What’s up at the DOL? Pulling Guidance and Changing Standards

 

 

 

By:  Claudia D. Orr

It is time to provide you with a couple of quick updates from the Department of Labor (“DOL”).  Spoiler alert…this is good news!

First, in January 2016, I wrote an article about the then new DOL guidance concerning joint employer relationships (both “horizontal” and “vertical”). Opinion Letter Fair Labor Standards Act, Administrator’s Interpretation No. 2016-1.  The article cautioned that “the mere fact that an employee works for two completely separate companies (as many workers today do) does not make those companies ‘joint employers.’ But, where a joint employment relationship exists, the employers may be held equally responsible for ensuring compliance for all provisions of the FLSA including overtime pay, and the DOL may seek to hold both employers responsible for any violation.” For my prior article click here.

While the DOL guidance was a tad confusing it made clear, at least to me, that the DOL intended to stretch the joint employer relationship principle as far as it could so there would be many deep pockets to reach into when a wage violation occurs. Well, the DOL has now pulled that guidance (and the guidance it had issued concerning independent contractors/employment relationships, Opinion Letter Fair Labor Standards Act, Administrator’s Interpretation No. 2015-1).  But a word of caution –the fact that the guidance was pulled does not change the law and employers should remain watchful for potential joint employer relationships.  However, pulling the guidance removes the ability to cite to, or rely on, the guidance when there is a wage dispute. Since the guidance was beneficial to employees’ wage claims, this is good news for employers.

The other DOL tidbit involves the application of the fiduciary standard to financial advisors working with ERISA (retirement) plans.  In short, the fiduciary standard would require advice that is in the best interest of the plan and its participants and prevent an advisor from pushing financial products because they are the most lucrative for the advisor.  For my prior article from March 2017 click here.

The fiduciary standard was to take effect on April 10, 2017, but soon after he took office, President Trump signed an executive order requiring the DOL to take another look at the issue. It did.

The DOL has now concluded that the fiduciary rule should be implemented.  The rule was given partial effect on June 9, with full implementation set for January 1, 2018.  While there is a lot of anxiety in the financial services industry, and a lot of false information being spread (like this will take away an investor’s choice), this is absolutely good news.  The only products that may become unavailable to investors are those that were not in their best interests because advisors may no longer be able to recommend them.

It is not often that I am able to report good news from the DOL to employers, so this pleases me.  If you need further information about joint employment relationships or the fiduciary rule, please consult with an experienced labor/employment attorney, like the author.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go click here.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. June 2017.

THE SIXTH CIRCUIT HOLDS THAT CLASS ACTION WAIVERS ARE UNLAWFUL WHILE THE SAME ISSUE IS STILL PENDING AT THE SUPREME COURT

In National Labor Relations Board v. Alternative Entertainment, Inc., No. 16-1385 (May 26, 2017), the Sixth Circuit Court (which includes Michigan) in a 2-1 split decision found that an arbitration agreement obliging employees to individually arbitrate their claims violates their right to engage in concerted activity under the National Labor Relations Act (“NLRA”), which includes a right to undertake a class action.  Although this decision is consistent with opinions from the Ninth and Seventh Circuit Courts, the Second, Fifth, and Eighth Circuits have all held similar class action waivers to be lawful.

In this case, Alternative Entertainment Inc. (AEI) employees signed an agreement stating:  “Disputes … relating to your employment” must, at the election of the employee or the company, be resolved “exclusively through binding arbitration”, and that “you and AEI also agree that a claim may not be arbitrated as a class action, also called ‘representative’ or ‘collective’ actions, and that a claim may not otherwise be consolidated or joined with the claims of others.”  The court determined that requiring employees to bring claims in their individual capacity unlawfully restricts the rights of employees to bring claims jointly with others under the NLRA.

This very issue is pending before the Supreme Court of the United States in the consolidated cases Epic Systems Corp. v. Lewis, NLRB v. Murphy Oil USA, Inc., and Ernst & Young LLP v. Morris. Oral argument is scheduled for October, 2017 and a decision is expected in the first quarter of 2018.  In the meantime, employers should review their onboarding documents to determine if they have a class action waiver.  If yes, employers should consult with experienced employment law counsel to evaluate whether to modify or remove such waivers before the Supreme Court issues a final decision.

This article was written by JAMES M. REID, a member of the Legal Affairs Committee of Detroit SHRM, a Resource Partner and Director of MISHRM, and a shareholder of the law firm of Maddin Hauser Roth & Heller PC located in Southfield, Michigan. He can be reached at (248) 351-7060 or jreid@maddinhauser.com. Detroit SHRM encourages members to share these articles within their organizations; however, members should refrain from forwarding them outside their organizations or printing for mass distribution without written permission of the Detroit SHRM Executive Committee. June 9, 2017

MICHIGAN COURT OF APPEALS DECIDES TRANSGENDER CASE

By:  Claudia D. Orr

Recently, a female member of a fitness club sued the club after encountering a transgender individual (“a man who identified as a woman”) in the women’s locker room and was told it was the club’s policy to allow access based on “whatever sex which an individual self-identifies.” Corporate offices confirmed that “this was consistent with their policy of not judging whether an individual is a man or a woman.”  While this is not an employment case, the court’s comments show how one panel of the appellate court analyzed a transgender case.  Let’s see what happened in Yvette M Cormier v PF Fitness-Midland, LLC and PLA-Fit Franchise, LLC.

Cormier joined Planet Fitness on January 28, 2015.  One month to the day, she encountered a transgender individual in the locker room.  She left immediately and reported this to the front desk, but was advised of the policy above. Cormier returned to the facility several times over the next few days and warned other women about the club’s policy and to be careful when they used the women’s facilities.  On March 4, the club terminated her membership.

Cormier sued for invasion of privacy, sexual harassment and retaliation under the Elliott-Larsen Civil Rights Act (“ELCRA”), and the intentional infliction of emotional distress, among other claims.  Her claims were dismissed by the lower court when it granted the defendants’ motion for summary disposition.

The appellate court began by reviewing her claims under the ELCRA which prohibits “sexual harassment” not only in employment, but also in public accommodations, public services, education and housing.  A club, even if private, may qualify as a public accommodation.  Thus, the question was whether Cormier was sexually harassed?  To prove that she was, Cormier argued that the club’s policy presented the “transgender man[1] with the opportunity to undress in front of her and to see her undressed.  This, she argued, is conduct or communication of a “sexual nature”.

However, Cormier’s claim failed because an opportunity that would or could create a hostile environment is insufficient. She had to show that she actually was; for example, that she was exposed to male genitalia in the women’s locker room. And, because she did not complain of an actual violation of the law (since the policy at issue was “gender neutral” and not unlawful discrimination), Cormier’s retaliation claim failed as well.

In non-binding dicta, the appellate court disagreed with the lower court’s finding that the policy did not violate the ELCRA. However, because the lower court reached the right result for the wrong reason, its decision was not reversed.  But the appellate court’s statement

[1] While it is unclear whether the plaintiff or the court made the mistake, a male who transitions to a female is not a transgender male, but rather a transgender female suggests that such a policy might violate the ELCRA had there been an actual undressing in Cormier’s presence.

The court found that Cormier’s invasion of privacy claim suffered from the same flaw.  Cormier’s privacy was never invaded.  She “did not undress or shower in the presence of a biological male.” She left “after encountering a ‘large, tall man’ and then ‘thoroughly check[ed]’ the locker room before using it on subsequent visits.”

Cormier relied on a cited a case that involved hidden cameras in a restroom in which the court had held that “though the absence of proof that the devices were utilized is relevant to the question of damages, it is not fatal to plaintiff’s case.”  Harkey v Abate, 131 Mich App 177, 182 (1983). The appellate court distinguished the facts in the instant case stating: “Thus, in Harkey, the plaintiff alleged intrusion of privacy but simply could not prove it under the circumstances of the case. In contrast, [Cormier] alleges only the possibility of intrusion of privacy.  One could argue that an exception similar to the one in Harkey would be appropriate for a woman unaware of defendants’ policy because the woman may not know the biological sex of the clothed persons in the locker room.”

But, the court’s reasoning misses the point that would be raised by the transgender community – the biological sex is irrelevant for purposes of a transgender woman being in the women’s locker room.  Clearly these are evolving issues. Regardless, the court pointed out that Cormier’s privacy was not intruded upon and, even if it had been, it would be by a guest/member, and not an employee.  Thus the claim failed.

The appellate court also found that Cormier’s intentional infliction of emotional distress claim failed.  To prove this claim, a plaintiff must show not only that there was conduct that was extreme and outrageous, but also that it caused extreme emotional distress. The court noted that “[t]ransgender rights and policies are polarizing issues and each individual may have a feeling on the issue and on what locker room such individuals should be using.  Regardless of whether an average member of the community may find the policy outrageous, the fact is that plaintiff did not suffer severe emotional distress as a matter of law. One encounter with a biological male in a women’s locker room, both persons clothed, does not constitute ‘distress…so severe that no reasonable man could be expected to endure it.’ Indeed, [Cormier] continued to visit the gym and would thoroughly check the women’s locker room for biological males apparently ready to experience such an encounter again.”

This case shows just how polarizing and emerging the transgender issue is. It seems from the comments in this case that the panel was not particularly supportive of a transgender person using the facility that corresponds with their identity and that it would have ruled opposite had there been any undressing involved. So, what should an employer do? The EEOC takes the position that it must grant the transgender individual access to the restroom that matches their identity.  But what of the other employees’ rights?  My experience is that if the situation is handled properly, it really becomes a non-issue.  If you have an employee who comes forward to say he is transitioning, or has, you should work with an experienced employment attorney, such as the author.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. June 2017.

New Case Highlights Requirements of Military Leave Law

By: Miriam L. Rosen

While most employers have some general knowledge about military leave requirements, the ins and outs of those protections are less familiar than the provisions of other employment laws.  A recent Sixth Circuit Court of Appeals’ decision, Savage v. Federal Express, explores several key provisions of the Uniformed Services Employment and Reemployment Rights Act (“USERRA”), the federal law that protects employees who participate in military service and applies to all employers regardless of size.

USERRA Overview

USERRA establishes the rights and obligations of employees and employers with respect to military service.  Some of the more well known provisions of the law address requirements related to leave and return to work:

  • USERRA requires that employers allow most employees leave time to participate in military service.
  • An employer must also return employees to their pre-leave position within certain timeframes based on length of military service. Generally, an employee may not exceed a cumulative total of five years of military leave. However, one exception to that limit includes when an employee’s military service is pursuant to an order to remain on active duty.

A lesser known aspect of USERRA relates to the benefits required for returning employees:

  • USERRA provides that the employer place the returning service member in the position he would have been in had he remained continuously employed. This means, for example, that retuning service members are entitled to the seniority that they would have had if they had remained continuously employed.
  • USERRA also specifies that returning service members are entitled to all “rights and benefits based on seniority,” meaning that they receive benefits, such as pension and vacation time, based on length of service that includes time away for military leave.

Like many other employment statutes, USERRA also prohibits an employer from discriminating or retaliating against a service member for her membership in or obligation to the military service.

How the various provisions of USERRA play out in the employment context can be seen in the Savage case.

The Case

Savage, a long time aviation mechanic for Federal Express (“FedEx”), also served in the U.S. Naval Reserve. During his employment, FedEx provided Savage with numerous leaves to participate in military training and service.  Savage participated in the FedEx Corporation Employees’ Pension Plan.  In mid-2012, Savage notified his manager and various FedEx benefits administrators about a discrepancy in his pension calculations because of his military service.

As a FedEx employee, Savage received a reduced rate for shipping personal, not commercial, items.  To prevent abuse of the reduced rate policy, FedEx regularly investigated employee misuse of that benefit.  As part of that review process, FedEx investigated the 90 times that Savage and/or his wife used the reduced rate shipping between May and August 2012. During the investigation, Savage acknowledged that he and his wife used the reduced rate to ship goods sold on eBay.  As a result of that conduct, FedEx terminated Savage in September 2012 for violating its reduced-rate shipping policy.

The termination came 34 days after Savage had completed a period of military service and less than a month after he complained about how his military service affected calculation of his retirement benefits.

Savage sued FedEx in January 2014 alleging that the company discriminated against him for performing his military service and retaliated against him for complaining about the calculation of his pension benefits in violation of USERRA.

The district court dismissed the claim finding that Savage did not show that the military service was a substantial or motivating factor in the decision to terminate. In any event, the court found that FedEx had a legitimate non-discriminatory reason for the termination – Savage’s violation of the reduced-rate policy.  The district court found the calculation of Savage’s pension based on an estimate of hours he would have worked during military leave periods complied with the law.

Challenging the dismissal in an appeal to the 6th Circuit, Savage emphasized the “temporal proximity” between his military service, his complaint about benefits, and his termination.  The court did recognize that the “33 days between Savage’s protected activity and his suspension, and the 41 days between his activity and his termination . . . raise[d] an inference that the adverse action was motivated by Savage’s protected activity.”  The court also noted that that comments by managers about leaves for training raised the inference of hostility to military service.

However, the court ultimately held that FedEx’s explanation that it terminated Savage for violation of the reduced-rate policy established that the company had a legitimate explanation of its conduct and “would have terminated Savage in the absence of discrimination or retaliation.” The court affirmed dismissal for FedEx on the discrimination and retaliation claims.

The court did, however, recognize that FedEx did not properly follow USERRA’s 12-month look-back rule in calculating Savage’s pension.  The court concluded that “FedEx should have calculated Savage’s pension benefit contributions based on an average rate of compensation (including both pay rate and hours) during the 12 months prior to each period Savage was on a military leave of absence.” Thus, the court reversed the dismissal on that claim and sent the case back to the district court.

Takeaways

The takeaways in this case are similar to many other employment cases:

  • When an employee has engaged in protected activity, the timing of subsequent legitimate adverse action can become an issue. To protect itself in these situations, an employer must be able to establish that it has a legitimate non-discriminatory and non-retaliatory reason for its actions. In Savage, FedEx could point to its consistently applied reduced rate policy to support its employment decision.
  • The ins and outs of employment statutes can be complicated, like USERRA’s benefit calculation requirement. Whether it’s USERRA, the FLSA or another employment law, employers should ensure that they have a thorough understanding of the requirements of those laws and should consult experienced employment counsel with any questions.

This article was written by Miriam L. Rosen, who is a member of the Legal Affairs Committee of Detroit SHRM and Chair of the Labor and Employment Law Practice Group in the Bloomfield Hills office of McDonald Hopkins PLC, a full service law firm. She can be reached at mrosen@mcdonaldhopkins.com  or at (248) 220-1342.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. May 2017.

 

 

COMMISSION v BONUS – What’s the Difference Under Michigan Law?

By:  Claudia D. Orr

Once upon a time, there were a lot of unhappy auto industry sales representatives in Michigan who were not being paid all of the commissions they felt they had earned.  Their cries did not go unheard by the state legislature which, in 1992, passed the Sales Representative Act, MCL 600.2961 (“SRA”). It is very pro-sales representative and applies whether there is an independent contractor or employment relationship.

However, the SRA only applies to commissions resulting from selling products, not services. But this is broadly defined (e.g., a lawn fertilizing service is a product, not a service). Regardless of whether the SRA applies, the procuring cause doctrine may be applied to commissions, granting the sales representative the right to receive payments for so long as the purchase order continues (which can be years) or the relationship with the customer exists.

The SRA provides, in relevant part, that “[a]ll commissions that are due at the time of termination … shall be paid within 45 days after the date of termination. Commissions that become due after the termination date shall be paid within 45 days after the date on which the commission became due.” If the employer (or principal) fails to pay all amounts due, the sales representative is entitled to: (a) actual damages; and (b) an amount equal to 2 times the amount of commissions due but not paid or $100,000.00 (whichever is less) for a willful violation. The Court of Appeals has held that unless the failure to pay is the result of an error in the calculations, it is a willful violation. This is true even if the principal (or employer) has a good faith dispute concerning the payment, such as another sales person actually “closed the deal or serviced the customer.”

Significantly, the SRA prohibits a contract between a principal and a sales representative purporting to waive any right under this section is void. Thus, a contract must be properly written to avoid the “earning” of commissions and then the waiving of the right to payment when the relationship terminates.  Finally, the prevailing party (whether sales representative or principal) is entitled to reasonable attorney fees and costs.

In Speet v Sintel, Inc, a recent unpublished case of the Michigan Court of Appeals, there was a 2001 agreement between the parties that provided for commissions for the generation of certain new business. It also contained a clause stating: “This commission arrangement may be terminated by either party upon 90 days written notice.  Sintel is responsible for paying commissions only on shipments that occur with in [sic] 90 days after termination.” Sintel was purchased by new owners in 2011 and a new agreement was entered in 2012 that stated “I [Speet] will support the parts/projects(s) as project liaison (sales rep.) and retain the account for the life of the project but no later than April of 2014 at which time I would like to renegotiate and renew the terms and conditions of this contract.” The 2012 agreement did not provide a termination clause.

We know nothing else about the terms in the 2001 agreement, but I suspect that it must have been written in such a way that caused the earning of commissions upon shipment of the product. Otherwise, if the commissions were earned at some earlier point in time (such as when the order is written or the customer signs the contract contract) it is conceivable that commissions could have been earned by Speet, but not payable to him because shipments may have occurred after the 90 day period following termination of the agreement.  This may be viewed as waiving a right under the Act.

Without going into the details of the ruling, suffice it to say that because the second agreement did not contain a termination clause, it remained in place and Sintel properly terminated the agreement. There was a math error in the payments by Sintel to Speet that were owed, but Sintel was determined to be the prevailing party because the court rejected Speet’s arguments that he was entitled to commissions for the life of the project or through April 2014, as provided in the amendment.

While this case ended up well for the principal, I frequently read about large payouts under the SRA. So, how can the principal protect itself? First, make sure the agreement is clear concerning the event that causes the sales representative to “earn” the commission and make it as far along in the process as makes sense for your business (e.g., obtaining the signed contract, shipping of the parts, payment by the customer, etc.). Also, disavow the procuring cause doctrine.

Better yet, if an employment relationship exists, create a bonus program instead of a commission program.  A bonus is a fringe benefit (like vacation and sick time) under Michigan’s Wages and Fringe Benefits Act, MCL 408.471, et seq., and not wages, as a commission would be. And, like any fringe benefit, an employer doesn’t have to pay fringe benefits at termination if this is agreed to in writing.

That is why employee handbooks should say something like: “Unused vacation time will be paid out at termination in the employer’s sole discretion, in exchange for a release, and provided the employee leaves on good terms, provides a two week written notice, and works during the notice period.”  You can even place a cap on the amount paid (i.e., up to 2-weeks’ time). With the discretion built in, the employer can pay it out, or not.  However, I strongly recommend that the employer pay it if the employee has complied with the terms (including signing the release of claims) because if it becomes known that the employer is not acting honorably, employees will just burn through their time and perhaps resign without any notice.

But I digress…How is a bonus plan created?  Glad you asked.  Under the SRA a “commission” is defined as “compensation accruing to a sales representative for payment by a principal, the rate of which is expressed as a percentage of the amount of orders or sales or as a percentage of the dollar amount of profits”.

Soon after the passage of the SRA I had my first case under it.  I argued, successfully, in Anusbigian v Trugreen/Chemlawn, Inc that, if the agreement does not use a “straight percentage” as the method of payment, but rather a sliding scale based on meeting a series of quotas, that it is a bonus and not a commission. Since I made that argument in federal court, it has not been used very often, or perhaps at all, but my argument was recently reaffirmed by the Michigan Court of Appeals in Heine v Mach 1 Global Services.

So, how does this work? For example, if you anticipate that a sales person may be able to sell $100K/annually in products and you would be willing to pay 10% or $10K for that achievement, you could promise: 7.5% on all sales up to $50K, and 10% on all sales made between $50K and $90K and 12% for all sales made over $90K. This method not only creates a bonus program (and removes the compensation from the SRA) but also encourages a sales person to really stretch and sell more products.  Play with the numbers and determine how to structure the payments.

Whether it is a commission plan or a bonus plan, it must be carefully drafted to avoid legal minefields. The plan must clearly indicate not only when the commission/bonus is due, but how often it is payable (for example monthly or quarterly), when it is payable (within 10 days after the month or quarter ends), what happens if the order is cancelled or part of the order is returned, what is due when the relationship with the sales representative terminates, and whether the employer/principal is able to change the terms of the plan. As you can see, there is a lot to be considered and the consequences of getting it wrong can be quite costly.  Always consult with experienced employment counsel, such as the author, when you are entering into an agreement with a sales representative.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html. 

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. May 2017.

Comp Time in the Private Sector: New Legislation Makes it a Real Possibility

By:  Miriam L. Rosen

After months of uneasy anticipation in 2016 about the new Fair Labor Standards Act (“FLSA”) overtime rule, employers can now anticipate a much different type of change to the FLSA.    On May 2, 2017, the U.S. House of Representatives passed the Working Families Flexibility Act (the “Act”).  As the name implies, the Act would provide employees (those with families and those without) with workplace flexibility by allowing the accrual of compensatory time off in lieu of overtime pay under the specific parameters of the Act.

The Act would amend the FLSA to allow private sector employers to offer non-exempt employees the choice between cash payment for hours worked over 40 in a work week or the accrual of an hour and one-half of compensatory time (“comp time”) for each overtime hour worked.  For example, an employee who works 45 hours in a work week could choose between 5 hours of pay at 1.5x their regular rate or 7.5 hours of paid time off in their comp time bank.  Under the Act, employees could accrue up to a maximum of 160 hours of comp time annually.

The Act does have restrictions intended to protect both employees and employers from the unintended “benefits” of such flexibility.  The Act provides that comp time accrual would only be available to employees who have worked at least 1,000 hours in a 12 month period before they could agree to a comp time arrangement.  The employer and employee would have to agree in writing to the comp time arrangement before any time could be added to the comp bank.  In addition, an employer could not coerce an employee into taking comp time.  Employers would also be prohibited from retaliating against employees based on the decision to use comp time.

Significantly, if the arrangement is revoked by either party, the employer would have to pay out the unused comp time.  Further, any unused comp time at the end of the calendar year (or another year designated by the employer) would be paid out at the employee’s regular rate when the comp time was accrued or the employee’s current regular rate, whichever is higher.

In terms of use of comp time, the Act provides that if an employee asks to use accrued comp time, the employer must grant the request “within a reasonable period” after the request as long as doing so will not “unduly disrupt the operations of the employer.”  What will “unduly” disrupt operations certainly seems to be an area that could cause friction between employees and managers.

While government employees have long had the ability to choose between accruing comp time and payment of overtime, the Act has received vastly different responses across the political aisle. Noting that the intent of the Act is to give employees choice about the use of their time, Rep. Bradley Byrne (R-Ala.), one of the Act’s co-sponsors, remarked that “[p]olicies written in the 1930s that are out of step with the needs of the 21st century workforce shouldn’t stand in the way of flexibility for workers and their families.”  In contrast, Rep. Bobby Scott (D-Va.), an opponent of the legislation, noted that “[m]ost employees can already take time off without pay. The bill does, however, create a new right for employers to withhold employees’ overtime pay.”

So, what’s the next step for this legislation?  A Senate version of the Act is currently under review by the Health, Education, Labor and Pensions Committee.  How long it will take the Act to work its way through the Senate is hard to tell.

The Working Families Flexibility Act is an opportunity to give workers in the 21st Century added flexibility in a way that was never contemplated when the FLSA was passed almost 80 years ago.

This article was written by Miriam L. Rosen, who is a member of the Legal Affairs Committee of Detroit SHRM and Chair of the Labor and Employment Law Practice Group in the Bloomfield Hills office of McDonald Hopkins PLC, a full service law firm. She can be reached at mrosen@mcdonaldhopkins.com or at (248) 220-1342.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information, is included in the re-post of the article. May 2017.

 

A Manager’s Conversations About Retirement Supported An Inference Of Age Discrimination

Print
By: Karen L. Piper

Gerard Howley worked as a Dispatch Manager for Federal Express Corporation (“FedEx”). He was discharged in November 2013, consistent with FedEx’s Acceptable Conduct Policy, after he received three disciplinary letters in nine months. Howley sued for age discrimination under Michigan’s Elliott-Larsen Civil Rights.  Following the close of discovery, the federal district in Detroit dismissed the case. Howley appealed. The Sixth Circuit Court of Appeals reinstated the case. Howley v. Federal Express Corporation, (6th Cir. March 15, 2017).

The appeals court reviewed Howley’s work record and characterized the circumstances surrounding his discharge as “suspicious.” First, Howley had worked for FedEx for 21 years without any disciplinary action. Second, Howley had received three disciplinary letters in a nine-month period for conduct the court deemed “fairly innocuous.” The first disciplinary letter was for inappropriate language. Howley submitted evidence that younger employees, and even Howley’s manager, used inappropriate language “all the time” but were not disciplined. The second and third disciplinary letters were for failing to respond to one email from a subordinate employee requesting FMLA leave for a medical appointment and declining another employee’s request that he speak to a customer about a lost package. Howley offered evidence that no other employee, including younger employees, had ever been disciplined for these specific behaviors. The court posited that none of these three disciplinary letters warranted discipline. 

Howley also produced evidence that his manager had discussed retirement several times. Specifically, the manager: 1) asked Howley how much money he made and expressed surprise about the length of his employment; 2) asked employees in the work group about their retirement plans and asked why they were still working; and 3) expressed concern that employees were “being old and not keeping up with technology” and “still around and should have been retired.” The court observed that under “normal circumstances, the alleged remarks … might be viewed as simply too attenuated from the termination process to constitute direct evidence of discrimination. And … generally … statements about the impending retirement of employees are not, by themselves, sufficient to constitute direct evidence of discrimination.” However, coupled with the suspicious circumstances of Howley’s discharge, these discussions “gave rise to a negative inference of age discrimination.” The court reinstated Howley’s claim.

The manager’s conversations with a long-term employee about his retirement plans took on new meaning in light of the manager having disciplined the employee three times in a relatively short period of time. Whenever a long-term employee with a good record begins to have multiple performance or misconduct issues in a relatively short amount of time, the employer should carefully review the situation and consult with experienced employment counsel, such as the author, before terminating the employee.

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law. Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com. For further information, go to: http://www.bodmanlaw.com/attorneys/karen-l-piper.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. May 2017.

THE TREND IS “DON’T ASK…”

Print

By:  Claudia D. Orr

Everyone working in Human Resources in Michigan knows that you cannot ask an applicant about any misdemeanor arrest that did not result in a conviction because it is prohibited under the Elliott-Larsen Civil Rights Act.  Everyone also knows that the Equal Employment Opportunity Commission frowns upon “the box” on employment applications asking if the applicant has ever been convicted of any crimes. 

But, did you know that companies having contracts (for goods or services valued at $25K or more) with the City of Detroit are prohibited from asking about criminal convictions of the applicant for a position that will fulfill the terms of the city contract before the job interview or until the applicant has been determined to be qualified for the position?  City of Detroit, Code of Ordinances, Div 6, § 18-5-81, et seq. Moreover, someone must sign an affidavit provided by the city that attests to being in compliance with the ordinance.  There may be other cities having this sort of ordinance, so you should check with the cities granting your company contracts.

There is another trend that may eventually pop up in Michigan and that is a prohibition against asking an applicant about their prior pay rates. The idea is that, if the previous employer engaged in wage discrimination, it may perpetuate the lower wage rate repeatedly. 

During the first week in April, the New York City Council passed such an ordinance by a 48:2 vote hoping to close the gender wage gap disproportionately affects minorities especially Hispanics and African Americans. New York’s Governor signed a similar measure to protect public sector hires.  NBC News reports that there have been at least 180 bills introduced nationwide and that, while nearly 50 have failed, seven were enacted and dozens are still pending.

On March 17, HR Morning reported that similar measures have already been enacted in New Orleans, Philadelphia, and Massachusetts. 

A lawsuit was filed April 6, 2017, challenging the wage equity amendment (prohibiting the wage questions) to Philadelphia’s Fair Practices Ordinance: Protection Against Unlawful Discrimination. Phila. Code §§ 9-1103, 9-1131. The amendment not only subjects offenders to civil penalties but also criminal penalties including up to 90 days in jail for a repeated offense.

Public Advocate Letitia James (who introduced the New York City bill in August) is quoted as saying: “Being underpaid once should not condemn one to a lifetime of inequality.” 

However, on April 27, 2017, the federal Court of Appeals for the Ninth Circuit (the most liberal bench of the federal appellate courts) ruled opposite. In Rizo v Yovino the employer started new hires at their prior salary plus a 5% increase.  The Ninth Circuit rejected the argument that relying solely on an applicant’s prior wage rate is per se a violation of the Equal Pay Act because it perpetuates existing pay disparities.  In doing so, it reversed the lower court and instructed it to consider the following four reasons the employer had provided for its practice: (1) it is objective; (2) by offering the prior salary plus 5% increase it encourages applicants to leave their prior job; (3) the policy ensures consistency and prevents favoritism; and (4) the policy is a judicious use of tax dollars.

The rules are always changing for employers and it is hard to stay current.  And, it’s even harder to know what you don’t know… If you haven’t had your employment application reviewed lately (or your employee handbook), there is no time like the present.  Contact an experienced employment attorney, such as the author, to ensure your company is not running afoul of new laws or regulations or missing out on potential defenses.

This article was written by Claudia D. Orr, who is Chair of the Legal Affairs Committee of Detroit SHRM, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full-service law firm and resource partner of Detroit SHRM).  She can be reached at corr@plunkettcooney.com or at (313) 983-4863. For further information go to: http://www.plunkettcooney.com/people-105.html.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. April 2017.

EMPLOYER MAY HAVE ACTED UNLAWFULLY IN REVOKING JOB OFFER

Print
By: Carol G. Schley, Clark Hill PLC

            A recent decision by a federal appeals court is a reminder to employers that there are limitations on taking adverse action against applicants and employees who act against the employer’s interests in their non-work activities.

            In Linkletter v. Western & Southern Financial Group, 2017 U.S. App. LEXIS 5130 (6th Cir. 2017), plaintiff Gayle Linkletter was offered a job with defendant Western & Southern, an insurance company located in Cincinnati, which she accepted.  However, before her employment commenced, the job offer was rescinded.  Linkletter alleged that she was told by the vice-president of HR that the offer was rescinded because Linkletter had “taken a position that was contrary to Western & Southern,” namely, Linkletter’s signing of an on-line petition supporting a local women’s shelter, Anna Louise Inn.

            Western & Southern and the Inn had a contentious history.  Prior to Linkletter’s job offer, the Inn had sued Western & Southern under the federal Fair Housing Act (FHA), alleging that Western & Southern had illegally attempted to force the Inn to move out of Western & Southern’s neighborhood.  Among other things, Western & Southern had been accused of informing Cincinnati’s mayor that the Inn was “not appropriate” for the neighborhood, due to its “low-income permanent housing” and housing for “recovering prostitutes,” photographing the Inn’s residents without permission, and falsely accusing the residents of criminal activity. 

            The litigation between Western & Southern and the Inn was ultimately settled.  However, while it was still pending, Linkletter signed an online petition supporting the Inn as “safe and affordable housing for single women.”  The Inn posted the petition online, and when Western & Southern discovered Linkletter had signed it, it revoked her job offer.

            Linkletter thereafter sued, claiming Western & Southern’s revocation of her job offer violated the FHA.  By signing the petition, Linkletter claimed she was aiding and encouraging the women of the Inn to exercise their rights under the FHA, which, among other things, prohibits housing discrimination on the basis of sex, and Western & Southern unlawfully retaliated against her when she did so.

            At the trial court level, Linkletter’s claim was dismissed for failure to state a viable claim.  However, the Sixth Circuit Court of Appeals (which is the federal appeals court for Michigan, Ohio, Kentucky and Tennessee), held that Linkletter’s claim was valid, and therefore could proceed to trial.  The appeals court held that the anti-interference provision of the FHA should be construed broadly and that “the scope of the statute extends to employers who cancel contracts in retaliation for Fair Housing Act advocacy.”  The court further held that Linkletter’s signing of the petition “aided and encouraged” the women of the Inn, as the petition “existed to encourage the women to remain in their residence in opposition to the alleged discrimination by Western & Southern.”  Finally, the court rejected Western & Southern’s claim that its opposition to the Inn, and its rescission of Linkletter’s job offer, were due to economic reasons, not sex discrimination.  “The existence of economic (or religious or moral) motivations does not protect the defendants from housing discrimination claims when their actions had a clear discriminatory effect.  Economic motivation does not cleanse discrimination.” 

            The Linkletter case is a reminder to employers that there are limitations on their ability to take adverse employment actions against applicants and employees based upon their non-work activities.  While Linkletter specifically dealt with a person supporting others’ rights under the FHA, there are other statutes that also contain similar provisions, including Michigan’s Elliott-Larsen Civil Rights Act and Title VII.  To avoid potential liability in this area, it is recommended that any adverse employment action that has a possibility of raising similar issues to be reviewed by legal counsel before a decision is made.

Carol G. Schley is a member of the Detroit SHRM Legal Affairs Committee and an attorney at the law firm Clark Hill PLC.  She can be reached at cschley@clarkhill.com or (248)530-6338.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. April 2017.

LESSONS LEARNED FROM THE MISSING $10 MILLION COMMA

Print
By: Carol G. Schley, Clark Hill PLC

Recently, a federal appellate court determined that the lack of a comma in an overtime statute rendered the statute ambiguous, resulting in an employer being potentially required to pay $10,000,000 in overtime pay to its employees.  While this case involved a Maine overtime statute, it provides important practical lessons for all employers.

The case, O’Connor v. Oakhurst Dairy, 2017 U.S. App. Lexis 4392 (1st Cir., Mar. 13, 2017), concerned a statute that exempted from overtime compensation any employees who worked on the following tasks:

            … canning, processing, preserving, freezing, drying, marketing, storing, packing for shipment or distribution of: (1) Agricultural produce; (2) Meat and fish products; and (3) Perishable foods.

              The language in dispute in O’Connor was “packing for shipment or distribution.”  The employer argued that “packing for shipment” and “distribution” were two separate tasks identified in the statute and, therefore, because its delivery drivers were involved in the “distribution” of products, the drivers were exempt and not entitled to overtime.  The delivery drivers argued that because there was no comma after “shipment” in the statute, the last category of exempt workers in the statute were required to be involved in packing (i.e., either packing for “shipment” or packing for “distribution”).  The delivery drivers argued that because they did not perform any “packing” in connection with their jobs, they were not encompassed by the statute and therefore were entitled to overtime.

              The O’Connor court analyzed in detail the lack of a comma after “shipment” in the statute, finding various arguments asserted by both sides to be credible, but also rejecting various other arguments by both sides as unpersuasive.  In the end, the Court found that the lack of the comma rendered the statute ambiguous and, therefore, the court construed the ambiguity in favor of the delivery drivers, “as that reading furthers the broad remedial purpose of the overtime law, which is to provide overtime pay protections to employees.”  The case was then remanded to the lower court for further deliberations, and the overtime pay owed by the employer to the delivery drivers under the statute may reach $10,000,000.

Despite concerning a Maine statute, there are good lessons for all employers to glean from the O’Connor decision:

  1. Take care in preparing employment-related documents. While this lesson should go without saying, it is surprising how often employment documents, such as employment agreements and employee handbooks, are unclear, contain typographical errors, or otherwise don’t correctly express what the employer intends.  As the O’Connor case demonstrates, something as small as a missing comma can cause big trouble for employers.  The extra time it takes to carefully draft a document and have it reviewed by knowledgeable individuals is well worth it, as doing so may avoid confusion, employee disputes, and potential litigation down the line.
  1. Don’t rely on forms or boilerplate. Too often, employers try to save time and money by using old forms for new issues, or by using “off the shelf” forms from books, office supply stores or the internet.  Doing this can create a host of issues, as such forms may not be compliant with current employment laws, which are always evolving.  Further, such forms may fail to be compliant with the law of an employer’s particular state and lack necessary and required provisions.
  1. Periodically review your agreements, forms, and manuals. Not only does the law change over time, but the needs of an employer may change as well.  Even if an employer is not aware of any issues or problems, it should periodically review its employment-related documents to ensure they continue to meet the needs of the employer and to make revisions as necessary to avoid potential future problems.
  1. Consult Counsel. When in doubt, or when a document is important (which, in the author’s opinion, all employment-related documents are), it is worth having legal counsel assist with reviewing and drafting.  Beyond just being a second set of eyes on a document to catch ambiguities and errors, legal counsel can also ensure that necessary provisions are included, unlawful provisions are deleted, and that a document clearly expresses the wishes and intent of the employer. 

Carol G. Schley is a member of the Detroit SHRM Legal Affairs Committee and an attorney at the law firm Clark Hill PLC.  She can be reached at cschley@clarkhill.com or (248)530-6338.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information is included in the re-post of the article. April 2017.