Allyn & Fortuna LLP
Nicholas Fortuna, November 24, 2014.
Claims that employers are not properly paying their employees for over-time or otherwise complying with federal and state wage and hour laws have risen to dizzying heights. The Federal Labor Standards Act (FLSA) requires employers to pay employees over-time at the rate of one and one-half their regular hourly rate for each hour worked over 40 hours in a given week. In addition, an employee is entitled to an extra hour of pay for each day that employee works 10 or more hours even if the total hours for that work week do not exceed 40. There are certain exemptions. Management and administrative personnel are not entitled to over-time pay. Many of the claims brought are for wrongfully classifying employees as exempt. The FLSA gives the employee a private right of action that allows him to sue on his own behalf as well as other employees similarly situated. This is considered a collective action under section 216(b) of the FLSA.
A collective action differs from a class action in that collective actions under FLSA require putative class members to opt into a case, while no such requirement exists for class actions. The FLSA specifically provides that “no employee shall be a party to any such action unless he gives his consent in writing to become a party and such consent is filed in the court in which the action is brought.” These opt-in employees are party plaintiffs, unlike unnamed class members in a class action. Once an action is brought as a collective action, the district court must certify it in order for it to proceed as a collective action.
To be certified as a collective action, the employees bringing the action are required to demonstrate they are similarly situated. There is no statutory guidance as to what is required to be similarly situated. A majority of the courts use a two-stage process to determine whether those that opted in meet the requirements.
In the first stage, known as the notice or conditional certification stage, the court determines if notice of the action should be issued to potential plaintiffs and if the action should proceed initially as a collective action. The court looks to see if at this stage the plaintiff(s) are able to make a threshold showing that the members of the proposed collective action are similarly situated. Courts generally require little more than substantive allegations supported by declarations or discovery that the plaintiffs and putative members are similarly situated. If the court conditionally certifies the collective action, potential plaintiffs are given notice of the action and the opportunity to opt-in.
The second stage of certification typically occurs at the end of discovery. The defendant(s) will most likely file a motion requesting that the court decertify the action. At this juncture, the court uses a more stringent standard to determine if the opt-in plaintiffs are similarly situated than previously used to determine if the action should go to trial as a collective action. Courts will generally consider three factors in deciding if the plaintiffs are similarly situated: (1) the disparity or similarity of the factual and employment settings of the individual plaintiffs, (2) the various defenses available to the defendant and whether those may be asserted collectively or individually as to each plaintiff, and (3) fairness and procedural considerations.
As to the first factor, the plaintiff must establish that their factual claims and employment backgrounds are sufficiently similar to warrant collective treatment. The courts will consider job duties, geographic locations, employer supervision, compensation, and whether a common employer policy, practice or plan allegedly violates the FLSA.
Looking at the second factor, the more a defendant’s defenses are general in nature and apply to the entire class, the more likely the action will be certified to proceed as a collective action. Conversely, the more the defendant’s defenses are individualized to each plaintiff, the more likely decertification is warranted.
The third factor has courts consider whether it is fair to both sides and procedurally feasible to adjudicate the action collectively. In the end, courts lean toward allowing collective actions to proceed.
The downside of collective actions for employers: plaintiff’s counsel will seek access to employees’ names and contact information for use to build a bigger case; notice will be distributed to putative class members as required by the court; word of the case will spread through social media and may attract union interest; the press may publish stories about the case; and there is an increased cost of defense.
The news is not all grim for employers: opt-in rates are generally low; other plaintiffs’ attorneys are discouraged from looking for similar cases because someone beat them to the courthouse; there is always the option of trying to get the action decertified if enough differences can be demonstrated among the plaintiffs.
Paula Lopez, November 14, 2014.
The National Labor Relations Board (NLRB) has a reputation of issuing decisions that afford employees the right to engage in unfettered social media activities and place employers in a precarious position for routine disciplining of workers for violations of company policy on social media. However, the NLRB’s recent ruling in favor of an employer upholding its rescission of an offer to hire back two employees based on a Facebook conversation encouraging insubordination and misconduct establishes that there are limits to what employees can post on social media sites even when they are engaging in concerted activity.
The case Richmond District Neighborhood Center and Ian Callaghan involves an employer who operates a teen center in San Francisco providing after school activities to students. In May 2012, an end of the school year employee meeting was held during which management asked employees to list the pros and cons of working at the teen center. After the meeting, several employees noticed that management had reacted negatively to their comments. Ian Callaghan, an activity leader and Kenya Moore, a program leader, requested a follow-up meeting but their requests were ignored.
It is customary in the summer for Richmond to send employees it wants to rehire for the upcoming school year rehire letters. In July 2012, Richmond sent Callaghan and Moore rehire letters. Moore’s rehire letter reflected a demotion from program leader to activity leader based on a negative performance rating she received from her summer supervisor. In August 2012, prior to starting work at the teen center, Callaghan and Moore exchanged messages on Facebook that discussed their plans for working at the teen center as well as lengthy statements describing planned insubordination. Some examples of the posts include:
Callaghan: “I’ll be back but only if you and I are going to be ordering shit, having crazy events at the Beacon all the time. I don’t want to ask permission, I just want it to be LIVE. You down?”
Callaghan: “…Let them do numbers, and we’ll take advantage, play loud music, get artists to come in and teach the kids how to graffiti up the walls and make it look cool, get some good food. Let’s do some cool shit and let them figure out the money. No more Sean. Let’s fuck it up. I would hate to be the person takin your old job.”
Moore: “Im glad im done with that its to much and never appreciated sO we just gobe have fuN dOin activites and the best part is WE CAN LEAVE NOW hahaha I AINT NEVER BE THERE even thO shawn gone its still hella stuck up ppl there that dont appreciate nothing.”
Callaghan: “You right. They dont appreciate shit. Thats why this year all I wanna do is shit on my own. have parties all year and not get the office people involved. just do it and pretend they are not there. i’m glad you arent doing that job…”
Moore: “…dont ask me nothing abOut the teen CenTer HAHA we gone have hella clubs and take the kids ;)”
Screen shots of Callaghan’s and Moore’s Facebook discussion was shown by another teen center employee to management. After learning about the posts Richmond rescinded their rehire letters. Callaghan filed an unfair labor practice charge against Richmond with the NLRB claiming that the Facebook discussion was protected concerted activity.
An administrative hearing was held during which the administrative law judge considered whether the posts were “protected concerted activity” and whether the teen center’s decision to rescind the rehire letters violated the National Labor Relations Act (NLRA). In pursuing the charge, general counsel’s office for the NLRB argued that the posts were an extension of the comments made by the employees’ during the May 2012 meeting. While the ALJ agreed that the May 2012 comments made by Moore and Callaghan during the meeting and the work place complaints included in the Facebook discussion constituted concerted activities, the discussion was not protected under the NLRA because of the egregious nature of the comments in promoting insubordination and violations of established rules and policies. In reaching this decision, the ALJ focused on the harmful nature of the comments in expressing the employees’ intended refusal “to obtain permission as required by the Respondent’s policies before organizing youth activities”, a disregard of “specific school-district rules” about loud music and graffiti on walls, as well as their intent to undermine leadership and neglect their duties. In light of the detail and magnitude of the insubordination discussed in the comments, the ALJ found that Richmond’s decision to rescind Callaghan and Moore’s rehire offers was reasonable because an employer is “not obliged to wait for employees to follow through on the misconduct they advocated” before taking action.
Section 7 of the NLRA protects both union and non-union employees from unlawful employment actions when they are engaging in activity and communications related to the terms and conditions of their employment. In affirming the ALJ’s decision in Richmond, the NLRB made it clear that employees’ expansive rights to engage in concerted activity through social media have limits. Comments indicating an intent to engage in insubordination and encouraging violation of policies, even when they are made amidst complaints about working conditions, will not be protected as concerted activity under Section 7 of the NLRA. Further, the Richmond decision illustrates that employers are not powerless when it comes to protecting their business against employee threats of insubordination and misconduct, even when they are made through social media.
Diana Uhimov, November 5, 2014.
On Oct. 9, the Second Circuit sided with Fujifilm Medical Systems USA Inc. in Weber v. Fujifilm Medical Systems USA Inc., et al., an employee discrimination case brought by John J. Weber, former executive vice president. Weber alleged he was fired because he was not Japanese, in violation of Title VII of the Civil Rights Act’s prohibition on discrimination in employment based on race and national origin. The court ruled that Fujifilm could use “after-acquired” evidence, or evidence of the employee’s misconduct during the period of employment that was found after the employee was discharged for another reason, to confirm nondiscriminatory grounds for the termination.
The appellate court’s opinion explores the rare question of the after-acquired evidence doctrine in employment discrimination cases. There are few rulings that pertain to the application of after-acquired evidence in determining damages and liability for discrimination. Case law has developed to allow employers to use evidence of misconduct discovered after discharge to significantly limit potential damages that the employee may obtain, even if the employer has been found liable for discrimination.
Thus, if an employer can show that they would have discharged the individual at a particular point in time after the misconduct came to light, then that could curtail damages, such as back pay, from the point the employee misconduct is discovered. The evidence can also preclude certain remedies altogether, such as front pay and reinstatement. Because of this powerful limit on damages, when an employer discovers evidence of misconduct that would have led to an employee’s termination during the course of a lawsuit, settlement discussions are often forthcoming.
Fujifilm asserted that it terminated Weber for mishandling the company’s finances. It sought to prove that his firing was not motivated by discrimination by using evidence of misconduct discovered after Weber was fired. Weber appealed to the Second Circuit after a jury found that Fujifilm was not liable for discrimination. He argued that the after-acquired evidence was not properly admitted in to evidence. However, the Second Circuit upheld the lower court’s decision to admit evidence regarding irregularities in a financing agreement that Weber was involved in while working for the company, for the limited purpose of demonstrating the truth of the non-discriminatory reason for the termination decision.
The court relied on a 1995 U.S. Supreme Court ruling in McKennon v. Nashville Banner Publishing Co. In McKennon, the employee, who claimed her termination violated the Age Discrimination in Employment Act, admitted to removing confidential company documents to protect her position. As a result of her wrongdoing, the company argued that it should not be held liable for discrimination, despite conceding that the employee’s age was a factor in letting her go, because it would have nevertheless fired her for taking the documents. Although the Court held that after-acquired evidence could not fully shelter the employer from liability, it could be considered with respect to damages. Weber has expanded the after-acquired evidence doctrine by allowing such evidence to be admitted to support an employer’s defense to a wrongful discharge claim.
To avail themselves of this potent limit on damages and potentially liability, employers must prove that the employee’s wrongdoing was so extreme that they would have been fired if the company had known about the conduct. Employers may have to demonstrate that they fired another employee for a similar type of misconduct, or that the behavior violated a company policy that would have resulted in the individual’s termination. This makes company policies on prohibited employee conduct essential.
Paula Lopez, October 16, 2014.
Last week, in the case Integrity Staffing Solutions v. Busk, the U.S. Supreme Court heard argument on whether warehouse workers are entitled to overtime pay for time spent waiting to pass through employer mandated security checks after they had already clocked out for the day. The plaintiffs were former warehouse workers in Nevada employed by Integrity Staffing Solutions, Inc. a company that provides warehouse space and staffing to Amazon.com and similar clients. The plaintiffs worked in two warehouses in Nevada as hourly employees filling orders placed by customers of Amazon.com. Company policy required that all warehouse workers pass through security checks prior to exiting the building. The security checks took place after the employees had clocked out for the day, and required employees to remove their jackets, belts, and shoes, empty their pockets and pass through metal detectors. The plaintiffs alleged that the security checks lasted up to 25 minutes.
Under the Fair Labor Standards Act (FLSA), employees are guaranteed compensation for all work or employment they engage in that is covered by the act. However, the statute never defines what constitutes “work” for which an employee is entitled to be paid. Following its enactment, a string of court decisions broadly defined “work”. In the 1944 case Tennessee Coal, Iron & R. Co. v. Muscoda, the Supreme Court held that the time spent traveling from the portal of a mine to the working area underground was compensable under the FLSA. Then in the 1946 Supreme Court decision Anderson v. Mt. Clemens Pottery Co., the Court held that the entire time that the employee is required to be on the employer’s premises is compensable. This included time spent walking from the time clock to their work stations.
The decisions in Tennessee Coal and Mt. Clemens led to such an avalanche of cases being filed under the FLSA for overtime claims that Congress amended the FLSA by passing the Portal-to-Portal Act of 1947. The Portal-to-Portal Act narrowed the FLSA’s coverage by creating categories of activities that do not constitute compensable work: (i.) walking, riding or traveling to the place where the employee is to perform the principal activity of his or her job, and (ii.) activities that are preliminary and postliminary to the employee’s job. Under the Portal-to-Portal Act, activities generally done before or after an employee’s principal activities are completed would not be compensable under the FLSA. As a result, the Supreme Court established a general test for determining whether certain preliminary or postliminary activities are of a nature that should be compensable. Under this test, an activity that is “integral” and “indispensable” to a principal activity is compensable under the FLSA even if it is performed prior to or subsequent to the employee’s regular shift.
The case of Integrity Staffing came before the Supreme Court following a decision from the Court of Appeals for the Ninth Circuit, reversing the dismissal of the plaintiffs’ claims for overtime pay for time spent waiting to undergo security checks. The district court had granted Integrity’s motion to dismiss the plaintiffs’ claims for failure to state a claim because it held that the time spent passing through security screenings fell into the category of a “postliminary” activity that is non-compensable under the Portal-to-Portal Act. However, the Ninth Circuit held that the security screenings were for the employer’s benefit because they were intended to prevent theft. Therefore, even if they were “postliminary” activities, they were “integral” and “indispensable” to the employees’ principal work activities. The federal government supports Integrity’s position that security checks are simply part of the egress process and the time is not compensable.
During oral argument, Integrity and the federal government argued that the security screenings at issue are akin to punching out at the end of the day and constitute “postliminary” activities excluded from the FLSA by the Portal-to-Portal Act. Plaintiffs’ counsel argued that the security screening is an additional task required by the employer and benefited only the employer by preventing theft, making it a principal activity for which employees should be paid. To establish that the security checks at issue are not merely part of the ingress and egress process covered by the Portal-to-Portal Act, Plaintiffs’ counsel pointed out that the security screenings occurred after the employees had punched out for the day.
The Justices, in an effort to expound on what is “integral and indispensable” to an employee’s principal work activity, presented each side with hypotheticals that pressed counsel for both parties and the government to concede instances of postliminary and preliminary activities that would and would not be compensable. Some of the hypotheticals included whether law clerks required to come in early to cut grapefruit and make a judge’s breakfast should be compensated for that time, or whether casino workers, bank tellers or employees working cash registers should be compensated for the additional time spent in reporting to management at the end of their shifts as part of an enhanced close out process intended to prevent theft. Plaintiffs’ counsel took the position that each of the activities is compensable. (Counsel for the government conceded that law clerks should be compensated for the time spent cutting grapefruit). Meanwhile, Integrity’s counsel took the position that the additional time spent by casino workers, bank tellers, and register workers was a closer case for compensable time than that of the warehouse workers going through security screenings. What also appeared to catch some of the Justices’ attention is the amount of time involved in passing through the security checks and whether Integrity could have taken steps to significantly reduce the duration by staggering shifts or hiring additional security checkers.
Integrity affords the Court another opportunity to provide clarity over which activities are an “integral” and “indispensable” part of an employee’s principal work activities, compensable under the FLSA even if they are performed before the shift starts or after it ends. In January 2014, the Court addressed the issue of what constitutes “changing clothes” in Sandifer v. United States Steel Corp., and held that the extra time spent at the work place to put on and take off protective gear was not compensable because the FLSA excludes from the compensable workday time spent changing clothes. The Court held that the items at issue fell within the definition of “clothes” excluded under the FLSA. Important to the Court’s holding was that the time involved in donning the protective gear was de minimis. In deciding Integrity, irrespective of how the Court rules, the decision will provide desperately needed clarity as to what activities constitute compensable “work” under the FLSA. A decision is expected within the next few months.
By: Megan J. Muoio, October 8, 2014
The Equal Employment Opportunity Commission (EEOC) continued its recent aggressive advocacy on behalf of employees by filing suit against two employers, claiming that the employers terminated employees because they were transgender. The suits are the first lawsuits ever filed by the EEOC alleging sex discrimination against transgender individuals under Title VII of the Civil Rights Action of 1964. These lawsuits comport with the EEOC’s Strategic Enforcement Plan for 2012, which expressly seeks to expand lesbian, gay, bisexual and transgender coverage under Title VII sex discrimination provisions.
The first case, EEOC v. R.G. & G.R. Harris Funeral Homes, Inc., was brought in the United States District Court for the Eastern District of Michigan, Southern Division. In the complaint, the EEOC alleges that employee Amiee Stephens was employed by the defendant as a funeral director/embalmer since 2007. She was terminated in 2013 when she disclosed to the defendant that she would be transitioning from male to female. The defendant allegedly stated that the reason she was fired was because her proposed transition was “unacceptable.”
The second case, EEOC v. Lakeland Eye Clinic, P.A., was brought in the United States District Court for the Middle District of Florida, Tampa Division. In the complaint, the EEOC alleges that the defendant hired Brandi M. Branson (who then presented as male) as its Director of Hearing Services in 2010. Sometime in 2011, Branson began presenting as a woman in her clothes and makeup. As a result, the defendant’s other employees ostracized Branson and the defendant stopped referring patients to Branson, effectively destroying her practice. The defendant eventually terminated Branson in June 2011, claiming that it was closing the Hearing Services division. In actuality, the defendant continued the division and replaced Branson with a male employee.
The recent lawsuits are based on the EEOC’s decision in Macy v. Holder, an appeal that was heard and decided by the full Commission in 2012. That case was brought by Mia Macy, an applicant for a position at a crime laboratory operated by the Bureau of Alcohol, Tobacco, and Firearms (ATF). At the time that she first discussed the position with the director of the lab, Macy presented as a man. The director assured Macy that the position was hers and she started the background check procedure to secure the position. Before being officially awarded the job, however, Macy informed the lab that she was in the process of transitioning from male to female. Shortly after, Macy was informed that the position had been eliminated due to federal budget restrictions.
Macy then filed a formal complaint with the EEOC in which she stated the basis for her complaint was “gender identity” and “sex stereotyping.” The EEOC accepted the complaint on the basis of sex discrimination but informed her that the EEOC was not empowered to address Macy’s claims for gender identity and sex stereotyping. Macy appealed the determination and was successful in forcing the EEOC to accept her claims regarding discrimination based on her status as a transgender individual. In determining the appeal, the full EEOC held that discrimination based on gender identity – specifically, one’s status as a transgender individual – falls under the category of discrimination on the basis of sex under Title VII of the Civil Rights Act of 1964. The EEOC cited decisions from the Sixth and Eleventh Circuit Courts of Appeal, which have held that sex discrimination encompasses not only discrimination on the basis of biological sex, but also stereotyping based on gender expectations or norms. In this manner, discrimination against an individual who is transgender is discrimination related to the individual’s sex, whether the discrimination is based on the employee’s non-stereotypical gender expression or the employee’s transition from one gender to another.
In attempting to broaden the ruling of Macy v. Holder, which applied to federal employees, to all employees covered by Title VII, the EEOC is signaling to employers that it will lead the vanguard in pursing the rights of transgender individuals. Issues surrounding transgender individuals in the workplace are increasingly prevalent and the pace of litigation over transgender employee rights is only going to increase as this issue continues to come to prominence. It is likely that we will see an increase in claims made to the EEOC and to local agencies, as well as new state and local laws and regulations protecting transgender employees. Employers would be wise to remain current on these changes and be prepared to review their employment policies, procedures, and training in light of new developments as they occur.