Allyn & Fortuna LLP
Nicholas Fortuna, June 17, 2015.
The Supreme Court will take another stab at defining the limits of class actions in the employment setting. On June 8, 2015 the Court granted review certification of a class of more than 3000 Iowa meat-processing employees on their wage and hour claims that resulted in a jury award of nearly $5.8 million in Tyson Foods, Inc. v. Bouaphakeo. The justices will consider the Eighth Circuit’s 2-1 decision that the district court did not abuse its discretion by certifying the workers’ collective and class actions under the federal Fair Labor Standards Act (FLSA) and the Iowa Wage Payment and Collection Law. The employees claimed that the amount added to their paychecks by their employer, Tyson Foods, Inc. for putting on and taking off protective gear and the required walking between stations was insufficient to compensate the actual time spent to cover pre- and post-production activities. This case will be a follow-up to the Supreme Court’s decision in Wal-Mart v. Dukes and could be another blockbuster in the area of class action litigation.
Under Federal Rule of Civil Procedure 23, a court may not certify a damages lawsuit in a class action unless there are questions of law or fact common to the class that predominate over any questions affecting only individual members. The FLSA imposes similar certification requirements on collective actions. In Wal-Mart, the Supreme Court held that in order to satisfy these commonality and predominance requirements, plaintiffs must demonstrate that the class members have suffered the same injury by proving their claims depend upon a common contention that is capable of class-wide resolution “in one stroke.” The Court explicitly disapproved of “trials by formula,” in which liability is determined for a “sample set” of class members and then applied to the remaining members of the class.
In Tyson, the Supreme Court will decide two questions about when a class may be certified under Rule 23 and a collective action under the FLSA: 1) whether differences among individual class members may be ignored, and a class certified, when plaintiffs use statistical techniques that presume all class members are identical; and 2) whether a class may be certified that contains hundreds of members who are not injured and have no legal right to damages. The framing of the questions for review suggests that the Court is skeptical of the validity of the certification in Tyson. The ruling could have far reaching effect depending on how precise the examination must be to determine if all class members are “similarly situated.”
The class members in Tyson are hourly workers at a pork-processing facility who allege that Tyson failed to compensate them fully for time spent donning and doffing personal protective equipment and walking to and from their work stations. At trial, the district court allowed the plaintiffs to prove liability and damages to the class with statistical evidence that presumed all class members are identical to an “average” employee as defined statistically.
Currently there are five Circuit Courts (Second, Fourth, Fifth, Seventh, and Ninth) that do not allow plaintiffs to obtain an aggregate damages award for a class by extrapolating from a statistical “average” class member. The Supreme Court’s decision will result in uniformity of treatment of this issue across the country.
The decision in will be of particular interest among businesses that are facing, or could face a putative class or collective action. Businesses are frequent targets of such suits and lower courts have been permissive in allowing putative class members with differences to obtain certification. The Supreme Court will likely set a uniform standard for tolerance of such differences. A decision is expected by June, 2016 – the end of the next term.
Paula Lopez, June 5, 2015.
On Monday, the U.S. Supreme Court issued its decision in the case EEOC v. Abercrombie & Fitch Stores, Inc., reversing the Tenth Circuit Court of Appeal’s decision holding that Abercrombie could not be held liable on a religious discrimination claim for failure to accommodate. In an 8-1 decision reversing a decision of the Tenth Circuit Court of Appeals, the U.S. Supreme Court made it clear that Title VII requires employers to make efforts to accommodate an applicant or employee’s “religious observance and practice” in employment even in circumstances where the applicant or employee does not expressly request an accommodation if the employer has reason to know that such an accommodation is needed.
The Abercrombie case originated 7 years ago when Samantha Elauf, a 17 year-old applied for a sales floor position with an Abercrombie store in Tulsa, Oklahoma. At the time, Abercrombie had a “Look Policy” in place that detailed what its sales floor people, referred to as “sales models,” could wear. The policy prohibited the wearing of “caps.” Ms. Elauf, who is Muslim and wore a headscarf to the interview, was interviewed by Heather Cooke, the Assistant Manager, and received high ratings in all aspects of her interview evaluation. Her ratings qualified her to be hired. At the end of her interview, Ms. Cooke told Ms. Elauf that she would call her in a few days about orientation. Ms. Elauf’s religion, her headscarf, or the company’s “Look Policy” were never discussed during the interview.
Following the interview, Ms. Cooke wanted to hire Ms. Elauf but was concerned that her headscarf conflicted with Abercrombie’s “Look Policy.” Ms. Cooke eventually spoke to the District Manager to get guidance on whether she could hire Ms. Elauf. In speaking with the District Manager, Ms. Cooke expressed her belief that Ms. Elauf was Muslim and wore the headscarf as part of her religious beliefs. The District Manager told Ms. Cooke that the headscarf violated the company’s “Look Policy” and directed her not to hire Ms. Elauf. When Ms. Elauf did not hear back from Abercrombie she asked a her friend who worked at the store what happened and was told that she was not hired because management said her headscarf violated company policy. Ms. Elauf filed a claim with the EEOC, who then filed a Title VII lawsuit against Abercrombie. The district court ruled in favor of the EEOC, granting it summary judgment on liability and after a trial on damages, awarded Ms. Elauf $20,000.00. The Tenth Circuit Court of Appeals reversed the district court’s decision, placing the burden on the Plaintiff to inform the employer that she has a religious belief or practice that conflicts with the employer’s policy and needs an accommodation. Therefore, because Ms. Elauf never told Abercrombie that she was Muslim and wore the headscarf because of her religion and would need an accommodation, the employer could not be held liable for intentional discrimination.
In reviewing the Tenth Circuit’s decision, the Supreme Court considered the issue of whether Title VII’s prohibition that employers cannot “refus[e] to hire an applicant in order to avoid accommodating a religious practice that it could accommodate without an undue hardship” applies only when an applicant has informed the employer of her need for an accommodation.
The Supreme Court’s decision outright rejected the Tenth Circuit’s reasoning and Abercrombie’s argument that a Title VII plaintiff cannot prevail on a religious discrimination claim if she cannot show that the employer had “actual knowledge” of the individual’s need for an accommodation. Instead, the Court held that an applicant only needs to show that the need for an accommodation was “a motivating factor in the employer’s decision.” The Court went on to explain that “motive” and “knowledge” are separate concepts, stating that an employer who has knowledge about the need for an accommodation would not be liable under Title VII for refusing to hire an applicant if avoiding the accommodation was not a motivating factor in the decision. However, an employer who does not have actual notice of the need for an accommodation based on the applicant’s religious beliefs but suspects that such an accommodation is needed will be liable if avoiding the accommodation is a motivating factor. The facts in this case showed that Abercrombie refused to hire Ms. Elauf because she wore a headscarf even though it had reason to know that she wore the headscarf because of her religious beliefs.
The Court also rejected Abercrombie’s argument that it cannot be held liable for intentional discrimination because it was merely applying a neutral no-caps policy. In doing so, the Supreme Court makes it clear that Title VII requires employers to make accommodations to otherwise neutral-policies when such an accommodation is based on an applicant’s religious practice and/or belief. It is not sufficient to apply a neutral policy across the board; religious accommodations that do not impose an undue hardship are to be given preferential treatment.
The Supreme Court’s ruling makes it clear that employers cannot avoid liability under Title VII by sticking their heads in the sand when it comes to religious accommodations. Instead, employers who suspect that an applicant’s religious practice or belief may conflict with an existing policy have a duty to engage in a dialogue about whether an accommodation is needed. A good practice would be to inform the applicant about the employer’s policy and find out whether the applicant can comply with the policy. This would open the door to a discussion about any needed accommodations without bringing up the individual’s religion.
By: Megan J. Muoio, May 29, 2015
The issue of the minimum wage – whether it should be increased, how, and whether increases should be centered on workers in specific industries – has been in the news lately. In this blog post, several recent developments in the area of the minimum wage in California, New York, and New Jersey will be discussed.
A New Minimum Wage for California?
In California, a state-wide ballot measure aims to increase the minimum wage to $15 by 2021. The ballot measure is being pushed by the SEIU United Healthcare Workers West union, which hopes to put the issue on the ballot for the November 2016 election. If it passes, it would increase the minimum wage for workers in California by $1 per year until it reaches $15. Oakland and San Francisco have already moved to increase the minimum wage for workers in their cities to an amount higher than the current state minimum wage. In Los Angeles, where fifty percent of the work force makes the minimum wage, the City Council recently approved a bill to raise the minimum wage city-wide to $15 per hour by 2020. Quizzically, labor organizers are now lobbying for exemptions for unionized workforces, which would leave them free to negotiate a wage below the minimum wage. A 2014 wage increase for hotel workers (to $15.37 per hour) contains a similar exemption.
A Proposal to Improve Fast Food Workers’ Wages in New York
In New York State, the trend to increase the minimum wage is focused on fast food workers. On May 7, 2015, Governor Andrew Cuomo announced his intention to impanel a Wage Board to recommend an increase in New York State’s minimum wage for fast food workers. Cuomo argued in an op-ed piece in the New York Times that his proposal was meant to overcome delays by the New York State Legislature in taking action to provide a living wage to fast food workers. Focusing on the profitability of the fast food industry in general (and going so far as to call the income gap in the fast food industry “extreme and obnoxious”), Cuomo emphasized that nationwide 52% of fast food workers are on welfare and that New York State pays $700 million per year in public assistance to fast food workers.
A study by the Berkeley Center for Labor Research and Education at the University of California found that three-quarters of people helped by public assistance programs are headed by a low wage worker. Advocates for an increased minimum wage stress that the minimum wage is not a living wage. As illustration, they point to the fact that full time minimum wage workers only earn approximately $16,000 per year, even though the poverty line for a family of 3 is more than $20,000 per year. Nationwide, $153 billion is spent on public assistance to families of low wage workers. As a result, taxpayers are assisting the poor and subsidizing large corporate employers who pay their employees low wages.
In response, the National Restaurant Industry described the proposal as an “assault” on the restaurant industry that would affect new minority and women-owned businesses and restaurants started by those entrepreneurs on the “first rung of the ladder.” Other critics have criticized the proposal for possibly resulting in raised food prices at fast food restaurants, which would affect those restaurants’ customers, many of whom are of modest means themselves. In response, Cuomo countered that McDonald’s manages to pay its workers in Australia $16 per hour and in France more than $12 per hour, without having to raise its prices in order to remain profitable in those countries. Labor advocates have contended that raising the minimum wage will increase consumer spending and improve the overall economy, and point to economic data from minimum wage increases in other cites which did not result in economic disaster. For example, after restaurant associations in San Francisco and Santa Fe predicted disaster for their industries in the face of living wage increases, both cities had lower unemployment rates and higher rates of restaurant growth than neighboring no-living wage cities.
An Effort to Standardize the Minimum Wage in New Jersey
Nine cities in New Jersey have enacted local laws providing paid sick leave for workers, and others have considered raising the minimum wage above the state-mandated $8.38 per hour. The possibility of a patchwork minimum wage – higher in some cities and municipalities than others – with no uniform statewide wage is the subject of proposed legislation in both chambers of the New Jersey State Legislature. Republican lawmakers have proposed a bill that would prohibit local units of government from adopting increased minimum wage or mandatory paid sick leave provisions for private employers. The New Jersey Business and Industry Association supports the legislation and has argued that it would be unreasonably burdensome for businesses to comply with potentially different rules in each of New Jersey’s 565 municipalities. Although it is unclear whether the bills have enough support to make it into law, the legislation likely has the support of Governor Chris Christie, who has opposed Democratic legislator’s efforts to increase the minimum wage state-wide.
Employers would be wise to keep an close watch on the trends in minimum wage laws across the country and monitor how these legislative changes will affect their businesses nationwide.
Nicholas Fortuna, May 27, 2015
The National Labor Relations Board (“NLRB”) Office of the General Counsel issued an Advice Memorandum on April 28, 2015, finding a restaurant franchisor, Freshii Development LLC, and its franchisee are not joint employers. This is an important development in light of the pursuit by NLRB’s General Counsel to establish McDonald’s Corporation as a joint employer with its franchisees.
The Advice Memo found that the franchisor was not a joint employer under both the NLRB’s current joint employer test and a new test proposed by NLRB’s General Counsel in its case against Browning-Ferrris. Currently, companies will be considered joint employers if they ”share or codetermine those matters governing the essential terms and conditions of employment.” According to the Advice Memo, the NLRB”s General Counsel has argued that the test should be whether “the putative joint employer wields sufficient influence over the working conditions of other entity’s employees such that meaningful bargaining could not occur in its absence.” NLRB’s Division of Advice found that the Freshii franchisor did not meet either test, because it did not control, directly or indirectly, the terms and conditions of employment of the franchisee’s employees.
The facts determined the outcome here. Freshii’s franchise agreement expressly disclaims any involvement in the franchisee’s employment or labor relations practices. Freshii’s Operation Manual contains advice on human resources, such as hiring and scheduling employees, how to calculate “labor cost percentage,” and how to project labor costs in scheduling. All of this is considered training and the franchisee is free to not follow the suggestions of the franchisor. The franchisor does not monitor the employees. The franchisee exclusively decides who to hire, wage increases, wage decreases, or any other change of benefits.
This case is distinguished from the McDonald’s Corporation joint employer action brought by the NLRB in that McDonald’s monitors the franchisee’s employees through a software system. Under the standard proposed in the McDonald’s cases and the case pending against Browning-Ferris Industries of California, the NLRB would examine the “totality of circumstances, including the way that separate entities have structured their relationship,” to determine if the proposed joint employer wields enough influence over the terms and conditions of the other entity’s employees such that meaningful collective bargaining between the franchisee and its employees could not take place. This is referred to as the “industrial realities” test. The outcome of Browning-Ferris and the McDonald’s cases will shape the standard for the future of when a company is considered a joint employer.
The importance of the Freshii decision is that a restaurant franchisor’s requirements regarding food preparation, recipes, menu, uniforms, décor, store hours, and initial employee training prior to a franchise opening are not evidence of control over a franchisee’s labor relations. Rather, it recognizes the franchisor’s legitimate interest in protecting the quality of its product and brand. Whatever the joint employer standard is in the future, the franchisor will still be able to protect its interests without becoming a joint employer.
Diana Uhimov, May 22, 2015
On May 10, 2015, Governor Andrew M. Cuomo announced that he would enact emergency measures to combat the wage theft and workplace safety hazards faced by the thousands of people who work in New York State’s nail salon industry. The new rules come after a series of New York Times articles brought to light the working conditions and potential health risks suffered by nail salon employees who are often times immigrants with a high language barrier and unaware of their rights. The articles exposed widespread labor law violations including underpayment and nonpayment of wages, discrimination, verbal and physical abuse, as well as exposure to dangerous chemicals because of inadequate safety measures. At one salon, new employees must pay $100 to work, then work unpaid for several weeks, before they are started at $30 or $40 a day. A manicurist at another salon earned about $200 for each 66-hour workweek, amounting to approximately $3 per hour. But on snowy days, she would receive nothing. Even more horrifying are reports of repeated miscarriage, birth defects, breathing problems, and skin conditions among manicurists. New York State acted quickly and aggressively to tackle the uncovered exploitation of salon workers, in accordance with its longstanding labor law enforcement practices.
A multiagency task force has been instituted to immediately begin conducting investigations of individual salons, and establish new safety rules that salons must follow to protect manicurists both from chemicals and contagious skin conditions. According to the U.S. Occupational Safety and Health Administration, there are potentially dangerous chemicals in nail polishes, glues and other materials used by manicurists, including formaldehyde which can cause cancer. Key features of the new safety regulations include: protective equipment, such as gloves and face masks, that each work station be equipped with personal fans, and that adequate ventilation be provided.
The emergency measures also aim to address unlawful wage practices reported to be commonly engaged in by nail salon owners such as, paying workers below minimum wage, not at all, or even charging money for a job. Educational outreach efforts designed to apprise workers of their state law rights are included in the measures to encourage manicurists to report any abuses, regardless of their immigration status. Governor Cuomo’s office has ensured that the agencies involved in the task force will not inquire about workers’ immigration status as part of their investigations. As part of the new measures, salons will be required to post signs concerning workers’ rights in multiple languages. Also, as a means for providing an enforcement mechanism capable of covering claims for unpaid wages, nail salons will have to secure a bond or an additional insurance policy as part of their licensure. Nail salons that do not comply with orders to pay their workers back wages, or are unlicensed, will face penalties such as license revocation, fines and even business shutdowns.
Workers can file wage claims with the Department of Labor or file an action in court. In fact, two manicurists have already filed a class action in the Federal Court of the Southern District of New York, in the case Fernandez et al v. Nailsway Inc. et al. The action was filed against nail salons located in Manhattan’s Upper East Side neighborhood. The complaint, filed on behalf of 40 employees, alleges that the salons paid their employees a flat daily rate in cash every week which did not amount to minimum wage, failed to pay overtime, and did not permit their employees to take meal or rest breaks.
The increased publicity of nail salon practices, combined with workers learning that they may be entitled to additional wages will create incentives for filing claims, just as wage and hour claims in the restaurant industry increased after similar coverage over the industry’s wage practices. Although many workers are undocumented and are hesitant to file lawsuits out of fear of exposing themselves to the authorities or jeopardizing their employment, an upswing in litigation is predicted as this new information reaches immigrant communities.
The NY State Health Department will analyze and make findings about the most effective safety practices needed in nail salons in order to put in place permanent safety rules, which may differ in scope from the current emergency measures. Employers are advised to maintain proper records and review their employment practices to ensure compliance with wage and hour laws and OSHA requirements, as increased agency investigations can often lead to enforcement actions and/or litigation.