defendant itself ignored its structure and decision-making hierarchy when the notified plaintiffs of the 'decisional unit.'" Because the decisional unit of which the plaintiffs were notified and the actual decisional unit were two separate groups, the waiver was void.

Conclusion

RIFs are not do-it-yourself projects for businesses. They raise myriad employment law issues, not the least of which is the scope of the proper decisional unit for purposes of making disclosures under the OWBPA. It is crucial to get these waivers absolutely right, or companies risk paying severance and still getting sued for age discrimination. Don't put yourself in that position - seek professional help before carrying out a RIF.

Refresher on age discrimination waivers

Yesterday, we looked at Coryell v. Bank One Trust, which found that the offering of a severance package could constitute evidence of a constructive discharge. Even though the employee was losing his job as part of a corporate reorganization, the court believed a question existed as to whether he had any meaningful choice but to accept the severance package.

As I mentioned yesterday, the lawsuit could have been avoided if the company required Coryell to sign a severance agreement that included a valid release of claims as a condition to receive the severance package. In fact, I'd go so far as to say that it would take a very rare case for me to feel comfortable with an employee receiving severance of any kind without signing a release in return.
Severance agreements for employees age 40 or over present their own set of problems. The Older Workers Benefit Protection Act (OWBPA), which amended the federal Age Discrimination in Employment Act, requires that any releases and waivers of federal age discrimination claims be "knowing and voluntary." Simple enough, right?. What release is not entered into knowingly and voluntarily? Not so fast. The OWBPA specifically defines what a "knowing and voluntary" waiver means, and it is not as simple as it might sound:

1. The waiver must be part of an agreement between the employee and the employer.
2. The waiver must be written in a manner calculated to be understood by the employee.
3. The waiver must specifically refer to rights or claims arising under the ADEA.
4. The employee cannot be waiving any rights or claims that arise after the date he or she signs the agreement.
5. In exchange for the release, the employee must receive consideration in addition to that which he or she is already entitled.
6. The employee must be advised, in writing, to consult with any attorney before signing the agreement.
7. The employee must be given 21 days to consider whether to sign the agreement.
8. The agreement must provide for a period of at least 7 days following its execution for the employee to revoke the agreement, and the agreement cannot become effective or enforceable until that revocation period has expired.

If the release and waiver is provided as part of some severance program offered to a group of employees (such as a reduction in force), these requirements change. The 21 day period within which to consider the agreement is extended to 45 days. Moreover, at the start of that 45 day period (i.e., at the same time the employer gives the severance agreement to the employees), the employer must also disclose, in writing:

1. The eligibility criteria for inclusion in the group.
2. The job titles and ages of all individuals eligible or selected for the program.
3. The ages of all individuals in the same job classification or organizational unit who are not eligible or selected for the program.

Meeting these criteria is vitally important. The absence of even one of these factors invalidates the entire release as to the employee's federal age discrimination claim. Thus, even if an employee signs a severance agreement, the employee is free to bring a federal age discrimination claim if one of the above eight elements is missing from the agreement. To make matters worse, under Oubre v. Entergy Operations and current EEOC regulations, an employee is not required to tender back the severance pay as a condition to bringing an age discrimination claim under an invalid waiver. As Dan Schwartz points out in his Connecticut Employment Law Blog: "Employers are advised to seek legal counsel before using a model agreement."

Tomorrow, we'll examine the disclosures required in a group separation, and look at some cases from Ohio and elsewhere that talk about how to define the scope of the job classification for purposes of making these disclosures.

Offering of severance package found to be evidence of a constructive discharge

With the exception of a "for cause" termination, I am firm believer that most terminations should be communicated with an offer of some amount of severance pay. It not only cushions the blow for the employee who may be losing his or her job through no fault of his or her own, but also presents an opportunity for the employer to get something positive out of bad situation. For one thing, an offer of severance should always be tied to a release by the employee of any and all possible claims against the employer. Thus, the employer is buying certainty that the employee will not sue. The severance agreement also gives employers the chance to gain benefits such as a cooperation clause and promises as to non-disparagement and confidential information.

Courts should be protecting severance agreements as good policy in promoting harmonious employer/employee relationships. Yet, in Coryell v. Bank One Trust, the Franklin County Court of Appeals held that an employee who accepts a severance package in lieu of termination can claim a constructive discharge sufficient to satisfy the 2nd element of the prima facie case of age discrimination (the suffering of an adverse action).

As part of a reorganization of Bank One, James Coryell (age 49) accepted a severance package that provided him with 52 weeks salary and benefits continuation. The severance documents expressly stated that Coryell could continue to seek a new position with the company. Coryell testified that he believed he had no better option than accepting the severance package. Although Coryell did continue to look for an internal position, he ultimately obtained an job with a different company during the pay continuation period. Coryell alleged that after his separation he was replaced by a 42-year-old, which constituted age discrimination.

Coryell pursued his age discrimination claim under the indirect method of proof, which requires a prima facie showing that:

1. the plaintiff is a member of the statutorily protected class;
2. the plaintiff suffered an adverse employment action;
3. the plaintiff was qualified for the position; and
4. the plaintiff was replaced by a substantially younger person or that a comparable, substantially younger person was treated more favorably.

The trial court found, as a matter of law, that Coryell was "neither directly nor constructively discharged because he chose between meaningful options when he accepted the severance package." Because he was not discharged, it concluded that he could not establish the second element of his prima facie case, that he suffered an adverse employment action.

Coryell is not the first time an Ohio court has faced the issue of whether an employee who accepts a severance package can claim discharge. In Barker v. Scovill, the Ohio Supreme Court found that an employee who was offered termination with severance pay "made a conscious ,well-informed, uncoerced decision [and] should not now be allowed to cry foul." In Caster v. Cincinnati Milacron, the Hamilton County Court of Appeals found that an employee who was offered either the opportunity to obtain other employment with the company, 12 weeks layoff with the potential for recall, or permanent severance with a $100,000 payout, and who chose the latter, could not claim termination.

The Coryell court, however, distinguished those precedents and found that Banc One constructively discharged him by offering the severance package.

When a plaintiff chooses termination in lieu of other options, courts will not construe his decision as an actual discharge. Rather, the plaintiff must show that he was constructively discharged, i.e., that his or her choice of termination was involuntary or coerced. Courts generally apply an objective test to determine whether a plaintiff was constructively discharged, asking "whether the employer's actions made working conditions so intolerable that a reasonable person under the circumstances would have felt compelled to resign." ...

Here, in support of his contention that he was constructively discharged, Coryell argues that appellees stripped him of his title, position, responsibilities, functions, supervisory role, and involvement in day-to-day operations and management, leaving him with no real position. ... We agree with Coryell that this evidence creates a question of fact as to whether Coryell had any meaningful choice but to accept the severance package.

This case is a cautionary tale for all employers. If you are going to offer a severance package, make sure to get something of value in return. The best return on the investment is a clear, comprehensive, and enforceable release of all potential claims by the employee against the company. Once the employee releases the age discrimination claim, it becomes irrelevant if the employee had meaningful choice but to accept the severance package, or was constructively discharged.

Waivers of age discrimination claims present their own unique problems - namely a federal statute known as the Older Workers Benefit Protection Act. The OWBPA has specific requirements a release of federal age discrimination claims must meet to be valid and enforceable. Tomorrow, we'll take a look at the OWBPA and try to give a short refresher course on its key provisions.

Gas prices dictate new types of employment policies

Yesterday's Cleveland Plain Dealer ran an article on new types of perks that companies are making available to their employee to offset the rising gas prices. The options discussed:

• Helping potential car poolers connect.
• Adjusting workweeks so some employees can put in four 10-hour days instead of five 8-hour days, or offering flex time options.
• Handing out maps of bike routes and riding tips.
• Accommodating, and even subsidizing, mass-transit use.
• Offering work-from-home options.
• Making available forgivable, low-interest loans to help employees buy dwellings near work.
• Providing gas gift cards as rewards.
• Raising mileage reimbursements.
• Catering in-house breakfasts and lunches

I have some concerns about some of these perks. For example, gas cards might be a great idea, but it may have a negative impact on those who do not own cars. Thus, consider combining a gas card program with a bus pass program to make sure that all employees are equally covered by the benefit. In other words, my standard disclaimer with any employment policy applies - make sure that it applies on a non-discriminatory basis.

What I'm reading this week #34

For the past 12 years, it has been the law in the 6th Circuit that an employer cannot discriminate against a female employee because she had an abortion (see Turic v. Hollan Hospitality). This week the 3rd Circuit joined suit, and held that the term "related medical condition" in the Pregnancy Discrimination Act includes an abortion. The case is Doe v. C.A.R.S. Protection, and you can read about it on the LawMemo Employment Law Blog and the Nolo Employment Law Blog.

WorkplaceHorizons posts this week on two separate recent legislative issues: the little known Child Labor Provisions of the Genetic Information Non-Discrimination Act, and a potential compromise between employers and disability rights advocates on the ADA Restoration Act. For my prior thoughts on the ADA Restoration Act, see ADA Restoration Act unnecessarily seeks to broaden the definition of "disability". While these changes would be a step in the right direction, it would be a big mistake to amend the ADA to affirmatively state that mitigating measures should not be considered when determining whether an impairment materially restricts an individual's major life activity.

The Pennsylvania Labor & Employment Blog has some information on a topic that often plagues HR professionals, whether an employer is required to continue an employee's accrual of vacation benefits while out on FMLA or military leave.

The Delaware Employment Law Blog reports on mixed results for employers from the Families & Work Institute's recent study of flexible work benefits among U.S. companies.

We'll finish this week's review with a trio of articles about e-discovery. HR Tech News reports that employment lawsuits cause the most e-discovery headaches, while Rush on Business tells us why document retention policies are so important for businesses to have in light of that news. Meanwhile, ediscoveryinfo gives us 5 key misconceptions that businesses have about electronically stored information and their e-discovery obligations.

Crusader seeks to ban cursing - should businesses comply?

Jim O'Connor runs the Cuss Control Academy. He believes that America has developed an addiction to swearing that needs to be curbed. According to Jim: "Swearing can be rude, crude and offensive. It can reflect a bad attitude that hurts your image and your relationships. People might perceive you as an abrasive person who lacks character, maturity, intelligence, manners and emotional control." He suggests that instead of cursing, people use substitute words such as "balderdash" instead of "bullshit."

So, do companies need anti-cursing policies? No. But, businesses should not totally ignore foul language either. Instead, it should be treated like any other workplace behavior - dealt with when it offends co-workers, alienates customers, or reaches a level so extreme or outrageous that it may create a hostile environment.

Courts sets boundary on associational discrimination claims

Recall in Thompson v. North Am. Stainless, the 6th Circuit recognized a claim for associational retaliation, and held that "Title VII prohibit[s] employers from taking retaliatory action against employees not directly involved in protected activity, but who are so closely related to or associated with those who are directly involved, that it is clear that the protected activity motivated the employer's action."

At the time, I questioned the practical application of the Thompson decision by asking, "How close is close enough?"

In Thompson, the relationship was a fiancee. It is safe to assume liability will also extend to action taken against spouses. What about boyfriends and girlfriends? How long do you have to date to be protected from retaliation? The same protection also will probably extend to parents and children. What about siblings? Grandparents? Cousins? 3rd cousins twice removed? In-laws? Friends? Carpoolers? The people you share your lunch table with? The person you sat next to in 3rd grade? How close is close enough for an employer to intend for its actions to punish the exercise of protected activity? Do employers now have to ask for family trees and class pictures as part of the orientation process?

Last month, the United States District Court for the District of Oregon, in EEOC v. Qwest Corporation, gave us some clarity on how close is close enough to support an associational discrimination claim. In that court's view, the law requires something more than just a friendship:

To maintain a claim of discrimination or harassment based on her association with a black person, plaintiff must show the existence of an association. The law requires something more than mere work-related friendship. There must be a significant connection between the plaintiff and the non-white person.

While I was writing tongue-in-cheek when I asked whether carpool buddies would be able to bring an associational retaliation claim under Thompson, it is refreshing to see a court take a practical look at this type of case and reject an associational claim made by a friend. As we try to figure out the limits of Thompson, these types of decisions are certainly worth following.

[Hat tip: Manpower Employment Blawg]

Just because paid family leave is a popular issue does not mean it is good for Ohio

Ohioans for Healthy Families, the union-backed group behind the Ohio Health Families Act, continues to try to gather enough signatures to have the OHFA placed on the November ballot. According to a May 28, 2008, press release by Ohioans for Healthy Families, the organization has:

already gathered over 50,000 new petition signatures and, with over 70% of Ohioans supporting paid sick day legislation, have no doubt whatsoever that we will be able to gather the number needed to put it on the November ballot. Personally, I think anyone running for legislative office this year while opposing paid sick days is playing political Russian roulette.

By law, if the Coalition gathers an additional 120,683 signatures by August 6, the Ohio Healthy Families Act will appear on the November ballot.
A poll on MSNBC.com of over 10,000 people reveals that only 28% oppose government mandated paid family leave. Further, as the MSNBC article points out, the United States severely lags behind most of the civilized world (and even some of the third world) on paid family leave benefits. The issue isn't whether paid family leave is a good idea or a bad idea. The issue is whether the Ohio Health Families Act, as written, is good for Ohio businesses, which it is not.
Separate and apart from the myriad ambiguities and other drafting problems in the legislation, which I've discussed before (see Deconstructing the Ohio Healthy Families Act), Ohio simply does not need to be on the forefront of this issue. Only three states (California, Washington, and New Jersey) currently require paid family leave. Nothing about becoming the 4h state to join this movement will make Ohio a more attractive business climate. We should be passing legislation to draw companies to Ohio, not drive them away.
There will come a time when paid leave will be a reality for all but the smallest of businesses in this country. If Obama wins in November, I expect that time to come in the next 4 years. Assuming that the OHFA makes the November ballot, Ohio voters will have to look past their own self interests and consider the greater good of the state. Is it more important to have a few days of paid medical leave per employee, or have more businesses choose to call Ohio home, which creates more jobs and less of a tax strain for everyone?

Accuracy of background checks poses potential problem for employers

Business Week magazine this week is running a story on the lack of accuracy in credit reports. The article claims that inaccuracies are a huge problem in the background checking industry, and gives a few heart-wrenching anecdotal examples to support the allegation. Dan Schwartz, at the Connecticut Employment Law Blog, has done the math, however, and estimates that only 0.000023 percent of all background checks end up in a complaint being filed with the Federal Trade Commission. Dan's conclusion: "Are there issues with faulty records on some? Absolutely. But the numbers presented in this article hardly suggests a rampant problem with background checks."

It's the faulty records, however, that present the biggest risks to employers. Third party background checks by employers on current or prospective employees are governed by the federal Fair Credit Reporting Act ("FCRA"). It has very stringent requirements employers must comply with before obtaining or using a background check from a third party:

1. The employer must first disclose to the employee or applicant that a background check will be done and receive written consent.
2. The employer must then certify to the consumer reporting agency that it made the disclosure and has obtained written consent. An agency that does not ask for this certification, or provides a background check in its absence, should be a huge red flag about its credibility and the credibility of the information provided.
3. Finally, if you are going to take an adverse action based on information disclosed in the background check (such as not hiring someone), you must first provide the applicant or employee with a copy of the report you received along with a copy of the person's rights under the FCRA (available directly from the FTC). An employer must then wait a reasonable period of time (5 business days) before actually taking the adverse action, at which time the applicant or employee must be provided with an adverse action letter under the FCRA.

Any one of these steps can cause potential liability issues for an employer, but the only risk of any real damages stems from using an inaccurate report. Let's say, for example, a company violates the statute, but in the process learns of an applicant's bona fide criminal history. That history automatically disqualifies the person from consideration. Even though the statute has been technically violated, how has the person been harmed by not being hired for a job he or she was not qualified for in the first place? If, however, the criminal history was faulty (for example, the person was the victim of identity theft), and he or she is disqualified without having the opportunity to dispute the inaccuracy, that violation of the FCRA could open a company up to the fully panoply of employment-related damages.

Just because FCRA is seldom enforced does not mean that it should be ignored. Compliance is relatively simple, and failing to comply is an unnecessary risk for businesses to take.