Business Litigation Perspectives - Insights & Commentary on Business Legal Issues

Employers expecting to have to post new notices of employee rights in the workplace can breathe a sigh of relief. On April 17, 2012, the U.S. Court of Appeals for the District of Columbia issued an injunction delaying the effective date of the National Labor Relations Board’s Final Rule requiring most employers to post a notice of employee rights in their workplaces. The Final Rule, previously scheduled to take effect on April 30, 2012, has now been postponed indefinitely due to conflicting opinions issued by several federal district courts.

Judge Amy Berman Jackson of the U. S. District Court for the District of Columbia issued a ruling on March 2, 2012, that upheld the NLRB’s authority to enact the Final Rule but invalidated the primary enforcement mechanisms. However, on April 13, 2012, Judge David C. Norton of the U.S. District Court for the District of South Carolina struck down the Final Rule in its entirety in Chamber of Commerce v. NLRB, No. 2:11-cv-02516-DCN. Judge Norton held that by enacting the Final Rule, the NLRB exceeded its statutory authority in violation of the Administrative Procedure Act.

As a result of the conflicting opinions, the D.C. Circuit enjoined the enforcement of the Final Rule pending appeal. NLRB Chairman Mark Gaston Pearce expressed the Board's opposition to the order but confirmed that all regional offices have been directed to comply with the injunction. The D.C. Circuit ordered an expedited briefing schedule and directed the court clerk to schedule oral argument in September.

Stay tuned... 

Streaming music or videos while at work might be becoming a thing of the past.  With more and more employees clogging up the Internet while at work, companies are shutting off streaming sites or limiting access.

Companies such as Proctor & Gamble, GE Aviation, and Major League Baseball have all taken steps to block or limit their employees' access to sites that use large amounts of bandwidth.  Sites such as Netflix, Pandora, and YouTube use such large amounts of bandwidth that they have the practical effect of shutting down business servers.  The problem can be so severe that even adding additional servers is not enough to fix the problem. 

With new sites popping up everyday and more and more apps becoming available, company policies have to change just as quickly to keep up with the ever-changing technology.  The reality of today's business is that most companies do or should have an Internet usage policy in addition to having social media and computer software and usage policies.

Most policies remind employees that when it comes to the Internet and computer usage, their privacy rights will be limited.  A good policy should also limit such usage for business purposes only and to the extent it is permitted, it should only be used during an employee's lunch or other break period.

Ah, spring is in the air and summer is just around the corner.  What does that mean?  Summer internships of course.

With every upcoming summer, certain businesses must assess their needs for summer interns and ultimately make a decision whether to hire them.  For interns, this experience can be invaluable.  It allows individuals to fill gaps in their resumes, gain experience in a particular industry, make business contacts, and sometimes find gainful employment.

For businesses though, deciding whether to hire an intern can sometimes be difficult.  As I discussed last year, this decision can be especially difficult if the internship is going to be unpaid because there are strict laws that must be followed in order for the unpaid internship to be lawful.  Making matters worse, last year, the Department of Labor decided to start cracking down on unpaid internships, which didn't make the decision to hire interns any easier. 

This year, as reported by Paul Davidson, many employers are doing away with such unpaid internship programs in the wake of the crack down and recent lawsuits that have been filed.  For example, last month, an unpaid intern sued Harper's Bazaar claiming that she was forced to do work that was normally done by a paid fashion assistant.  Fox Searchlight Pictures was also sued by interns who claimed that they performed work that was customarily done by paid employees.

So, if you are in business and looking to hire an intern this summer, what does this mean? You just need to exercise caution in hiring especially if the internship is going to be unpaid.  If you question whether the internship meets the criteria set forth by the Department of Labor that probably means the intern should be paid.  In the end, paying an intern even minimum wage will certainly be cheaper than defending your business in a lawsuit.

Once again, it is open season at the U.S. Supreme Court. Among the many interesting cases heard and just decided by the Supremes this term is an employment/school law case that places federal employment discrimination law and freedom of religion squarely at odds. The case is Hosanna-Tabor Evangelical Lutheran Church and School v. Equal Employment Opportunity Commission et al. and it involves a former teacher at the church school who was fired after she went on disability leave due to narcolepsy, a sleep disorder that causes excessive sleepiness and frequent daytime sleep attacks.

The teacher (who was considered a “called” teacher and a minister at the church) filed a charge with the EEOC, claiming that she was fired in violation of the ADA.  Invoking what is known as the “ministerial exception,” the church argued that the suit was barred by the First Amendment because the claims concerned the employment relationship between a religious institution and one of its ministers.

The trial court agreed and granted summary judgment in the church’s favor. The Sixth Circuit Court of Appeals vacated and remanded. It recognized the existence of a ministerial exception rooted in the First Amendment, but concluded that the teacher did not qualify as a “minister” under the exception.

The Supreme Court reversed. It found that the Establishment and Free Exercise Clauses of the First Amendment bar suits brought on behalf of ministers against their churches, claiming termination in violation of employment discrimination laws. The lower court held that the teacher wasn’t really a minister, but the Supremes disagreed.

The church held her out as a minister, with a role distinct from that of most of its members. Her title (“Minister of Religion, Commissioned”) represented a significant degree of religious training followed by a formal process of commissioning.  The teacher also held herself out as a minister by, for example, accepting the formal call to religious service.  Her job duties reflected a role in conveying the church’s message and carrying out its mission. As a source of religious instruction, the Supreme Court found that the teacher played an important part in transmitting the Lutheran faith.

The Court's opinion specifically states that it expresses "no view" on whether the ministerial exception bars other types of suits against religious employers, including actions by employees alleging breach of contract or tortious conduct by their religious employers.

The decision really isn’t that surprising given the Court’s generally pro-church rulings in land use, school law and other areas in which religion and state conflict. However, one can certainly question the consistency of the Court’s rulings, in light of the church voucher decisions and other rulings that have extended financial and other government-paid benefits to churches and other religious organizations.

Effective January 1, 2012, just in time for the new year, Florida's minimum wage will increase again up to $7.67 per hour.  Florida's current minimum wage, which has been in effect since June 1, 2011, is $7.31 per hour.

For all employees who receive tips, minimum wage will also increase.  The hourly wage for tipped employees will increase to $4.65 per hour up from $4.23, which is equal to the minimum wage ($7.67), less the tip credit ($3.02).

These increases are the result of a 2004 amendment to Florida's constitution which created Florida's minimum wage.  The 2012 increase is based on the percentage change of the federal Consumer Price Index for Urban Wage Earners and Clerical Workers in the south region for the twelve-month period to September 1, 2011.

Since federal law requires employers to pay employees the higher of the federal or state minimum wages, Florida's minimum wage will prevail over federal minimum wage.

Florida employers need to be mindful of these changes and to remember to replace their minimum wage posters.

For further information see Florida's Department of Economic Opportunity's website.

Several months ago, my colleague wrote a post about CareerBuilder.com's annual list of the most unusual excuses for calling in sick.  And today, there should be a new number one.

Scott Bennett of Pennsylvania, published a fake obituary for his living mother to get some additional time off work.  Apparently, Bennett did not want to get fired from his job for taking the time off work so he wrote an obituary for his living mother, which was later published.

After publication, several relatives called the paper to say that Bennett's mother was alive and well.  Bennett's mother also visited the paper confirming her status among the living.  The editor accepted the obituary after being unable to confirm the funeral arrangements at press time. Bennett has now been fired and charged with disorderly conduct.

While Bennett certainly deserves an A+ for originality, he gets an F for honesty and professionalism.  Given that most employment is at-will, meaning an employee can be fired for a good reason, a bad reason, or no reason at all, so long as there is no unlawful motive for the termination, Bennett learned an important lesson that while creativity may be appreciated when it comes to your work product, it is not appreciated when it comes to your work excuse absences.

Back in June, we blogged that the U.S. Supreme Court had thrown out a discrimination lawsuit filed on behalf of 1.5 million Wal-Mart female employees.  That lawsuit alleged that the retail giant had systematically discriminated against women in pay and hiring decisions.  However, the Court ruled that the case could not go forward as a class-action because the plaintiffs could not show that Wal-Mart had a common policy of discriminating against women. 

Wal-Mart's victory was short-lived, as last week two more gender discrimination lawsuits were filed against Wal-Mart-one in California and the other in Texas.  The new filings confine their respective allegations to female workers in each of the two states.     

The California lawsuit was the first to be filed.  The proposed class of plaintiffs in the California federal court filing approximates 90,000 current and former female employees.     

Like the California action, the Texas lawsuit alleges that Wal-Mart paid women lower wages for similar work and kept them from being promoted to managerial positions.  The proposed class of plaintiffs in that action exceeds 45,000 women. 

It is anticipated that these latest complaints are the beginning of a number of similar cases that will be filed against our nation's largest retailer in the months to come.  The new class of plaintiffs are optimistic, fueled by the fact that the Supreme Court did not rule on the merits of their action, only the technicalities of class certification.

Among other relief, the recent lawsuits seek class certification, monetary damages, punitive damages, and an injunction against continued unlawful discriminatory practices.  It is expected that these cases will rely upon information and statistical evidence of a pattern of discrimination, not considered by the U.S. Supreme Court.  

Greg Rossitier, a Wal-Mart spokesman, calls the lawsuits "groundless," stating that the claims are unsuitable for class treatment.  The proposed classes are "no more appropriate than the class the Supreme Court rejected," he said, adding further that "Wal-Mart is a great place to work."                                  

Termination letters have been sent to some 34 Hertz employees.  Twenty-six of the employees are Somali Muslims who drive the company's rental cars to and from the Seattle-Tacoma International Airport for cleaning and refueling.  The basis for the termination letters is that these employees have refused to consent to a clock out agreement for daily breaks.

According to press reports, some Hertz employees were taking daily breaks but not clocking out before the breaks were taken.  Hertz, which claims that these workers were violating provisions of a collective bargaining agreement with the EEOC, states that some of the workers were taking more than the allotted 10 minutes.  Apparently, the workers receive 2 paid 10 minute breaks during a regular 8 hour shift.

While some of the drivers have signed the agreement and returned to work, for those who have refused to sign the agreement, the union has filed an unfair labor practices with the NRLB and religious discrimination charges with the EEOC.  The union spokesman, Paul Zilly stated that if Hetz believed some employees were abusing the break policy, those employees should have been dealt with on an individual basis.

These claims will ultimately center around the dueling agreements.  On the one hand, there is the union agreement, which apparently permits the workers to take 2 ten minute breaks per 8 hour shift without clocking out.  On the other hand, there is Hertz' agreement with the EEOC, which apparently requires the workers to clock out.  Which agreement will prevail? It's hard to say, but it is clear that there is definitely a breach of one of those agreements.

As for the religious discrimination charges, they might have merit if the drivers can show that the facially neutral rule disproportionately affects the Somali Muslims.  According to Hertz, it has been accommodating to the religious needs of its workers and has even set up a prayer room for them.  While the new rule certainly doesn't prohibit the workers from praying, the workers will have an uphill battle trying to establish that Hertz was acting in a discriminatory manner when it enacted the rule.

The employment law litigation community has been abuzz with chatter in the past few weeks since the Eleventh Circuit Court of Appeals issued its order in Dionne v. Floormasters, 647 F.3d 1109 (11th Cir. 2011).  The Court’s decision in Dionne seems to provide employers with a mechanism through which they can minimize their exposure to attorney’s fees in unpaid overtime cases.  The decision, while intriguing from an academic perspective, leaves the practitioner to ponder the ruling’s practical value to large employers facing claims for substantial damages.

The Plaintiff in Dionne filed an action in federal district court seeking to recover overtime compensation, liquidated damages, and reasonable attorney’s fees and costs.  Floormasters, in defending the case, made a strategic move to pay the amount Plaintiff claimed he was owed and then moved to dismiss the case.  The court dismissed the case and allowed Plaintiff’s counsel 30 days to file a motion for attorney’s fees. 

Plaintiff’s counsel filed his motion for attorney’s fees within the 30 day deadline, claiming Plaintiff was entitled to fees pursuant to the FLSA’s prevailing party provision.  Defendant maintained that an award of attorney’s fees was improper as Plaintiff was not a prevailing party.  Both the district court and the Eleventh Circuit Court of Appeals agreed with Defendant, and denied Plaintiff’s claim for attorney’s fees.

At first blush, the Dionne opinion seems to provide protection for employers against exposure for prevailing party attorney’s fees that potentially accompanies any FLSA claim for unpaid overtime.  It also allows the employer to minimize the cost of litigation while making a business decision to effectively settle claims early in the litigation process. 

However, a deeper look leaves the employment law practitioner wondering if this ruling can be practically applied to larger, multi-plaintiff claims for substantial back-pay, which in many cases, could prove meritless.  It seems impractical for employers faced with meritless claims of any substantial value to offer plaintiffs their asking price in an effort to render an FLSA claim moot, therefore avoiding prevailing party attorney’s fees.  An employer utilizing this practice not only runs the risk of paying plaintiffs monies they are not entitled to, but also sets a potential precedent that they, as a business entity, can be easily extorted through frivolous lawsuits.

While the Dionne ruling certainly provides employers with the ability to make legitimate business decisions when faced with unpaid overtime wages of a relatively insignificant value, it will likely prove impractical for the employer faced with claims for substantial damages.

In the recent years, wellness programs have become increasingly popular among employers, but along with that popularity has come quite a few pitfalls. Compliance with the law is always an issue for employers so why should employer sponsored wellness programs be any different?  Well, they're not and navigating through laws such as the ADA, HIPPA, GINA, and the Affordable Care Act can be a cumbersome task especially when applied to these programs.

Generally, the ADA prohibits employers from requiring employees to undergo a medical examination or answer medical inquires; however, an important exception exists for wellness programs that are deemed voluntary.  A wellness program will only be considered voluntary if it neither requires participation or penalizes employees who don't participate.

But, when is a wellness program voluntary? Wellness programs almost always include some sort of financial component where, for example, an employee can receive a discount on their health insurance premiums or receive certain medications for free.  With this type of financial component, it begs the question, is participation in the program really voluntary?

Just this year, the case of Seff v. Broward County was decided that may shed some light on the issues faced by these programs.  In determining that the Broward County wellness program did not violate the ADA, the court held that the program came under the "safe harbor" exception to the ADA.  The safe harbor exception protects employers and plan administrators from liability arising out of establishing, sponsoring, observing, or administering a wellness program if the program meets the following criteria:

1) the program is part of the terms of a bona fide benefit plan;

2) the program is based on underwriting risks, classifying risks, or administering risks; and

3) the program is based on and not inconsistent with State law and is not used as a subterfuge to evade the purposes of the ADA prohibition.

At least one other court has followed the approach set forth in Seff, but it is still unclear as to whether the EEOC, the agency responsible for enforcing the ADA, will follow it.  Nonetheless, the Seff opinion provides guidance for employers and makes a strong argument that offering financial incentives does not necessarily render a wellness program involuntary.

Thanks to Eric Meyer, who blogs for the ABA Section of Litigation Employment and Labor Relations Law, for pointing out in his most recent blog that a miniature horse (which generally ranges in height from 24 inches to 34 inches measured to the shoulders and weighs between 70 and 100 pounds) may be a reasonable accommodation under the Americans with Disabilities Act.  Really.  

Believe it or not, the final regulations implementing title II (state and local government services) and title III (public accommodations and commercial facilities) that became effective March 15, 2011 require covered facilities to accommodate miniature horses as a reasonable accommodation. This applies where the horses have been individually trained to work or perform tasks for people with disabilities.

Fortunately for employers, under the final regulations for title I of the ADA (which covers employment), there is no parallel provision (yet) requiring businesses to permit miniature horses as a reasonable accommodation for qualified, disabled employees.

Under the final title II and title III regs, covered entities (state and local govern­ments, businesses and nonprofit organiza­tions that serve the public) must modify their policies to permit miniature horses where reasonable, subject to a four-factor test: (1) whether the miniature horse is housebroken; (2) whether the miniature horse is under the owner’s control; (3) whether the facility can accommodate the miniature horse’s type, size, and weight; and (4) whether the miniature horse’s presence will not compromise legitimate safety requirements necessary for safe operation of the facility.

Having represented employers for 20 years, I'm having a hard time envisioning a scenario where an employee could reasonably claim that s/he could not perform the essential functions of the job....without a horse in the workplace. Let's hope that federal regulators think carefully before extending this requirement to the employment arena!   

In June, I wrote a blog entry about a group of food servers who work at Yankee Stadium and brought suit against its concession company, Legends Hospitality.  The suit alleges that Legends Hospitality, which is co-owned by the Yankees, the Dallas Cowboys, and Goldman Sachs, unlawfully withheld their tips.

Well, it seems as if the concession company is concerned about the servers' allegations and judging by their new menus, it appears that Legends Hospitality agrees that at least the fans should know how the service fee is being spent.  The menus now explain the supplemental charge of 20% and advises that 4-6% will be taxed as gratuity, depending on the server's seniority and that 14-16% will be taxed as an administrative fee to defray administrative costs.

While the new disclaimer may be an attempt to resolve the issues raised in the lawsuit, it doesn't change the fact that prior to the disclaimer being added, the servers allege that they weren't receiving any portion of this supplemental fee.  If determined that this is true, it's still a strikeout for Legends Hospitality.

Should you be judged on whether you have good or bad credit or whether you've filed for bankruptcy when applying for a job?

In a recent article by Byron Acohido for USA Today, he reports on this issue.  He notes that in 25 states, 49 bills are pending that concern a job applicant's creditworthiness, the majority of which are aimed at restricting when credit histories can be used in the hiring process.  

Is this fair especially given the current state of the economy?  No, say privacy and advocate rights groups.  If credit histories are allowed to be used, it permits the employer to make a value judgment about the applicant.  This can be unfair given that there are often mitigating circumstances for why a person's credit is less than stellar. 

But, there are also pitfalls for the employer especially when the use of credit reports in the hiring process can disproportionately affect minorities and subject the employer to a discrimination lawsuit.

With the recent decision in Myers v. TooJay Management Corp., this issue becomes even more complicated given that private employers can use an applicant's past bankruptcy to deny that individual employment.

So, what does this all mean? For employers, while the use of credit reports and bankruptcy filings can be useful because they provide a glimpse at whether an applicant has been prudent in handling his/her finances and whether the applicant will be a good fit, that benefit must be weighed against whether the information is truly necessary for the position and whether it is worth the risk of a potential lawsuit. 

For employees, if a perspective employer inquiries about your credit history, you should be prepared to explain any mitigating factors such as whether your credit has suffered due to unforeseen health or medical issues.

Well, it's that time of year again - time to hire summer interns, but do they have to be paid?  In most instances, the answer is yes and if you think the Department of Labor won't take action against you for not paying your summer interns, you would be wrong.

In an article written by Steven Greenhouse for the New York Times last year, he notes that the Labor Department is cracking down on firms that fail to pay interns properly and expending efforts to educate companies, colleges, and students on the law regarding internships.

Nancy J. Leppink, the acting Wage and Hour Administrator, says: "If you're a for-profit employer or you want to pursue an internship with a for-profit employer, there aren't going to be many circumstances where you can have an internship and not be paid and still be in compliance with the law."

Does this mean you can never have an unpaid internship? No, but the Department of Labor has set forth six criteria [PDF] for you to follow in determining whether an internship should be paid.  This criteria include, that the experience is for the benefit of the intern, the internship is similar to training that would be given in an educational setting, and that the employer derives no immediate advantage from the activities of the intern.

Of all the factors, probably the most difficult to overcome is that the employer receive no immediate advantage or benefit from the intern.  Some critics of the test believe that it is out-dated, and feel that it should be more of a mutual benefit test.  But, until these criteria are changed, you will have to follow the law and make sure you are in compliance.

The Equal Employment Opportunity Commission (“EEOC”) investigates and enforces Federal civil rights laws that bar discrimination in the workplace.  The Florida Commission of Human Relations (“FCHR”) investigates and enforces state civil rights laws that bar discrimination in the workplace.  To the extent that these laws overlap—and they do, as discrimination based on race, color, religion, sex, national origin, age, and disability is prohibited under both state and Federal law—wouldn’t it be efficient to only conduct one investigation of an alleged victim’s complaint?

That is what the EEOC and the FCHR think, and to that end, have entered into a work sharing agreement.  Under the terms of this agreement, which has been renewed annually for decades, when a complaint is “dual filed”—meaning with both agencies—only one will investigate the complainant’s claims and notify the other of the outcome.  Ordinarily I’d be the first to applaud coordinated government efforts, particularly those that save money.  In this instance, however, this arrangement frequently undermines the intent of the Florida Civil Rights Act.

Here’s the problem—an EEOC investigation results in one of two possible outcomes: either they find a violation of a law, in which case they’ll force an employer into mediation or sue on the employee’s behalf; or they find “insufficient evidence” of a violation of the law, in which case they issue the employee a “Right-to-Sue” letter.  The latter outcome means that, even if the EEOC thinks a complaint is baseless, one can still sue in Federal court.

The FCHR, however, handles these investigations differently.  Like the EEOC, if the FCHR finds a violation, they’ll go to bat for the victim.  Unlike the EEOC, however, the FCHR will issue a finding of “no reasonable cause” if a complaint is clearly without merit, which bars a lawsuit on state law claims while providing a right to an administrative hearing.  This provision keeps nuisance complaints out of the court system.

The Florida Supreme Court has held that the EEOC’s “insufficient evidence” determination is not the same as the FCHR’s “no reasonable cause” finding.  Therefore, when the EEOC investigates a claimed violation of the Florida Civil Rights Act under the work sharing agreement, there is absolutely no possibility that the complainant will be limited to the administrative hearing remedy dictated by the Florida Legislature. 

The work sharing agreement between the EEOC and the FCHR is thwarting the will of the Legislature and should be amended.

A Florida judge ruled that the state violated its own constitution when it failed to raise its minimum wage rate for 2011.  As a result, the new rate will be $7.31 per hour, up from $7.25.  For tipped employees, the new rate will be $4.29, up from $4.23.  This rate change will take effect on June 1.

In 2009, after a spell of deflation, Florida lowered its minimum wage rate.  The rate change went unnoticed in 2010, because the federal rate of $7.25 prevailed over the lower state rate.  When the state rate was announced for 2011, and it was still no higher than the federal rate, workers took notice, filed suit, and a judge has now ruled in their favor. 

According to the ruling, the rate is supposed to hold steady during deflationary periods.  The judge determined that the rate can never be decreased and that the state must use the formula laid out in the state constitution to calculate future wages.

The new minimum wage rate has already been posted on the website for the Agency for Workforce Innovation.  Employers need to be mindful of the rate change and make sure that adjustments are made accordingly.  Otherwise, employer beware...