Arbitration Clauses, Class Action Litigation

Class Action Waiver and Arbitration Clauses in Limbo

Mandatory arbitration clauses and class action waivers have not yet ripened into the panacea that employers had hoped.  While they can sometimes eliminate or reduce the expense and exposure of legal claims and even eliminate class actions, they also can spawn their own litigation as to enforceability, as three recent decisions illustrate.

First, federal Judge Joseph F. Leeson Jr. in Allentown, Pa., last week issued a stay of a Fair Labor Standards Act lawsuit for overtime pay against U-Haul International and its subsidiaries, pending the outcome of three cases on arbitrability and class action waivers now pending before the U.S. Supreme Court.  That will delay the U-Haul case for months, as the Supreme Court won’t hear oral argument on its cases until October 2, with decisions to follow later this year or next.

Second, a state court in New Jersey rejected a mandatory arbitration clause that was sent to employees electronically, requiring them to click on a box acknowledging that they had read and understood the policy.  Held the court in Dugan v. Best Buy Co. Inc., “Plaintiff’s mouse-click on the acknowledgment box did not manifest his assent to the policy, only that he read and understood the policy.”  Instead, the mouse-click should have said something like, “I agree.”

And third, the U.S. Court of Appeals for the Third Circuit (over federal courts in Pennsylvania, New Jersey, Delaware and the U.S. Virgin Islands) ruled last month that under New Jersey law, in order for an arbitration clause to be enforceable as to statutory claims (such as employment discrimination or wage payment violations), the clause must (1) make clear that the employee is agreeing to arbitrate statutory claims, (2) make reference to the types of claims being waived, such as “workplace discrimination claims,” and (3) explain the difference between arbitration and litigation, including the waiver of the right to a jury trial.  Because the clause in Moon v. Breathless Inc. did not meet all three of these standards, the appellate court ruled it unenforceable.  And so the parties, after a year of litigation over arbitrability, can advance to litigation on the merits.  Fun.

So a word to the wise – check your arbitration clauses closely to be sure they are enforceable under both state and federal law.  Legal review is definitely recommended.  And watch for the Supreme Court’s decision soon on its arbitration trio – NLRB v. Murphy Oil USA, Epic Systems v. Lewis, and Ernst & Young v. Morris.  That could be a game changer.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Fair Labor Standards Act (FSLA), FLSA Requirements, Uncategorized

The Overtime Rule Clock is Ticking Down

As we previously reported, the newly released Final Rule updating overtime regulations under the Fair Labor Standards Act takes effect December 1, 2016.

Among other changes, these new regulations nearly double the minimum salary for “white collar” exempt executive, administrative and professional workers to $913 per week ($47,476 annually for a full-year worker).  Here are a few key points to keep in mind as your company prepares for the new rules to kick in:

  • Now is the time to reevaluate your overtime exposure. The pending application of the new overtime regulations should prompt each employer to reexamine whether it is properly applying the overtime laws – old and new.  If changes are needed, this is the time to make them, coordinating with the December 1 effective date of the Final Rule.
  • Advance preparation is essential to anticipate and make any adjustments to your workforce to limit the costs of complying with the law.  Taking action to reorganize the workforce, change employees from salary to hourly, limit overtime, and redefine jobs to meet the exemptions can all dramatically reduce overtime risk, cost, and exposure.
  • Job descriptions should be reviewed and revised to fit the job being performed and any exemption being claimed. Job descriptions are often important evidence that the Department of Labor and courts examine to determine whether an exemption applies.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Joint Employer

New Joint Employer Guidance from the DOL

tempIn case you missed it, on January 20, 2016, the U.S. Department of Labor (“DOL”) issued new guidelines on joint employment under the Fair Labor Standards Act and the Migrant Seasonal Agricultural Worker Protection Act. The guidance can be found here. Although the Administrator’s Interpretation does not have the force of law, it provides helpful guidance and examples of the DOL’s opinion about what factors apply in determining when two or more employers may have “joint employment” liability to pay wages and overtime to particular employees.

This “joint employer” issue is most common in two scenarios covered by the guidelines: (1) horizontal joint employment, where two or more entities have common ownership or management, and exercise joint control over the work of the employee(s); and (2) vertical joint employment, where one employer serves as an “intermediary employer” – often a temp agency or subcontractor – for another employer that exercises direction and control over the work performed.

Given that this is an area of emphasis with the DOL, employers should check their existing practices and agreements to identify and deal with any potential exposure.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Ban the Box, Binding Arbitration Agreements, FLSA Requirements

New Year’s Resolutions to Stay Out of Trouble at Work in 2016

office partyyyy

With the New Year upon us, this is the perfect time to consider whether your employment policies and
practices need updating or fine-tuning.  Based on recent developments in the law and our experience advising hundreds of employers and employees in 2015, here are five recommended New Year’s Resolutions to stay out of trouble at work:

  1. Consider implementing mandatory and binding arbitration agreements for your workforce, including express waivers of the right to a jury trial and the right to participate in collective or class actions. Per our previous Updates, these agreements must be properly drafted to be enforced, but, if that is done, then they can help an employer avoid thousands and even millions of dollars in legal fees, liabilities and management headaches.
  2. Prepare for Overtime-ageddon. President Obama and the U.S. Department of Labor have proposed new regulations under the Fair Labor Standards Act that would more than double the minimum base salary required for the most common exemptions to overtime pay.  Although recent reports indicate the regulations will not be finalized and take effect until late this year or early 2017, now is the perfect time to audit your company’s wage and hour compliance and take steps to make any cost-saving changes and workforce adjustments before the new, tougher regulations take effect. Updating job descriptions is one powerful step that can support appropriate wage and hour classifications.
  3. Be nicer to job applicants. Numerous states and cities recently have adopted strict measures limiting what and when employers can ask job applicants about their criminal records.  Be sure your company complies with these various “ban the box” laws.  Also check your company’s compliance with the federal Fair Credit Reporting Act, which requires mandatory disclosures and notices to employees whenever an employer seeks background checks by a third party on employees or applicants, or uses the results to make employment decisions.
  4. Keep up with the electronic age. Yes, Virginia, there is an Internet. Most workers are using electronics and mobile devices throughout the day, yet their employee handbooks are often still stuck in the horse-and-buggy days.   Do you have a “don’t text and drive” policy, as recommended by OSHA?  Are there written measures that protect your company’s electronic systems and data from internal misappropriation or external cyber-attacks?  What does your company do with the electronic data on an employee’s personal phone, tablet or computer when he or she resigns or is fired?  Are you limiting non-exempt employees’ after-hours access to work email to avoid potential wage and hour violations?  If you don’t know the answer to one or more of these questions, your company could be facing an expensive wake-up call.  Get help.
  5. Get more organized – find those employment agreements. Often when we are called on to help a client involved in non-compete litigation, we find that key employment agreements are missing or not signed.  This can be avoided by conducting regular reviews of personnel files to ensure all necessary documents and agreements are signed and preserved.  Not having the signed documents can severely hamper an employer’s ability to enforce its rights and protect itself from unfair competition and stolen trade secrets.  This simple annual review can be conducted by a clerical employee and do not require legal fees or expenses.  Do it now, and avoid that painful “D’oh!” moment in the future.

Bonus resolution, free to subscribers:

  • Do not procrastinate. The Update staff needs to work on this one, as this article was supposed to go out in December!

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

 

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Conscientious Employee Protection Act, Fair Labor Standards Act (FSLA), Whistleblower, Whistleblower Complaints

Whistle-blowers and Watchdogs – Beware of the Bite

Three courts recently confirmed that employers need to beware of retaliation claims by human resources professionals and other compliance employees who identify and report unlawful practices as part of their jobs.

In July, the New Jersey Supreme Court in Lippmann v. Johnson & Johnson, Inc. rejected lower court decisions that had limited the applicability of the state’s main whistleblower law, the Conscientious Employee Protection Act (CEPA), when the whistle-blowing at issue was part of the employee’s job duties.  The Supreme Court found no statutory basis for that court-developed limitation and held that CEPA therefore applies with equal force to protect “watchdog employees” like compliance and human resources officers who object to unlawful conduct while performing their normal job duties. 

Similarly, on August 24, in Kavanaugh v. C.D.S. Office Systems, Inc., a federal court in Illinois refused to dismiss a retaliation claim by a human resources director who was fired shortly after she reported to her boss, the CFO, concerns that the company was not paying its IT engineers overtime, in violation of the Fair Labor Standards Act.  And on August 10, the U.S. Circuit Court of Appeals for the Fourth Circuit reversed a ruling in DeMasters v. Carilion Clinic that a “manager rule” prevented retaliation claims by an EAP counselor whose job responsibilities included reporting discrimination and harassment claims.

It remains true that some laws, including the First Amendment, limit the protections against retaliation for employees who are engaging in the protected conduct as part of their job duties.  But these three recent cases make clear that many anti-retaliation laws do not have such limits.  Managers are well-advised to check the applicable legal standards under state and federal law before taking an adverse action against an employee who has reported – internally or externally – a suspected violation of the law, even if the report was part of his or her job and even if the report had nothing to do with the reasons for termination.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Fair Labor Standards Act (FSLA), FLSA Requirements, Independent Contractors, US DOL

Crisis = Opportunity with FLSA Changes

time is moneyFrom the outrage and dread being spewed on the blogos-fear, one would think that the latest moves by the U.S. Department of Labor (DOL) on overtime pay and the misclassification of independent contractors are nothing but bad news for employers.

But the Update is here to report a silver lining.

As you may have seen reported in July, President Obama announced proposed federal regulations for the Fair Labor Standards Act that would substantially revise the law on “white collar” exemptions to overtime pay, including more than doubling the minimum salary required for such exempt positions.  As a refresher, “white collar” employees who perform certain executive, professional and administrative duties can be exempt from overtime pay, if they are paid a base salary that exceeds the minimum threshold (currently $455 per week).  The proposed DOL regulations are far from final, but they give employers a great opportunity to review – and change  – any problematic treatment of employees who, arguably, should have been overtime eligible all along.

The same applies to the recent “interpretation” published by the DOL on July 15, 2015, in relation to the misclassification of employees as “independent contractors.”  According to the DOL, “most workers” now should be considered employees rather than independent contractors, and the DOL intends to “crack down” on employers that misclassify portions of their workforce as independent contractors in order to avoid overtime pay obligations, wage taxes, benefit costs and other expenses.  If a worker performs tasks that are “integral to the employer’s business,” then that worker is most likely an employee, according to the DOL.  Likewise, if the worker is “economically dependent” on the employer, then he must be an employee, the DOL contends.

Instead of merely complaining about this double-barreled DOL attack, employers should seize the opportunity to review and revise any longstanding and improper treatment of employees, thus emerging stronger than ever — before any new rules kick in.  If employers find that some employees are currently not being paid overtime – or treated as employees – but they should be, the new DOL efforts provide a good rationale for making a change now, without highlighting to employees that any pre-existing practices could support a claim for back pay.

For example, an employer that has not been paying overtime wages to “assistant managers” who might be seen by the DOL as non-exempt senior retail sales clerks, could use the proposed DOL regulations as a reason to shift the employees from salaried to hourly, with overtime.  A typical announcement in such a situation could state, “In light of newly proposed federal regulations that will change the rules with regard to ‘exempt’ salaried employees, ABC Company has reviewed and updated its pay policies.”  The employer can then bring the employees’ pay into compliance with less chance of raising a red flag — or class action lawsuits – by an employee asking, “Hey, should I have gotten overtime pay in the past?”

Likewise, employers can change independent contractors to employees – where existing law supports the reclassification – and can explain that the DOL has just come out with “new” guidance that, in the company’s view, makes it more appropriate to pay the worker as an employee going forward.

Using the DOL initiatives as the driving force behind such changes in pay is a proven strategy that can reduce the employer’s risk of wage and hour claims, and bring the workforce into greater compliance with federal law.

Action item:  The first step in this process is to conduct a “wage and hour audit,” either internally or with outside employment counsel, to determine whether the employer has any compliance vulnerabilities (most employers do), either under existing law or the proposed changes in the law.  Once that is done, the employer can then work with counsel to determine the best path forward to make any changes needed, including the important “messaging” noted above that can limit the risk of individual or class action suits.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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Fair Labor Standards Act (FSLA), FLSA Requirements

Paralegal Payback.

Most lawyers, especially those who deal with the Fair Labor Standards Act (FLSA), know that paralegals are generally considered non-exempt employees, entitled to overtime pay. One would think that Pasricha & Patel, a law firm in Edison, N.J., that occasionally handles plaintiffs’ FLSA claims, would know that, too.

But maybe not.

Jason Barros, a former paralegal at the firm, has filed a collective action lawsuit alleging he and four other firm paralegals have been paid a flat salary and denied premium pay for hundreds of hours of overtime over the past three years. Barros claims the violations are willful, as the law firm should know better.

The case serves as a reminder to everyone in the legal field – be sure your paralegals are paid by the hour and paid overtime, or be prepared to justify their treatment as exempt professionals through some unusual facts, such as having a principal duty of managing other employees or a requirement that the paralegal have an advanced degree (such as an engineering degree) to perform specialized paralegal work.

Michael Homans is a Labor & Employment attorney and founding partner of HomansPeck LLCFor more employment law updates, including news and links to important information pertaining to legal developments that may affect your business, subscribe to Michael’s blog, or follow him on Twitter @EmployLawUpdate.

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