Court Refuses to Enforce Shortened Limitations Period for Title VII Claims

 By: Carol G. Schley, Clark Hill PLC

 

Michigan courts have long recognized the enforceability of shortened statute of limitations provisions in employment-related documents, such as applications and employment agreements.  In general, these provisions significantly shorten the time period that applicants or employees would otherwise have under law to assert claims and file lawsuits against the employer.  Recently, however, the U.S. Sixth Circuit Court of Appeals held that shortened statute of limitations provisions are unenforceable for claims asserted in federal court under Title VII of the Civil Rights Act of 1964, which prohibits discrimination based upon race, color, religion, sex and national origin.

In Logan v. MGM Grand Detroit Casino, Barbrie Logan commenced employment with MGM in 2007.  As part of the hiring process, she signed an application that included a provision requiring her to bring any claims against MGM “no more than six (6) months after the date of the employment action that is the subject of the lawsuit.”  Ms. Logan subsequently resigned her employment on December 4, 2014, which she asserted was a constructive discharge.  She filed an EEOC charge 216 days later, alleging sex discrimination and retaliation in violation of Title VII, and the EEOC issued her a right to sue letter in November 2015.  On February 17, 2016, 440 days after she resigned her employment, Ms. Logan filed a lawsuit against MGM.  The trial court dismissed Ms. Logan’s claims on summary judgment, finding that they were barred by the 6 months limitations period in her employment application.  However, the Court of Appeals reversed and reinstated her claims, primarily relying on two grounds for its decision.

First, the court discussed the detailed enforcement scheme that is encompassed within Title VII, which includes: (i) a requirement that the claimant first file a charge with the EEOC before pursuing claims in court; (ii) specific deadlines for filing an EEOC charge (180 days or 300 days depending on the circumstances); (iii) a deadline for the EEOC to investigate the charge; and (iv) a deadline for the claimant to file a lawsuit once the EEOC issues a right to sue letter (90 days from receipt of the letter).  Further, the court noted that, unlike other federal statutes, Title VII does not only provide for damages to a claimant, but also requires the EEOC to investigate and mediate the dispute as a first step in an attempt to reach a resolution.  According to the court, “Any alterations to the statutory limitation period necessarily risk upsetting this delicate balance, removing the incentive of employers to cooperate with the EEOC, and encouraging litigation that gives short shrift to pre-suit investigation and potential resolution of disputes through the EEOC and analog state and local agencies.”

Second, the Court of Appeals held that Title VII was enacted in order to be “national in scope” and “required uniform enforcement.”  Per the court, allowing parties to contractually shorten the statute of limitations, and allowing courts to determine whether or not such provisions were enforceable based upon state law, would undermine these objectives.  While the court recognized that Michigan courts have enforced contractual provisions shortening the statute of limitations to six months in the employment context, “[i]t is not difficult to imagine, however, that in a different state courts could come to an opposite conclusion on this determination.  This is turn would give rise to the anomalous result that similarly situated plaintiffs in different states would have different rights in the enforcement of wholly federal claims in federal courts.”

What is the upshot of this case for employers?  Statute of limitations provisions that conflict with the time frames in Title VII will no longer be enforced for Title VII claims asserted in federal courts located within the Sixth Circuit (which includes Michigan, Ohio, Kentucky and Tennessee).  However, such provisions will still be recognized and enforced with respect to claims brought in Michigan state courts and may also still be enforced by federal courts for other types of claims.  Therefore, requiring applicants and employees to sign a shortened statute of limitations provision is still recommended, as they are generally an effective way to shorten the time period in which the employer can be sued for many types of claims.  However, employers who require applicants and employees to sign a shortened statute of limitations provision should have the provision reviewed by legal counsel to ensure it encompasses all applicable claims and has the best chance of surviving judicial scrutiny.

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.  October 2019

DOL’s New FLSA Salary Level Rule effective January 1, 2020

 By:  Miriam L. Rosen

 

On Sept. 24, 2019, the U.S. Department of Labor (DOL) issued the final rule on the new salary threshold for white-collar exempt status employees under the Fair Labor Standard Act (FLSA). The new rule changes the current salary level for exempt employees from $23,660 per year to $35,568 annually. The new rule will be effective Jan. 1, 2020.

Components of the New FLSA Salary Level Rule

In announcing the new rule, the DOL noted the following key components:

  • The standard weekly salary level changes from $455 to $684 per week (equivalent to $35,568 per year for a full-year worker).
  • The total annual compensation level for “highly compensated employees (HCE)” changes from the current level of $100,000 to $107,432 per year.
  • Employers are permitted to use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the standard salary level.

Significantly, the new rule does not change the job duties test related to exempt status and does not require annual automatic adjustments to the salary threshold.

The final rule updates the salary level threshold for exempt executive, administrative, and  professional employees for the first time since 2004. With a salary level increase that most employers consider reasonable, this rule will likely go into effect with minimal fanfare, unlike the unsuccessful effort in 2016 to raise the salary level to $47,476 annually. The DOL has estimated that the new rule will result in an additional 1.2 million workers will be entitled to minimum wage and overtime pay as the likely result change in status from exempt to non-exempt.

Next Steps for Employers

With the Jan. 1, 2020 effective date on the horizon, employers should take steps to prepare:

Review positions currently classified as exempt from overtime pay. There are two aspects to this review – determine whether employees currently in exempt positions meet both the new minimum salary requirement and the duties test for an overtime exemption.

  • The salary test. The new regulations require that as of Jan. 1, 2020 an employee in a white collar exempt position must be paid at least $684 per week. If the weekly salary is below that level, an employer must take some action.

An employer has two options:

  1. Raise employees’ pay to meet the new salary level requirement to maintain exempt status; or
  2. Convert the employees to non-exempt status and pay the employees for overtime worked over 40 hours in a week. 

In making this decision, employers should consider a number of factors that include: the employee’s current pay, the hours regularly worked by the employee, and the employer’s ability to control or manage the hours worked.

  • The duties test. Remember, a position classified as exempt must meet the salary and the duties test. Employers should use this regulatory change as an opportunity to review the classification of all exempt positions, regardless of salary level. Positions that meet the exempt status duties test are not always clear cut and changes in responsibilities and technology can muddy the waters even further. This is an opportunity to review and fix misclassification errors.

Ensure that timekeeping procedures are in place. Once it is determined that some employees will be reclassified as non-exempt, ensure that procedures are in place to properly track hours worked for these employees. For many newly non-exempt employees who have not tracked time worked, this will be a significant – and unpopular – change. Employers must also address such timekeeping items as travel time, lunch and break time, after-hours emailing and texting, and other compensable time issues.

Review other policies and procedures. The reclassification of employees may also impact other employment policies such as time off benefits, telecommuting, flex-time, and incentive pay policies.

Prepare employee communications. It is critical to communicate these changes to employees in a clear and direct manner so that employees understand how their pay and hours will be affected. The communication should address timekeeping procedures and other policy issues. Newly non-exempt employees used to having workplace flexibility as exempt employees will need to understand requirements for timekeeping and getting approval for overtime work.

Employers should consult with their employment lawyers about the provisions of the new rule and use the next three months to prepare for the January 1, 2020 effective date.

This article was written by Miriam L. Rosen, who is Chair 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. September 2019.

Lessons Learned – Part Three: The Oral Contract

By: Claudia D. Orr

 

This is the last article in my three part series called “Lessons Learned” pointing out the mistakes of others so we don’t step in the same messes. In the first article we discussed a case that showed how a no-fault attendance policy violated the Family and Medical Leave Act even though no points were assessed for taking such leave. The second article discussed just how expensive it can be when a human resources manager drops the ball and punitive damages are awarded in a Title VII case.

Today, we are going to look at the unsigned employment agreement in Rowe v Detroit School of Digital Technology, a recent unpublished opinion by the Michigan Court of Appeals.

In this case, plaintiff Christy Rowe had several discussions with Jamie Kothe about working for the school as the Director of Affiliate Affairs. Plaintiff contends that both she and Kothe agreed to an annual salary of $100K and an additional $1,000 per month for telephone and car allowance. Plaintiff drafted the agreement and provided it to Kothe. According to plaintiff, Kothe said it accurately reflected the terms that were agreed to verbally. However Kothe never signed it.

Although the contract remained unsigned, Rowe provided services to the school from November 7, 2016 through April 3, 2017. She received payments sporadically, including cash, for her work but received no compensation in February or March. That is when she submitted a letter to the school indicating it owed her over $26K in unpaid wages and phone/car supplemental pay.

According to Plaintiff, Kothe agreed the terms in the written contract were accurate, but didn’t sign it because she wanted her attorney to review it. According to Kothe, she declined to sign the agreement because she had not agreed to those terms and the school had only paid Plaintiff as an independent contractor for the work she performed and not as an employee.

The defendants moved for dismissal before discovery was conducted, which was granted. This is usually premature. Rowe appealed and the Court of Appeals reversed. Based on Plaintiff’s affidavit and text messages between her and Kothe referencing the job title and $100K, the court ruled that Plaintiff had a fair chance to uncover sufficient evidence during discovery to prove her claims, “notwithstanding the fact that the memorialization of that agreement was not signed by Kothe.”

There are several simple lessons in this case. First, don’t ever let someone start performing services for your company before the agreement (whatever it is) has both signatures. In addition, written communications during negotiations should indicate that, until the parties reach an agreement on all of the terms and reduce it to a writing signed by both, there is no enforceable agreement. Remember, in most situations, an oral agreement is enforceable. The fact that plaintiff performed services for several months may prove to be problematic for the defendant.

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. September2019.

Lessons Learned – Part Two: Punitive Damages

By: Claudia D. Orr

 

I have been working on a three part series called “Lessons Learned.” The first article focused on a recent published case from the US Court of Appeals for the Sixth Circuit that held that a no-fault attendance policy violated the Family and Medical Leave Act. In case you missed it, there was a twist to the policy, so check it out. Points were not given for taking time off under FMLA as you may be thinking.

Today, we are going to learn from the mistake of a Human Resources Manager in a Title VII case that resulted in an award of punitive damages. To be clear, the Human Resources Manager did not discriminate or retaliate, he just dropped the ball.  Let’s look at the lengthy opinion from a high altitude so we can focus on just a couple of key points.

Hubbell v FedEx SmartPost, Inc. is another recently published opinion by the Sixth Circuit. The plaintiff worked for FedEx in Belleville from 2006 until the end of 2014. She had no discipline, several awards and certificates for excellent service and was promoted to a “lead” before getting a new “hub manager” in 2011. That’s when everything changed.

The new manager allegedly told plaintiff that she should accept/take a demotion “because ‘females are better suited to administrative roles and males are better suited to leadership roles.’” He also repeatedly disciplined her, had surveillance conducted to determine her bathroom usage, prohibited her from punching in early (although others did and they received “casual overtime” as a result), gave her poor performance reviews, demoted her and eventually fired her for supposedly leaving work early one day.

Along the way, plaintiff complained to human resources and thereafter filed a series of charges with the Equal Employment Opportunity Commission (EEOC). Eventually a civil lawsuit alleging sex discrimination and retaliation was filed. There was a trial and plaintiff was awarded $85,600 in front and back pay, $30,000 in non-economic damages (i.e., for emotional distress), $403,950 in punitive damages (which was reduced to $300,000 because it is capped under federal civil rights laws) and $157,733.75 in attorneys’ fees.

There were a lot of issues discussed in the appellate decision, including that, for retaliation claims, you only have to show employment actions, such as the surveillance, that would discourage an employee from exercising rights and not a materially adverse employment action as required for discrimination claims. Also, the appellate court noted that the temporal proximity, by itself, of issuing three disciplinary actions within two months of plaintiff’s first EEOC charge – one within 4 days – may be sufficient, by itself, to show the causal connection between the protected action and the retaliation.

However, what I found interesting was the discussion concerning the punitive damages because there are not that many cases involving these damages.

The court relied on the three part test in Kolstad v American Dental Assoc, 527 US 526 (1999), for determining the appropriateness of punitive damages. First, the plaintiff needs to show that the discrimination was perpetrated with malice or indifference to federal civil rights. Second, the plaintiff must show that the employer is liable because the person is a manager and acted within the scope of his employment. Third, if the plaintiff makes the requisite showing, the employer needs to demonstrate “good-faith” efforts to comply with the civil rights law to avoid punitive damages.

The company relied on an unpublished district court decision to argue that, without proof of “egregious” conduct, the award of punitive damages is improper. But the appellate court disagreed, saying that evidence of egregious conduct is but one means of satisfying the requisite proof of “malice or reckless indifference.”

The company pointed to its “implementation, promulgation, and training regarding anti-discrimination policies” to show the company did not act with malice or reckless disregard of employees’ federal rights. However, as the court explained, evidence of “malice or reckless indifference” focuses on the behavior of the individual who discriminated, not the company. Oddly enough, the fact that the company provided anti-discrimination training to managers actually supported the jury’s finding that the hub manager acted with malice or reckless disregard of federal civil rights. Moreover, implementing an anti-discrimination policy is not a shield in the Sixth Circuit to punitive damages.

A corporate Human Resources manager testified that if an employee had complained, her next step would have been to open an investigation. However, she also conceded that she did not know of any investigation or report by FedEx concerning any of the plaintiff’s complaints. FedEx attempted to argue that the plaintiff was simply relying on testimony from a witness who was unaware of the investigation.

It asserted that “[i]t is not accurate to say that FedEx never investigated, only that the HR Department did not.” The appellate court found this to be an implicit admission that the Human Resources Department had not investigated plaintiff’s complaints and found the suggestion that the legal department had conducted one to be unsupported by evidence. Thus, there was sufficient evidence to show that, despite its formal anti-discrimination policy, FedEx did not engage in good-faith efforts to comply with Title VII.”

Moreover, plaintiff testified that another “senior manager” from Human Resources had met with her to discuss her complaint of discrimination following the poor performance review and comment by the hub manager. However, she claimed the Human Resources Manager responded by saying “he preferred the term ‘favoritism’ to ‘discrimination’ because ‘discrimination’ was an ‘inflammatory word.’ Rather than addressing [plaintiff’s] concerns about discrimination, [he] told her that ‘maybe [she] just had a bad review, and to keep [her] head down, and let the managers do their job.’” Boom, the ball was dropped.

So, having a policy is obviously just the beginning of the good faith defense. An employer has to ensure that its managers are actually complying with it and that all complaints of discrimination are investigated, and the results documented. Finally, when an employee complains about sex discrimination, it is not sufficient to do what this human resources manager did – basically tell her to put on her big girl panties and sweep the complaint under the rug. Had the Human Resources Manager investigated, the treatment may have been halted and the employer could have avoided paying over a half million dollars to its former employee.

Next week, in the final article of the Lessons Learned series, I will tell you about the enforceability of an oral agreement and how to avoid a costly mistake facing an employer.

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. September2019.

Lessons Learned – No-Fault Attendance Policies

By: Claudia D. Orr

 

This is the first article in a three part series called Lessons Learned. Each article will discuss the mistakes of others so we can avoid stepping in the same messes. Today we are going to review an employer’s no-fault attendance policy that violated the Family and Medical Leave Act (“FMLA”). I know you are thinking that a no-fault policy violating FMLA is nothing new. Well, true enough. However, read on because there is a twist in Dyer v Ventra Sandusky, LLC, a recent published opinion by the US Court of Appeals for the Sixth Circuit.

As is typical for no-fault policies, the Ohio automotive supplier didn’t require employees to produce a note from a doctor or other evidence to justify an absence. The employee just got between .5 and 1.5 points assessed depending on whether the employee called in, was late or missed an entire shift, etc. Discipline was imposed along the way and 11 points resulted in discharge.

But, unlike the no-fault systems you are familiar with, this one did not assess any points, at all, when the absence was protected under FMLA or another leave law. So, how did they run afoul of FMLA?  Glad you asked.

The system provided for the reduction of one point if the employee had perfect attendance for a rolling 30 day period. What a nightmare for tracking, right? I am guessing this had to be the brainchild of someone in operations, not Human Resources, because there is plenty enough to track already.

If an employee took time off for vacation, bereavement, jury duty, military duty, union leave or holidays, the company treated it as a day worked and kept the employee on track towards achieving the 30 day one point reduction. If an employee used a vacation day for a day off under FMLA, it also kept the employee on track for the reduction. So far, so good.

But employees were not required to use paid time off while taking FMLA leave. That turned out to be the rub (and no good deed ever goes unpunished). Most of my clients require the use of paid time off for FMLA leave either until it is exhausted or until the employee is down to a certain number of vacation days left. Of course even if the company required employees to drop vacation in during FMLA leave, it is unlikely any employee would have enough time to cover 12 weeks’ worth of days off. Eventually, the employee exhaust their time and the system would still run afoul of FMLA.

Because it was optional, plaintiff decided not to use his vacation time when he missed work for migraines which he had approved as intermittent leave under FMLA. Thus, every time he missed work for this reason, the “forgiveness” clock started over with “day one” of the requisite 30 day period needed to drop a point.

Eventually plaintiff was fired for having 11 points. So, while the no-fault system did not add points for FMLA time, it classified the unpaid leave as a missed day that reset the 30 day point dropping forgiveness clock.

The company argued that unpaid FMLA was treated the same as all other non-FMLA leave for purposes of the point reduction and therefore permissible. If the day off was paid, it counted as being worked. If it wasn’t paid, it didn’t.

The appellate court wasn’t buying it. Every time the plaintiff returned from a FMLA absence and had the no-fault clock reset to day one, he was denied the flexibility of the company’s no-fault system that others enjoyed. While the policy did not “formally hinge point reduction on not taking FMLA leave, the practical result is the same for someone like [plaintiff] who must take frequent intermittent FMLA leave.”

The problem was that “an employee benefit, the accrual of which, like the accrual of other benefits or seniority, must be available to an employee upon return from leave. … [B]enefits accrued at the time leave began…must be available to an employee upon return from leave.” Wiping out an attendance point is an employee benefit that affords employees the ability and flexibility to manage their absences. Plaintiff was denied this benefit when he returned from FMLA and started over with day one of the 30-day clock. Thus, the policy violated FMLA.

One lesson is this: keep it simple. It amazes me sometimes just how convoluted a client’s attendance system can become. But more importantly, review your system very carefully when you create it to ensure that there aren’t any negative effects on FMLA leave (or now the Michigan Paid Medical Leave Act).

Speaking of the Michigan Paid Medical Leave Act, we are still waiting for the Michigan Supreme Court’s decision on the constitutional challenge to that law. If you are contemplating changing your attendance or paid time off benefit systems, its best to wait for the court’s decision or you may need to change it again when the opinion comes out…hopefully soon. We of course will let you know when it does.

Next week in Part 2 of the Lessons Learned series I will tell you how a human resources manager dropped the ball and it cost his employer $300K in punitive damages!  You won’t want to miss that!

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. September 2019.

Don’t Fall Behind: Address these Employment Law Issues to Finish 2019 Strong

By: Miriam L. Rosen

 

For most, Labor Day marks the unofficial end of summer.  For employers – and particularly their human resource professionals – Labor Day marks the official beginning of the race to complete 2019 projects and plan for 2020.  Here some issues that employers should consider now to avoid falling behind:       

1.  New State Laws.   This year has seen a proliferation of new state employment laws across the country covering issues from anti-harassment, pregnancy rights, pay equity, non-compete restrictions, and paid leave to legalizing recreational marijuana. While some changes took effect during the year, such as the Michigan’s Paid Medical Leave Act, in many states the new requirements will be effective on January 1, 2020.   Whether your organization is located in a single state or is a multi-state employer, now is the time to familiarize yourself with new state laws and determine what changes are necessary to the company’s policies, procedures, agreements, and forms.

2.  Federal Compliance Issues.  This year did not bring any new federal employment laws, but there are plenty of regulatory issues for employers to address.

    • Pay Equity. For employers required to file the EEO-1 form, the September 30th deadline to submit 2017 and 2018 pay data is fast approaching.  The EEOC has also been active in pursuing equal pay issues through litigation under the Equal Pay Act and Title VII.   Year-end compensation reviews present an opportunity for employers to review pay practices and address pay inequities.
    • FLSA Salary Level Changes. Employers should anticipate that the Department of Labor will soon issue its final rule on the salary level for exempt status. Assuming no changes from the proposed rule issued in March 2019, the minimum salary will increase from $455 to $679 per week ($35,308 annually). The new rule is anticipated to take effect in January 2020. Employers should budget for salary adjustments necessary to maintain exempt status or make plans to change classification status if adjustments are not made.
    • Workplace Harassment. The EEOC continues to focus on workplace harassment. For the federal government’s fiscal year ending September 30, 2018, EEOC filings of workplace harassment lawsuits increased by 50% and individual discrimination charges were up by 12%.   With the 2019 fiscal year-end approaching, employers can expect to see that trend continue.   This means that employers must remain vigilant in establishing workplace practices that combat harassment, encourage prompt reporting when incidents occur, and continue to provide regular training.

3.  Training, training, training.   Speaking of training, as you are planning for 2020, employee training must be on the agenda.  Training on employment law issues is critical at all levels of an organization to ensure effective compliance efforts. Training efforts should begin at the time of hire and continue throughout employment.  Training does not have to time-consuming or boring.  Employers should deliver training through various methods to keep employees interested and engaged.  For respectful workplace and harassment training, the EEOC has recommended both in-person training and a scenario based approach.

4.  Crisis management preparation.  Employers have seen their fair share of crises in 2019 from data breaches to workplace violence to measles outbreaks.   Planning ahead is critical to an effective response and to ensure employment law compliance in challenging circumstances.   Employers should think through how various crisis situations may impact their organization and develop contingency plans to address such things as workforce communications when regular channels are down, back up employee information and payroll data if electronic systems are not accessible, and security arrangements for personnel and facilities.

Planning and implementation now will help employers minimize employment law risks in 2020. If you have questions regarding the issues above, you can contact the author or your employment law attorney.

This article was written by Miriam L. Rosen, who is Chair 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. September 2019.

DOL Opinion Letter: Rounding Employees’ Time

 

By: Claudia D. Orr

I remember hearing about an older partner bragging that when he was an associate, he knew all of the employment laws by heart, and the young associate saying that’s because there was only one law back then! Alright there were two. The National Labor Relations Act was passed in 1935 and it was followed by the Fair Labor Standards Act (FLSA) in 1938. But still, those were simpler times.

Now there are so many laws, and so many nuisances to those laws that it is difficult for an employer to get it right. But I had to chuckle when I read a recent Department of Labor (“DOL”) opinion letter that was advising on rounding principles for timeclocks.

This employer wrote the DOL asking if its payroll system rounded their employees’ time in a manner permitted under the FLSA. Stay with me here, because this will make you laugh too.

The employer advised that “employees generally clock in and out for each work period using a time clock or computer and the payroll software converts the amount of time an employee records working in each work period into a numerical figure in decimal form extended out to six decimal points (e.g., 7 hours and 30 minutes coverts to 7.500000 hours). The payroll software then totals the converted hours (extended to six decimal points) for each work period on each working day to calculate a numerical figure for daily hours, which is also extended out to six decimal points.

Next, the software rounds that number to two decimal points – if the third decimal is less than .005, the second decimal stays the same (e.g., 6.784999 hours worked rounds down to 6.78 hours); but if the third decimal is .005 or greater, the second decimal rounds up by 0.01 (e.g., 6.865000 hours worked in a day rounds up to 6.87 hours).” FLSA2019-9. Then the software calculates the wages by multiplying the hours worked by the wage rate. Seriously?

This is like the measurement of time used for a photo finish of the Kentucky Derby! Who enters their time by the one millionth of an hour? Do I have this right? [Clients, please don’t get any ideas…]. The employer wanted to know if rounding to the one hundredth of an hour is acceptable. Ok, so apparently the DOL decided to play along…

In relevant part, the DOL responded that “it is common and acceptable for employers to round time in determining an employee’s hours worked provided that doing so ‘will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.’ It has been our policy to accept rounding to the nearest five minutes, one-tenth of an hour [.1], one-quarter of an hour [.25], or one-half hour [.5] as long as the rounding averages out so that the employees are compensated for all the time they actually work.” Id (internal citations omitted). The DOL concluded that because the rounding practice was neutral on its face, the time keeping system was in compliance.

I am not sure if the employer was bragging about its system that tracked time to the one millionth of an hour or seriously confused. And, I can picture the employee at the DOL showing the employer’s letter to coworkers and laughing as he wrote the response.

But I will admit that I learned something. I did not know that an employer could round by a half hour. I have never seen that done. Keep in mind that Michigan requires rounding to the tenth of an hour because its wage and hour agency believes this is “more favorable” to employees. I think we can debate that. An employee would be pretty happy if he only worked 16 minutes and it was rounded up to a half hour. But I digress.

Bottom line, you can keep track of your employees’ work time by the millionth of an hour and round back to the hundredth of an hour and still comply with both the spirit and the intent of the original lawmakers when they passed the FLSA in 1938. Could their time clocks (or sundials) even track time like that back in the 1930s?

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. August 2019.

Sixth Circuit Finds Potential USERRA Violations

 

By: Claudia D. Orr

The Uniformed Services Employment and Re-Employment Rights Act (“USERRA”) has been around since 1994, but there are very few court decisions under this law. So, I was pretty excited to see a published opinion by the US Court of Appeals for the Sixth Circuit and couldn’t wait to read what it had to say about the law. Nearly 25 years after it was enacted, I still have not had a single client ask me any questions about this law. Maybe this will just be knowledge for me to store away in my gray matter.

In Hickle v American Multi-Cinema, Inc (“AMC”), plaintiff Jared Hickle was fired from his job. AMC claims it was for unprofessional behavior and for impeding an investigation. Hickle, who also served in the Ohio Army National Guard, believed it was due to AMC’s anti-military animus, so he filed suit under USERRA and the comparable Ohio law.

The district court in Ohio granted AMC’s motion to dismiss, but the Sixth Circuit reinstated the case. Let’s take a closer look at what happened.

Hickle began his career at AMC in 2004 while he was still in high school. Two years later he received a promotion to Operations Coordinator at the theatre. In 2008, Hickle joined the National Guard. Before he left for training, Hickle interviewed with Tim Kalman (the General Manager) for a management position. When Hickle mentioned that he would need a six month leave of absence for military training, Kalman immediately ended the interview.

Hickle did not receive the promotion, but the person who did thanked him “for joining the military. I just got promoted.” Hickle received a promotion into management following his training and became Kitchen Manager in 2013. During that time, Hickle continued to serve, including a one year tour in Afghanistan.

Senior Manager Jacqueline Adler, Hickle’s immediate supervisor, made several comments over the years about how frustrating his time off was to her and maybe he should be moved to the front of the house where there are more managers to cover for him when he is gone “and it wouldn’t be such a [headache] to her.”

In June 2014, Hickle was supposed to close on the Thursday night before his military obligation on Friday. Closing occurred well after midnight which was when his orders could commence. Thus, Hickle informed Adler he could not close on Thursday. In response Adler commented that he needed to find another job as he no longer met the minimum qualifications at AMC. Hickle told Kalman about Adler’s comment and he said he would take care of it.

After returning from military duty, Hickle asked to meet with Kalman and Adler. During the meeting Hickle provided Kalman with a pamphlet that provided a detailed explanation of an employer’s obligations under USERRA.  Maybe this is the reason none of my clients ever call with questions. After the meeting, Adler continued to make comments suggesting that Hickle could (or should) be fired for taking time off for military service, including in February 2015 when Hickle asked for time off for military duty and she suggested that they needed to replace him.

In April 2015, AMC was expecting huge crowds for “Avengers weekend.” Hickle reminded Adler that he would be gone that weekend for military service. Adler told him that he would be fired if he missed work that weekend. When Hickle reminded her that terminating him for military service would be illegal, she said “that’s okay. We will find something else to terminate you on.” AMC would later argue that Adler was just joking. However, Hickle was fired in April, not long after she made that comment.

Hickle was fired because of the chicken finger incident. No kidding, I am not making this up. Apparently, one of the employees told Hickle that Quinton Branham had asked her to make extra food so he could take it home at the end of the shift. She refused but a “to go” box was found with 10 chicken fingers in it. This exceeded the amount an employee could take home for a shift meal.

Branham admitted that they were his but that they had been abandoned and would have been tossed out. Hickle told the employees that they could not take food home that night but would be permitted to eat their meal at the theater. Well, when finger licking good chicken is at stake, apparently tempers flare. Another employee began cursing at Hickle and acting disrespectful. Hickle wrote a statement concerning the incident and denied losing his temper or otherwise acting unprofessional in return.

The next day, an employee told Hickle that Adler was plotting to get rid of him. According to the employee, Adler was asking an employee to get into an argument with Hickle in front of other employees so they could then write statements against him. While Hickle gathered employee statements about Adler’s plot, AMC was investigating Hickle about the chicken finger incident.

Hickle’s actions were viewed as impeding the investigation. Hickle was fired by Keana Bradley, a “corporate adjudicator” after reviewing findings by AMC’s corporate compliance office which conducted the investigation with input from Kalman.

Under USERRA, employees who perform military service are protected from termination because of their military service. A plaintiff has to show by a preponderance (a tipping of the scales of justice) that his protected status was a “substantial or motivating factor in the adverse employment action.” Then the employer needs to show by a preponderance that it would have taken the same action without considering the military service and for a lawful reason.

The Sixth Circuit found that the district court was wrong when it held that Hickle had not offered any direct evidence of the violation. The decision maker was well aware of Adler’s persistent, discriminatory comments and threats and that Hickle was gathering evidence of Adler’s plot to frame him.

The court, relying on the Supreme Court’s decision in Staub v Proctor Hosp, 562 US 422 (2011), applied the “cat’s paw” theory: “if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”

Hickle presented evidence of Adler’s comments, including that she stated she would find another reason to fire him, and of her plotting to get him fired. Thus, a fact issue existed that needs to be resolved by a jury to determine whether Adler may have influenced the decision.

AMC tried to rely on a case where the investigator was not aware of the plaintiff’s complaints about military leave, and conducted a thorough investigation, terminating the employee solely for lawful reasons. However, the court found the instant case to be distinguishable, stating: “[t]his was not a case in which the decisionmaker was acting on a clean record and in ignorance of lurking discriminatory motives. The decisionmaker was fully aware of the facts suggesting that the ‘impeding the investigation’ charge was pretextual.”

AMC also argued that it had never denied Hickle’s request for time off, which the district court found to be persuasive evidence of a lack of anti-military animus. But the Sixth Circuit said this was not “determinative, as there could be numerous situations in which an employer would grant requests for military leave (albeit grudgingly) for years and nevertheless finally wrongfully terminate an employee for taking such leave.” While granting leave helps AMC’s case, it does not insulate it from liability.

So, in the end, a jury will decide whether AMC relied solely on the chicken finger incident in deciding to fire Hickle and whether it would have reached the same result absent the allegations that he had impeded AMC’s investigation.

I see two lessons from this case.  First, and while recognizing that staffing can become a legitimate concern, I would encourage employers to be supportive of employees who are willing to serve in the military. At the very least, don’t be as blatant in expressing disapproval as Adler was.

Second, if you want to avoid the cat’s paw theory, choose your decision maker carefully and keep that individual completely independent and far away from the opinions and taint of the supervisor who will be accused of discrimination. Such strategy decisions may best be made with the assistance of legal counsel or the cat’s paw may end up without chicken fingers to fall back on.

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. August 2019.

Filing the EEO-1 Survey with Pay Data by Sept. 30

By:  Claudia D. Orr

 

Well, the time has come. Not only do many employers have to file an annual EEO-1, but now those employers must submit compensation data (known as “Component 2” data). Let’s first look at the EEO-1 so we are all on the same page.

The EEO-1 (or the Standard Form 100) must be filed by any employer having 100 or more employees (excluding “state and local governments, public primary and secondary school systems, institutions of higher education, American Indian or Alaska Native tribes and tax-exempt private membership clubs other than labor organizations”) and any employer having fewer than 100 employees if it is owned or affiliated with another company, or there is centralized control, ownership or management such that the entities constitute a single enterprise having 100 or more employees. Single enterprises include those that have “a central control of personnel policies and labor relations.” In addition, many federal contractors that have 50 or more employees must file an EEO-1 annually.

The EEO-1 survey for 2018 was required by May 31, 2019. This form asks about sex and races of employees in different job categories (executive/senior managers, first/mid-level officials and manager, professionals, technicians, sales workers, administrative support, craft workers, operatives, laborers and helpers and service workers). Click here for a sample form: https://www.eeoc.gov/employers/eeo1survey/upload/print-single.txt. There are different forms for single-establishment companies and multi-establishment companies.

The EEO-1 needs to be “certified” as accurate or the employer is in violation. It is interesting that if the person certifying the accuracy of the form willfully makes a false statement, they can be fined and imprisoned for up to five years. However, if an employer simply fails to file the form, and gets caught, the Equal Employment Opportunity Commission’s (“EEOC”) remedy is to petition a federal district court for an order.

The data for the survey is gathered during the “workforce snapshot period” which is a pay period selected by the employer between October 1 and December 31 of the reporting year. The employer only reports data on the EEO-1 for employees who were on the payroll during that snapshot period.

Now, in addition to providing the statistical information above, these same employers need to file Component 2 data by September 30, 2019.  The only exception is that while most federal contractors with 50 or more employees are required to file the EEO-1, federal contractors with fewer than 100 employees will not need to file the compensation data.

Employers are permitted to choose a different “snap shot” pay period for the Component 2 data if they want. The requested compensation data is obtained from the tax form W-2, Box 1. Thus, if an employee was hired at $100K annually, but only earned $50K according to Box 1 because he only worked six months, the employer would report the data in the compensation band that corresponds with $50K. If a corrected W-2 is issued, the employer can use the original or corrected Box 1 data. If the employee starts at one company but then transfers to a different company in the multi-establishment enterprise, the information is only reported for the company where the employee worked during the “snapshot” pay period.

There is also an “hours-worked” matrix for Component 2 data. Each cell in this matrix will correspond to a cell on the summary compensation matrix. For exempt employees, the employer should report accurate hours if time records are maintained. If not, the employer would use 40 hours a week for full time exempt employees and 20 hours for part-time exempt. If an exempt employee works 37.5 hours a week (common at many non-profits), the employer can use that number. “Hours worked” is time actually worked and does not include paid time off for vacation, holidays, etc.

On its website, the EEOC announces that the “web-based portal for the collection of pay and hours worked data for calendar years 2017 and 2018 is now OPEN. The URL for the portal is https://eeoccomp2.norc.org. EEO-1 filers should submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019…” The EEOC’s website has a lot of helpful information including a Frequently Asked Questions page: https://eeoccomp2.norc.org/Faq. There is also a link to a “suggestion box,” but please remember it’s not anonymous.

Critics are concerned about employers’ wage information being obtained by competitors or unions through the Freedom of Information Act (“FOIA”). But the EEOC claims there are exemptions under FOIA that “may” apply and protect the data from disclosure, but I wouldn’t count on it remaining confidential. I guess time will tell.

Adopt and Amend? Supreme Court May Decide Fate of Paid Medical Leave, Improved Workforce Opportunity Acts.

By:  Claudia D. Orr

 

On July 17, I listened to the oral arguments before the Michigan Supreme Court in In re Advisory Opinion on 2018 PA 368 & 369. It was riveting, but I walked away with only a sense of the direction that some of the justices may be leaning in the ruling.

Before we dive in, let’s review what has happened to bring the important issues of Michigan’s Paid Medical Leave and Improved Workforce Opportunity acts before the Supreme Court.

As you may recall, there were two citizen initiatives that were to appear on  the November 2018 ballot which, among other things, would have (1) provided 40 hours of paid sick time to employees who work for smaller employers (having fewer than 10 employees) and 72 hours of paid sick time to employees working for employers with 10 or more employees; and (2) increased the minimum wage rate to $10/hour with additional yearly increases, bringing the minimum wage rate to $12/hour by 2022 and phasing out the tip credit by 2024.

If both initiatives became law by vote of the citizens, the Michigan Legislature could only change them by a three-quarters vote of all members of both chambers of the Legislature, rather than a simple majority vote.

But the citizen initiatives were removed from the ballot when the Legislature adopted both laws.  If that was the end of the story, we would not now have issues to be decided by the Supreme Court. After the November election, the Legislature amended both laws and then Gov. Rick Snyder signed the amended versions into law during the lame duck session. That’s the rub. Can they adopt and then amend in the same session?

The amendments significantly watered down the benefits to employees, making both laws friendlier to employers.  For example, under the amended laws (which became effective March 29, 2019), paid sick time must only be provided by employers with 50 or more employees and then only 40 hours a year.  Similarly, the minimum wage rate was increased to $9.45/hour and it won’t reach $12/hour until 2030. In addition, the tip credit will stay in place.

Democrats in the Legislature asked the state’s new Attorney General Dana Nessel to opine on whether the so called “adopt and amend” process is constitutional under Article 2 § 9 of the Michigan Constitution, which begins by stating: “The people reserve to themselves the power to propose laws and to enact and reject laws, called the initiative, and the power to approve or reject laws enacted by the legislature, called the referendum.”

The Republicans made the same request of the Michigan Supreme Court, believing its conservative majority would provide a more pro-employer opinion. The Supreme Court agreed to hold oral arguments on the issue but did not commit to issuing an advisory opinion. It requested briefs from the attorney general’s office, arguing both for and against the constitutionality of the process that had been utilized by the Legislature and the new laws.

So, July 17 was the hearing which lasted approximately two hours. Therefore, much of what I am conveying now is being paraphrased. However, it does provide a glimpse into what happened.

Remember that the Supreme Court asked the attorney general’s office to brief and argue both sides of the issue. Assistant Attorney General Eric Rustuccia was first up to argue that the process and laws are constitutional. But, before making that argument, he first argued that the Supreme Court did not have the authority to issue an advisory opinion after a law has been given effect. It is clear that a request for such an advisory opinion must be made before the effective date of the law.

However, from the questions that were asked by the justices, it does not appear that the justices were at all convinced that the court had to issue its advisory opinion by any specific date. In fact, Justice Richard Bernstein pivoted from this issue to the substantive issues, asking whether the Legislature’s actions thwarted the will of the people?

The justices asked numerous questions, including whether amendments might further the will of the people while others might thwart it? And, setting aside the content of any specific amendment, couldn’t the process itself thwart the will of the people which reserved for themselves the right to ballot initiatives?

Next, attorney John Bursch argued for those in the Legislature who supported the constitutionality of the two new laws, indicating that the Legislature can amend any law at any time. That “how much of a thwart” should be permitted, a little or a lot, simply cannot be the test. Once the law was adopted by the Legislature, it is a law that can be amended at any time like any other law. He provided a hypothetical wherein the citizens pass a ballot initiative and the Legislature determines that there is not sufficient funding available. Shouldn’t the Legislature have the ability to change it?

The hypothetical was rejected by one of the justices who quickly asked whether anything like that occurred in this case? Justice Bernstein pointed out that the Legislature adopted the initiative as law. Isn’t the integrity of the Legislature, the belief of the people in their government, an issue that should be considered?  Bursch rejected that as the test, arguing that the only test is the text of the constitution and it contains no restriction on the Legislature’s ability to adopt and amend the law.

Next came arguments in opposition to the constitutionality of the process and the two new laws. Michigan Solicitor General Fadwa Hammoud, of the Attorney General’s Office, quoted the opening line from Art. 2 §9: “The people reserved for themselves the power…”  It is clear that the people did not intend to stand by as observers but were to be active participators in our government and Section 9 does not contemplate that the power of the people could be so easily thwarted. She argued that Section 9 was not intended to mean that the people could only propose simple suggestions for the legislature to consider.

If adopt and amend becomes the standard then Section 9 is in effect nullified and the people could never have their voice heard by ballot initiative. She argued that if the Legislature felt that a ballot proposal was harmful, its remedy is to have its own proposal on the ballot.

Chief Justice McCormack focused on the timing of the amendment, asking whether it would have been permissible for the amendment to occur in January, after the close of the 2018 regular session? What if during the same session, the Legislature just amended the law to correct citations in the adopted initiative? Is the issue the timing or the will of the people?

Justice Cavanagh asked if the court finds adopt and amend is not permitted, what would be the remedy? Do the original ballot initiatives stand? The will of the people was to have a state wide vote on the initiatives. So, should the initiatives be made law or should they be put on the ballot for a vote as originally intended?

Two more jurists (Mark Brewer and Samuel Bagenstos) argued that adopt and amend was unconstitutional. Mr. Bagenstos argued that adopt and amend allows the Legislature to kill any legislation that it does not agree with, and any tie on this issue should go to the people since the power was reserved to the people.

Justice Viviano asked if Art. 2 § 9 was put in place because of a mistrust of the legislature, why wouldn’t there have been more protections put in place in the constitution to prevent adopt and amend? Chief Justice McCormick said some amendments may further the will of the people while others could thwart. How should it be determined? Justice Bernstein asked doesn’t this process provide a ready means to thwart the will of the people?

Mr. Restuccia, who had reserved three minutes for rebuttal, had the final word.  He noted that it may be difficult to determine whether an amendment is friendly to the will of the people or not and this should not be the test. The question is whether the Legislature has the power to amend in these circumstances. The constitution is silent on this issue. There is no restriction or prohibition. The remedy is that if the Legislature doesn’t act to further the will of the people, they can be voted out. That is the remedy.

So, is it the process or the change in the law itself that will be the primary issue for the Supreme Court? Maybe it will be both. Were the new Paid Medical Leave Act and minimum wage rate law constitutionally enacted or not? If not, what is the remedy? Do the original initiatives become law or do they get placed on the ballot?

Unfortunately, I can’t provide you with answers to these questions or predict what the Supreme Court will do with any certainty, but I did walk away with the sense that the court was troubled by what had occurred. Hopefully the Supreme Court will issue an advisory opinion. Stay tuned.

This article was written by Claudia D. Orr, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and an experienced labor/employment attorney at the Detroit office of Plunkett Cooney (a full service law firm and resource partner of Detroit SHRM) and an arbitrator with the American Arbitration Association. 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. July 2019.