Last week the D.C. Circuit Court of Appeals issued its ruling in a case brought by several employer groups seeking to challenge the legality of the NLRB rule requiring employers to post an employee rights poster informing employees of their rights under the NLRA to unionize, among other things. As employers will recall, the NLRB had postponed the effective date of the posting requirement several times pending various court challenges to the legality of the required poster. The NLRB then gained a victory before a District of Columbia district court, which held that the poster was lawful. Employer groups appealed to the D.C. Circuit Court of Appeals, which temporarily enjoined the NLRB from implementing the posting requirement until a ruling on the merits of the appeal. Last week, the Court of Appeals reversed the district court decision and held that the NLRB’s posting rule violated employers’ free speech rights and was, therefore, unlawful. For now, employers remain free of any obligation to post the NLRB employee rights poster.

The “Employee Tricked Me Into Firing Her” Defense

The NLRB continues to issue decisions about whether an employer can lawfully terminate employees based on social media activity, and whether workplace policies violate the law protecting employees’ rights to engage in protected concerted activity. However, last week’s decision in In re Design Technology Group, LLC had an interesting twist.

Three sales employees were discussing several work-related issues in person, and their discussion continued on Facebook. Among the complaints made were about how the store manager treated them and other store employees. The store manager later learned about the complaints, and subsequently fired the employees. At the hearing, the employer made much about the fact that the employees were “giggling and smiling” at the termination meeting, and that Facebook posts after the meeting suggested that the employees were happy to have been fired, and perhaps even set up the circumstances in order to get fired and sue the employer.

Adopting the ALJ’s decision, the NLRB was not persuaded by the employer’s defense:

The judge correctly rejected the Respondent’s ‘discharge conspiracy’ theory. The Respondent contends that the Facebook postings were not protected because the employees had ‘no honest and reasonable belief’ that the purpose of their conduct was for the mutual aid and protection of employees’ and that instead, the employees ‘schemed to entrap their employer into firing them.’ The judge found the conspiracy theory to be ‘nonsensical,’ and we agree. There is no credible evidence that the employees’ actions were undertaken to entrap the Respondent into committing an unfair labor practice. But even if the employees were acting in the hope that they would be discharged for their Facebook postings, the Respondent failed to establish that the employees’ actions were not protected by the Act.

Employer Take Away: What should you as an employer take away from this development?

The NLRB says that entrapment is not a valid defense to a proposed violation of employees’ rights to engage in protected concerted activity. That is, if the employees did engage in protected concerted activity under the National Labor Relations Act, it does not matter if they did so for the purpose of getting fired.

It remains to be seen whether an “entrapment”-like defense to these cases will gain any traction in later cases. For the time being, it would behoove you to focus less on the motives of the employees engaging in certain conduct, and more on whether the conduct itself is protected, before deciding to take some adverse action because of the conduct.

California’s Legislature is considering AB10 this session, which would increase California’s minimum wage from the current $8 per hour to $8.25 per hour next year, to $8.75 per hour in 2015, and to $9.25 per hour in 2016. Beginning in 2017 and thereafter, the minimum wage would be automatically adjusted upward based on the state’s inflation rate. Recent legislative efforts to increase California’s minimum wage rate have failed and it is not clear whether this bill will fare differently. However, the bill did recently pass the Assembly Labor and Employment Committee. California’s minimum wage is already one of the highest in the country. Only a handful of states have minimum wage rates higher than California’s.

On the federal level, legislation has also been introduced to raise the federal minimum wage from the current $7.25 per hour to $8.20 per hour three months after the legislation is passed, to $9.15 per hour one year after the legislation is passed, and to $10.10 per hour two years after the legislation is passed. Starting the third year after the legislation is passed, the federal minimum wage would be automatically adjusted upward based on the Consumer Price Index. The federal legislation, known as the Fair Minimum Wage Act of 2013, would also increase the minimum wage for tipped employees over the next three years from $2.13 per hour to 70% of the minimum wage.

We will post developments on this and other employment-related legislation here.

Employer Hit With Unpaid Vacation Wages Even Though Union Agreed Vacation Was Properly Paid Under CBA

California employers should all be aware that California law requires employers to pay out all accrued, but unused, vacation pay immediately upon termination of employment. In other words, use it or lose it policies and/or policies that provide for forfeiture of vacation on termination of employment are illegal in California. Employers who fail to timely pay vacation wages on termination of employment are liable not only for the actual amount of unpaid vacation wages, but also for “waiting time penalties” of a full day’s regular wages for each day the payment is late, up to 30 days. There is, however, an exception to the rule prohibiting a forfeiture of vacation wages for unionized employees if the collective bargaining agreement “otherwise provides” (meaning it provides for something other than full payment of all vested vacation upon termination of employment). Recently, a California court interpreted this exception narrowly to hold that a collective bargaining agreement (“CBA”) must “clearly and unmistakably” specify that vested vacation does not need to be paid in order for a waiver to be found. In other words, an implied waiver or a waiver inferred from the totality of the circumstances (such as the past mutual practice of the union and the employer) is not good enough. The case is Choate v. Celite Corp..

In the Choate case, the employer granted its employees between one and five weeks of vacation annually. At the beginning of each year, the employer calculated the yearly vacation allotment based on an employee’s length of service and the number of hours the employee worked the year before. Under the CBA, employees terminated from employment were entitled to “receive whatever vacation allotment is due them upon separation.” Both the union and the employer understood this provision to mean that employees were entitled to be paid for the vacation time already allotted to them for the year of their termination, but not for any vacation time they had accrued toward the next year’s allotment by virtue of having performed a certain number of hours of work. The employer paid out vacation in accordance with this understanding. Notwithstanding the apparent agreement of the union and the employer as to the interpretation of the CBA’s vacation provision, a group of terminated employees sued for unpaid vacation wages and waiting time penalties.

The court held that the employer owed the pro rata vacation wages earned during the termination year because the CBA did not “clearly and unmistakably” waive employees’ right to receive those vacation wages. The court held that it was not sufficient that the union had for years agreed with the employer’s interpretation of the vacation provision. Although the court held that the vacation wages were owed, the court held that the employer did not owe waiting time penalties because the employer’s failure to pay was not “willful.” The court held that the employer reasonably believed that the wages were not owed based not only on the union’s agreement but also on conflicting case law, some of which suggested that an implied waiver standard was proper.

Employers with unionized employees who do not pay out all accrued, unused vacation on termination of employment should ensure that the applicable CBA clearly and unmistakably waives this entitlement.

The National Labor Relations Board (NLRB) decided in Banner Health System dba Banner Estrella Medical Center and James A. Navarro, Case No. 28-CA-023438, that an employer’s blanket rule requiring employees to maintain the confidentiality of pending internal company investigations violated the employees’ Section 7 right to discuss discipline or disciplinary investigations involving their fellow employees. Admittedly, employers will be concerned that the NLRB’s position complicates an employer’s ability to protect the integrity of an ongoing investigation. Nevertheless, I recommended that employers outside of California should treat each investigation on an individualized basis and that employers should document its specific business rationale for requesting employee confidentiality during an investigation. California in my opinion does not permit such a luxury.

The NLRB’s Division of Advice issued a Memorandum regarding this issue. In Verso Paper, NLRB Div. of Advice, No. 30-CA-89350, 1/29/13 [released 4/16/13] Associate General Counsel Barry J. Kearney advised that the employer maintained an overbroad rule requiring employee confidentiality to maintain the integrity of all internal investigations. The company’s Code of Conduct specifically provided:
Verso has a compelling interest in protecting the integrity of its investigations. In every investigation, Verso has a strong desire to protect witnesses from harassment, intimidation and retaliation, to keep evidence from being destroyed, to ensure that testimony is not fabricated, and to prevent a cover-up. To assist Verso in achieving these objectives, we must maintain the investigation and our role in it in strict confidence. If we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

Reviewing this policy, Mr. Kearney reiterated the Board’s position from Banner Health that an employer must show more than a generalized concern with protecting the integrity of its investigations. “Rather, an employer must ‘determine whether in any give[n] investigation witnesses need[ed] protection, evidence [was] in danger of being destroyed, testimony [was] in danger of being fabricated, and there [was] a need to prevent a cover up.” Thus, according to Kearney, a blanket rule prohibiting employee discussions of ongoing investigations is unlawful because it does not require the employer first to demonstrate a particularized need for confidentiality in any given situation. He therefore advised the NLRB’s Region 30 Director to issue a complaint against the employer in the absence of settlement.
In a footnote to his Memorandum, Mr. Kearney provided employers with a safe harbor policy that would avoid the potential Section 7 pitfalls. Specifically, he noted that the first two sentences of the employer’s rule lawfully set forth a legitimate interest in protecting the integrity of its investigations and then recommended modifying the remainder of the rule to lawfully advise employees that:
Verso may decide in some circumstances that in order to achieve these objectives, we must maintain the investigation and our role in it in strict confidence. If Verso reasonably imposes such a requirement and we do not maintain such confidentiality, we may be subject to disciplinary action up to and including immediate termination.

Keeping all of the above in mind, in my opinion telling employees to keep it confidential within the context as noted above, is a slippery slope. Besides, we all know it really does not matter! Employees will talk so why put yourselves at risk.

A. All Personnel and Employment Records made or used (including, but not limited to, requests for reasonable accommodation, application forms submitted by applicants, and records dealing with hiring, promotion, demotion, transfer, lay-off or termination, rates of pay, compensation, tenure, selection for training or apprenticeship, or other terms of employment) must be preserved for the following periods:

1. Private employers must retain such records for one year from the date of making the record or the personnel action involved, whichever occurs later, but in the case of involuntary termination of an employee, they must retain the terminated employee’s personnel or employment records for one year from the date of termination.

2. Educational Institutions and State and Local Governments must retain such records for two years from the date of the making of the record or the personnel action involved, whichever occurs later, but in the case of involuntary termination of an employee, they must retain the terminated employee’s personnel or employment records for two years from the date of termination.

B. Other Records must be retained for the following periods:

1. Labor Unions which are “referral unions” must retain all membership and referral records (including applications for same) for a period of one year from the date of making the record.

2. Apprenticeship Committees that control apprenticeship programs must retain all apprenticeship records, including, but not necessarily limited to, requests for reasonable accommodation, test papers completed by applicants, and records of interviews, for a period of two years from the date of making of the record.

C. Records Relating to a Charge of Discrimination

Where a charge of discrimination has been filed under Title VII, the ADA, or GINA, or where a civil action has been brought by the Commission or the Attorney General, the respondent private employer, state or local government employer, educational institution employer, labor union, or apprenticeship committee must retain all records related to the charge or action until final disposition of the charge or action. The date of final disposition means the date of expiration of the statutory period within which the aggrieved person may bring an action in a U.S. District Court or, where such an action has been brought, the date on which such litigation is terminated.

Note: This information came directly from the EEOC website.

Two years ago the EEOC published the regulations to the employment provisions of GINA, the Genetic Information Nondiscrimination Act. According to the EEOC, GINA has 4 stated purposes:
1. To prohibit the use of genetic information in employment decisions;
2. To restrict employers and others from requesting, requiring, or purchasing genetic information;
3. To require that employers maintain genetic information as a confidential medical record, with strict limits on disclosure; and
4. To provide remedies for individuals whose genetic information is acquired, used, or disclosed in violation of the Act.

1.
GINA does not just cover employees’ genetic information. It also covers the genetic information of relations as attenuated as great-great-grandparents, great-great-grandchildren, and first cousins once-removed (the children of first cousins).

2.
GINA is intended to be a broad anti-discrimination statute. It not only prohibits discrimination against employees on the basis of genetic information in hiring, firing, compensation, terms, conditions, or privileges of employment, but also harassment on the basis of genetic information, and retaliation where an individual opposes any act made unlawful by GINA, files a charge of discrimination or assists another in doing so, or gives testimony in connection with a charge.

3.
GINA’s prohibition against the request of genetic information about an employee or family member includes Internet searches in a way that is likely to result in obtaining genetic information, even if the information is publicly available. However, if an employer “inadvertently learns genetic information from a social media platform which he or she was given permission to access by the creator of the profile at issue” (such as an employee who posts family medical history on his Facebook wall, and his supervisor, with whom he is a Facebook friend, sees it), GINA has not been violated. Employers are similarly protected for genetic information employees inadvertently disclose during casual “water cooler” conversations.

4.
GINA permits employers to obtain genetic information as part of employer-provided health or genetic services, such as voluntary wellness programs. While the regulation do not define “voluntary,” they do provide that employers can offer certain financial incentives to employees without stripping the wellness program of its voluntariness.

5.
GINA requires that employers keep all genetic information confidential, stored in separately maintained confidential medical files, consistent with the medical information storage obligations of the ADA. There is, however, a grandfather provision for genetic information obtained before November 21, 2009. Employers need not strip that information from non-confidential files.

Take heed! With the rising cost of healthcare, employers seeking to avoid such costs are trying to get “creative.” This area is an emerging minefield of deception that could be costly.

The updated forms are available at http://www.dol.gov/whd/fmla/2013rule/militaryForms.htm, and the updated poster is available at http://www.dol.gov/whd/regs/compliance/posters/fmlaen.pdf.

What are the changes?

Most employers will need to be concerned only with the changes to leave available for military family members, and should review their FMLA policies and practices to ensure compliance with these new rules. Employees may take leave to care for the injuries of veterans who have left service within the past five years. Leave is also available for injuries that preexisted military service but were aggravated in the line of duty. (Before, employees could only take leave for current service members whose injury occurred in the line of duty in the first instance.) Qualifying exigency leave has also been expanded, allowing leave for employees whose qualifying family members serve in the regular Armed Forces as well as the National Guard and Reserves, requiring in both cases a foreign deployment. Qualifying exigency leave is also expanded to 15 days for qualifying family members of service members on rest and recuperation leave.

The DOL’s rules also incorporate new eligibility and recordkeeping requirements for airline flight crew members, which should be closely reviewed by affected employers.

What do employers need to know about the FMLA forms and poster?

As part of its final rule issuance, the DOL also updated its FMLA model forms regarding military family leave and required poster to be used starting March 8, 2013. Although employers are not required to use the DOL’s forms, many employers do. (However, if you use the DOL’s forms, we recommend you add GINA “safe harbor” language.) All FMLA-covered employers must post the DOL’s FMLA poster in a conspicuous place. Covered employers who also have FMLA-eligible employees must also provide a copy of the FMLA poster to employees as part of the employee handbook or in a handout provided to employees upon hire.

Ignoring the “extraordinary deference” to which the IWC’s orders are entitled, a California appellate court has now adopted a portion of a manual prepared by the Division of Labor Standards Enforcement (DLSE) which states that “all” hours” worked means the minimum wage must be paid for “each and every” hour worked, and applied it to service technicians at an auto dealership. The decision applies this pay obligation only when the flat rate earned by a technician exceeds pay at two times minimum wage: when two times minimum is paid because “flag hour” pay is lower, the decision is inapplicable. Why? Because, in the court’s view, when a technician has gaps in time – “down time” — between flag hour work, he isn’t’ being paid at all. The court’s ruling is based on an opinion in another court of appeal decision involving hourly paid employees, where an employer paid for some hours worked during the payroll period, but not others. When flag hour pay falls below the minimum wage and the employer pays minimum for all hours worked, there is no “down time” that is unpaid.

If applied broadly, the decision could impact not only all piece-rate employees in California, but inside sales persons who are paid commissions.
Dealers are rightfully up in arms. They have for years faithfully relied on the IWC Order and the DLSE’s Keyes Motors formula for calculating the regular rate of pay, which allows spreading piece-rate pay over all hours worked by the employee and applying that regular rate to the number of premium hours to compute overtime pay. The DLSE has long approved this formula and expected dealers to apply it in computing overtime.

The defendant in the pending case has asked the court for reconsideration and, if it is denied, will likely file a petition asking the California Supreme Court to overturn this unwarranted decision. If the decision is not reversed, this and other decisions will eliminate the right to pay piece rate, flag hour and commission pay.

We have assisted numerous employers, including dealerships, in defending and resolving complex wage matters. We are now preparing legal papers to immediately seek a stay of any complaint filed against an employer which challenges the employer’s piece rate, flat rate or commission compensation plan on the grounds stated above. Let us know immediately if a complaint is filed against you and we can assist you.

Arthur Silbergeld in association with Jim Potts

The I-9 form is used to verify work authorization of new hires in the U.S. as well to re-verify work authorization of foreign nationals working with temporary work authorization. The new and old forms are very similar in content. However, unlike the old one-page form, the new form is 3 pages long and easier to understand and fill out. The new form also clearly differentiates between employees who only need to be verified once (U.S. Citizens and permanent residents) and foreign nationals who are here temporarily and must be re-verified whenever their work authorization expires.

Regarding the list of acceptable documents that an employee tenders, the new form emphasizes that if a social security card is selected by the employee as a List C document, only an unrestricted social security card is acceptable. If the social security card has any restrictive language on it, it cannot be used for I-9 purposes since the individual may have obtained it when they had temporary work authorization and now no longer do.

Although there is a Spanish version of the I-9 form as well, it may only be used in Puerto Rico.

As a reminder, at the time of hire, employers must inspect an original document chosen by the employee from List A, or one each from Lists B and C. It must be done within the first 3 days of hire. It is recommended that copies of the documents be attached and retained to the I-9 as further proof of the good faith efforts by the Employer to comply with the mandate. If the documents appear to be authentic, then the employer will not be liable if it later turns out they are not authentic. The I-9 forms should be retained for 3 years after termination of employment. Employers who have enrolled in E-Verify must still have a paper or digital I-9 on file for every employee.

Employers are encouraged to periodically audit their I-9’s and take corrective action where errors are found.

In Gonzalez v. Downtown LA Motors LP, a decision of the California Court of Appeal filed on March 6, 2013, the Court dealt a potentially devastating blow to employers who pay employees – including auto dealer service technicians – on a piece rate (or flag hour) basis. The decision could impact dealerships throughout California, as well as garment industry, agricultural, transportation employers and those companies that pay inside sales employees on commission.

The right to compensate employees on a piece rate basis has been authorized in the California Labor Code since at least 1919, and that compensation system is used by employers of 1 million or more employees throughout California. All of the Industrial Welfare orders acknowledge piece rate compensation and state in section 4 that employers must pay at least the minimum wage for “all hours worked” in the payroll period. As the Supreme Court in the meal period case, Brinker Restaurants, stated: “The text of the wage order is dispositive . . .[and] The best indicator of [the IWC’s] intent is the language of the [wage order] provision itself.” Employers who pay piece rate have always assumed that the Wage Order means what it says.

Not so: even though Defendant paid its technicians at least minimum wage for all hours worked, Gonzalez states that when employees are paid on a piece rate basis, the employer must also pay them on an hourly basis at minimum rates for time in between piece rate tasks. The impact of the decision could force employers across many industries – those that use piece rate pay and those that pay employees on commission – to pay for time in between tasks when no work or work not compensated by the piece is performed. This, in turn, could force employers to revert to hourly compensation, depriving employees of the incentive to improve the efficiency of work. The incentive in the auto dealer industry has enabled thousands of technicians to earn annual pay well above per capita income year-after-year.

The Gonzalez Court arrived at its decision by superimposing on a dealer’s piece rate pay system language from an earlier decision, Armenta v. Osmose (2005) 135 Cal.App.4th 314. In Armenta, the employer refused to pay hourly employees for specific tasks at work that should have been paid. Instead of finding that employees paid on an hourly basis are entitled to be paid for “all hours worked”, Gonzalez imported from a DLSE Manual language suggesting that, in California, “all hours worked” means that every employer must pay minimum wage for each and every hour worked. When piece-rate tasks are not being performed, Gonzalez states an employer must pay for time in between tasks even if it has already added money to the paycheck to bring pay to minimum wage because the employee’s pay for all hours worked fell below minimum. The Armenta rationale has been adopted without further explanation in several decisions and, in Gonzalez, imposed wrongly, we believe, on piece rate pay.

Applied broadly, Gonzalez may trigger thousands of wage class actions against employers who are already reeling from having settled meal and rest period claims prior to the decision in Brinker Restaurant. Employers who cannot enforce individual arbitration agreements against named plaintiffs may again be exposed to class claims.
A petition for review must be filed with the California Supreme Court on or before April 15, 2013.

If you need any further information, please let me know.

Arthur F. Silbergeld
Dickstein Shapiro LLP
2049 Century Park East, Suite 700 | Los Angeles, CA 90067
Tel (310) 772-8308 | Fax (310) 772-8301
SilbergeldA@dicksteinshapiro.com

Iowa is the latest State to sign a Memorandum of Understanding and join forces with the U.S. Department of Labor to combat employee misclassification. Although Labor Secretary Solis has announced her resignation, it appears that the Misclassification Initiative that she championed continues, at least for now.
As mentioned in a previous these Memorandums of Understanding with state government agencies arose as part of the DOL’s Misclassification Initiative, with the goal of preventing, detecting and remedying employee misclassification. Iowa is now the fourteenth State to sign one of these Memorandums after California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington.

For nearly sixteen months, the DOL has been going after employers who misclassify employees as independent contractors. Since September 2011, the Wage and Hour Division has collected more than $9.5 million in back wages, primarily for minimum wage and overtime violations under the FLSA, which resulted from more than 11,400 workers being misclassified as independent contractors or otherwise not properly treated as employees. The DOL has stated that this represents an 80% increase in back pay and 50% increase in the number of workers receiving back pay since these agreements have been implemented between the DOL and the States.

Insight for Employers

It is important to remember that whether a worker is an independent contractor or an employee is a very fact specific analysis. If the misclassification of a worker as an independent contractor occurs, these employees may be denied appropriate wages and benefits. Similar to the misclassification of an employee as exempt, failure to properly classify a worker as an employee may lead to significant liability. Because of the amount of money at issue when employee(s) are misclassified, it may be worth a few minutes of your time to confirm with an experienced HR consultant or employment law attorney that your workers are properly classified.