Wage Theft: Are You Truly Guilty?

May 30, 2017

There was a recent study published by the Economics Policy Institute, which stated that “employers short their employees $15 billion in wages per year”. In my opinion, I do not believe most employers are truly trying to cheat their employees out of their hard earned dollars. In fact, most instances of an employer not paying an employee all he or she is owed under the law results from a complex system of wage & hour laws (and constant changes to those laws) and not a malicious penny pinching employer who is intentionally stealing from their employees. Let me make it clear that I do believe there are some out there but those individuals make up a very small percentage.

Let’s discuss the term “wage theft.” The very terminology suggests an intentional taking of wages by an employer. Are there employees are who paid less than the wage to which the law entitles them? Absolutely. It can happen. The reason is simple, we have a wage-and-hour problem in this country. Wage-and-hour non-compliance, however, is a sin of omission, not a sin of commission. Employer aren’t intentionally stealing; they just don’t know any better. I have seen it over my years in the business.

And who can blame them? The law that governs the payment of minimum wage and overtime in the country, the Fair Labor Standards Act, is 70 years old. It shows every bit of its age. Over time it’s been amended again and again, with regulation upon regulation piled on. What we are left with is an anachronistic maze of rules and regulations in which one would need a Ph.D. in FLSA (if such a thing existed) just to make sense of it all. Since most employers are experts in running their businesses, but not necessarily experts in the ins and outs of the intricacies of the Fair Labor Standards Act, they are fighting a compliance battle they cannot hope to win.

As a result, sometimes employees are underpaid. The solution, however, is not creating wage theft statutes that punish employers for unintentional wrongs they cannot hope to correct. Instead, legislators should focus their time and resources to finding a modern solution to a twisted, illogical, and outdated piece of legislation.

Let’s face it we are nothing without our employees. Most scrupulous employers favor employees receiving a full day’s pay for a full day’s work (although there are some employees…). What employers and employees need, though, is a streamlined and modernized system to ensure that workers are paid properly.

The FLSA and various state laws (let’s not talk about California) are voluminous in nature. Adding to this complex web are Plaintiff attorneys who suggest that employers are all are cheating their employees especially when the wages are commissioned based. Not true in the overall scheme of things! Commission issues arises sometimes merely by oversight. Employers did not create this mess. Instead, let’s fix the cause of the problem—a baffling maze of wage & hour regulations be it the FLSA or a state promulgated law.

Federal Court Decision: “Gender Dysphoria” is a Disability Under the ADA

May 26, 2017

The ADA expressly excludes from its coverage “transvestism, transsexualism, … [and] gender identity disorders not resulting from physical impairments….” Therefore, it should have been an easy call for a court to dismiss a lawsuit in which an employee, born a male but who identifies and presents as a female, alleges disability discrimination because of her gender identity disorder. This may seem simple enough however, the Court saw otherwise.

In Blatt v. Cabela’s Retail, the court denied the employer’s motion to dismiss the employee’s ADA claims, and expressly recognized her gender dysphoria as an ADA-protected disability.

Admittedly, it is fairly possible to interpret the term gender identity disorders narrowly to refer to simply the condition of identifying with a different gender, not to exclude from ADA coverage disabling conditions that persons who identify with a different gender may have —such as Blatt’s gender dysphoria, which substantially limits her major life activities of interacting with others, reproducing, and social and occupational functioning.

This is but one decision of one court on a preliminary motion to dismiss. Other courts may (and likely will) hold differently in future cases. However, this case is part of a larger trend—as long as Congress continues to drag its feet amending Title VII to protect LGBT employment rights, courts will continue to fill the void. By broadly (and, in my view, incorrectly) interpreting the ADA to achieve its view of a just and fair result, this court broke new ground. It will not, however, be the last court to find a similar conclusion. The realities are this is an issue that is not going away. Employers need to start planning ahead on this and related issues (bathrooms).

Please follow me on Linkedin

New Law/Case: Using Prior Salary History

May 22, 2017

The Ninth Circuit recently issued is decision in Rizo v. Yovino, reversing a district court ruling holding that an employer violated the federal Equal Pay Act through its bright-line policy of paying new employees 5% more than their prior salary.  According to the district court (and the stated position of the EEOC), basing compensation on an applicant’s prior compensation only serves to further historical wage disparity between men and women, and therefore violates the Equal Pay Act.  The Ninth Circuit surprisingly (given its notoriously liberal bent) disagreed.

Factually, this case involved employees of the public schools in Fresno County (California).  Plaintiff, a female, was employed as a math consultant.  When she later discovered that certain male counterparts were being paid significantly more than her for the same work, she filed suit under the Equal Pay Act.  Prior to coming to work for Fresno County, Plaintiff was a teacher in Arizona and was paid $50K per year.  Fresno County had a set starting salary range for new math consultants of between $62K-$81K (based on 10 levels within that range).  The County’s policy was to pay the new hire 5% more than they were earning in their prior job.  However, 5% more than Plaintiff’s prior salary of $50K was less than the low end of the starting salary range the County used. As such, the County paid Plaintiff at the lowest end of its range, $62K (considered Level 1 of the range).  A few years into her employment, Plaintiff was having lunch with her male colleagues, when one of them (who had recently been hired) told her that his starting salary was at Level 9 of the range (a far greater salary than Plaintiff’s).  Plaintiff subsequently learned that all of her fellow math consultants (all of whom were male) were paid more than her.  Not good.

Plaintiff tried to resolve her outrage informally with the County by complaining internally about the pay disparity.  The County defended the pay disparity, explaining that all pay decisions had been properly made in accordance with the County’s standard operating procedure (i.e. pay the employee 5% more than his/her prior pay).  Plaintiff sued.

The district court agreed with Plaintiff that the pay practice was discriminatory and violated the Equal Pay Act.  The Ninth Circuit, however, reversed and issued a very wishy-washy holding, saying that use of prior salary is okay IF the employer demonstrates that its use of prior salary “effectuated a business policy” and that the use was “reasonable in light of its stated purpose as well as its other practices.”  Rather uselessly, the Court did not explain what this means or what type of evidentiary showing would suffice.  The County had offered four justifications for its policy:  (1) the policy is objective, in the sense that no subjective opinions as to the new employee’s value enter into the starting-salary calculus; (2) the policy encourages candidates to leave their current jobs for jobs at the County because they will always receive a 5% pay increase over their current salary; (3) the policy prevents favoritism and ensures consistency in application; and (4) the policy is a judicious use of taxpayer dollars.  Rather than opine on whether these justifications were sufficient to defend the use of prior salary and defeat the Equal Pay Act claim, the Ninth Circuit remanded the issue to the district court to decide.  Sufficed to say, this is not real helpful for employers who need clear rules they can follow in order to have any shot of avoiding being sued.

Now let’s discuss California Law! Effective January 1 of this year, prior salary alone cannot justify a pay disparity. Thus, regardless of the Ninth Circuit’s analysis of the issue under the federal Equal Pay Act, California employers should safely assume that any plaintiffs’ attorney who isn’t living under a rock will file a disparate pay claim in state court in California under California state law.  This means that it is not a good idea to use prior salary “alone” to justify pay disparities between similarly situated employees of different genders, ethnicities, or races.  Employers are also cautioned that even outside of California, several other courts (notably the Tenth and Eleventh Circuits) have held that prior salary alone cannot justify a pay disparity, and more and more states are enacting laws along similar lines, including laws that prohibit employers from even asking applicants to disclose their prior salaries.  Equal Pay Act claims are very likely to be an increasing focus of litigation in the coming years, so employers would be wise to review their pay practices now to protect against such claims.

Just another day in Paradise!

High Court Clarifies “Day of Rest Rules”!

May 15, 2017

The California Supreme Court issued an opinion in Mendoza v. Nordstrom, clarifying California’s day of rest requirements.  These requirements are set forth in Labor Code sections 551 and 552. Section 551 provides that “every person employed in any occupation of labor is entitled to one day’s rest therefrom in seven,” and Section 552 prohibits employers from “causing their employees to work more than six days in seven.”  However, Section 556 exempts employers from the duty to provide a day of rest “when the total hours of employment do not exceed 30 hours in any week or six hours in any one day thereof.”  While these provisions do not appear too complicated or hard to follow at first glance, compliance has been challenged in wage and hour litigation, raising several questions of what these provisions technically mean.  Questions that have arisen include the following:

  • What does it mean to “cause” an employee to work more than six days in seven?  Is it enough to “allow” the employee to work seven days in a row, or must the employer require the employee to work more than six days in a row to be found in violation of the statute?
  • Is the day of rest required for any consecutive seven-day work period on a rolling basis, or is it measured based on the employer’s workweek (the definition of which varies from employer to employer and may not match a calendar week)?
  • Does the exemption from the day of rest requirement apply where the employee works 6 or less hours on at least one day during the workweek, or must the employee’s hours be 6 or less every day of the workweek (and no more than 30 for the entire week)?

The California Supreme Court agreed to answer these questions at the request of the Ninth Circuit in Mendoza v. Nordstrom.  Here’s how the Court recently ruled on these issues:

  1. A day of rest is guaranteed for each workweek. Periods of more than six consecutive days of work that stretch across more than one workweek are not per se prohibited.
  2. The exemption for employees working shifts of six hours or less applies only to those who never exceed six hours of work on any day of the workweek. If on any one day an employee works more than six hours, a day of rest must be provided during that workweek, subject to whatever other exceptions might apply.
  3. An employer causes its employee to go without a day of rest when it induces the employee to forgo rest to which he or she is entitled. An employer is not, however, forbidden from permitting or allowing an employee, fully apprised of the entitlement to rest, independently to choose not to take a day of rest.

With respect to question (1), the Court held that the seven-day period is based on the workweek as defined by the employer. Thus, if the employer uses a calendar week, then the seven-day period (during which there should be one day of rest) is based on each calendar week.  If the employer defines its workweek differently, then the seven-day period designated by the employer controls.  However, the one-day-of-rest-in-seven provision does not apply on a rolling basis to every consecutive seven-day period.

With respect to question (2), the Court held that if an employee works more than 6 hours on any day of the workweek, the day of rest provision applies.  The Court rejected an interpretation that would exempt employers from providing a day of rest to an employee who works 6 hours or less on just one day of the workweek.  Thus, if an employee’s hours exceed 6 on any day of the workweek, the day of rest requirement will apply.  You now ask, “What if the employee does not work more than 30 hours per week?”  Unfortunately, the Court chose not to clarify whether the day of rest exception for employees working no more than 30 hours per week or 6 hours per day should be read in the conjunctive or disjunctive (because the Ninth Circuit did not expressly ask the Court to answer this particular question).  Thus, left for another day (and more litigation) is the issue of whether the day of rest requirement applies to an employee who works more than 6 hours one or two days of the workweek, but whose total hours for the workweek do not exceed 30. The conservative approach of course, it to provide the opportunity for a day of rest to any employee who works more than 30 hours per week and/or more than 6 hours in any one workday.

Finally, with respect to question (3), the Court held that an employer “causes” an employee to work more than six days in seven if it motivates or induces the employee to do so.  This does not mean that the employer is liable if it simply permits an employee to work more than six days in seven.  “[A]n employer‘s obligation is to apprise employees of their entitlement to a day of rest and thereafter to maintain absolute neutrality as to the exercise of that right. An employer may not encourage its employees to forgo rest or conceal the entitlement to rest, but is not liable simply because an employee chooses to work a seventh day.”  Based on this interpretation, an employer generally should not affirmatively schedule or require employees to work more than six days in seven, but it is okay to offer employees the opportunity to work more than six days in seven, so long as they are apprised of their entitlement to one day’s rest each workweek and notified that they will not be penalized for choosing to take a day of rest (nor rewarded, apart from being paid their earned wages, for not taking a day of rest).

While the Court’s opinion clarified some issues relating to California’s day of rest requirements, it also left an important one unanswered.  Specifically, California Labor Code section 554 provides an exception from the day of rest requirement where the “nature of the employment reasonably requires that the employee work seven or more consecutive days, if in each calendar month the employee receives days of rest equivalent to one day’s rest in seven.”  There is a lack of guidance on when the “nature of the employment reasonably requires” seven or more consecutive days of work so as to allow accumulated rest days to be taken at a different time during the month, and the Court’s opinion does not shed light on that subject.

California employers are advised to review their scheduling and pay practices to ensure compliance with California’s day of rest requirements, as clarified by the California Supreme Court.  Employers are further reminded that California has special overtime compensation rules that apply to work performed on the seventh consecutive day of a workweek (time and one half for the first 8 hours of work performed on the seventh consecutive day of the workweek, and double time for hours in excess of 8).

Follow me on Twitter: Https://Twitter.com/JimPottsAuthor

Trumps Executive Order to Only “Hire Americans” is Misleading!

May 8, 2017

I do not like to publicly speak about politics however, I have been asked on a number of occasions about the impact of President Trump signing into an Executive Order to “Buy American, Hire American. I personally do not have an issue regarding “Buying American” because I think it will help American based businesses. What’s wrong with buying American-made products? Nothing in my opinion!

The portion of the Executive Order I am concerned about is “Hire American.” I can see employers being faced with National Origin discrimination claims when an employer fails to hire anyone that is not “American.” It will not matter that Trump didn’t mean to say “hire American workers only” which could violate Title VII of the Civil Rights Act of 1964 which does prohibit national origin discrimination.

Yes, Title VII still prohibits national origin discrimination. And, no, this Executive Order does nothing to change Title VII’s impact. But the manner in which the White House is promoting this Executive Order could be misleading for some.

If we read the fine print—that is, the actual language of the Executive Order—the doubting Thomas’s out there would learn that Hire American isn’t really “Hire American”, but instead it’s “hire any American citizen or anyone else legally authorized to work in the United States under our current immigration laws.”

But of course with the current political climate there are those pushing to believe that the White House is promoting “Hire American”, which sends a certain signal to certain racist individuals who might use this Executive Order to discriminate on the basis of national origin, or race, or religion. “Trump says Hire American, so I’m not hiring that anyone with a turban, or funny accent.” And that’s the exact type of discriminatory misconduct that Title VII is supposed to protect against.

Employers do not fall for this! Continue following all State and Federal guidelines and keep your hiring practices tight. If President Trump wants stricter borders, and to restrict work visas available to foreign nationals, so be it. Do not get caught up in the messaging and do not let the “haters” out there convince you otherwise.


How Not To Handle Leaves of Absences!

May 1, 2017

Suppose you have an employee who takes FMLA leave for rotator-cuff surgery. Let’s say during said FMLA leave, you discover that the employee is vacationing on a Caribbean island. And, further suppose that you discover this employee’s island vacay via his own public Facebook posts, which included photos of him on the beach, posing by a boat wreck, and in the ocean. Or, more accurately the employee’s co-workers saw the photos and ratted him out to management. So, what do you do? Fire the employee for abusing and/or misusing FMLA leave by engaging in activities (verified by pictures posted on his Facebook page) that demonstrated his ability to return to work earlier than the end of the FMLA leave?

What have I constantly told clients about leaves of absence?? In all honesty I do not agree with the Court’s decision but that is the risk this employer ran. In Jones v. Gulf Coast Health Care, the 11th Circuit Court of Appeals concluded that based on these same facts, Rodney Jones was entitled to a jury trial on his FMLA retaliation claim. How did the court reach this conclusion?      1. Temporal proximity: The employer suspended Jones on the day he returned from his FMLA leave, and fired him a few days later. According to the Court, the “close temporal proximity” between the end of Jones’s FMLA leave and the adverse action is sufficient to create a jury issue on the causation prong of his FMLA retaliation claim.      2. Pretext: According to Jones, the only explanation the employer provided him “was that he was being fired for abusing and misusing FMLA leave by engaging in activities, posted on his Facebook page that demonstrated his ability to have earlier returned to work.” Yet, (a) Jones was not told that he had violated the company’s social media policy or that the company believed he had unnecessarily prolonged his recovery to take a vacation; and (b) because the company lacked a policy that required employees to stay at home or refrain from traveling while on FMLA leave, it could not conclude that he had “violated the ‘spirit’ of medical leave—to rehabilitate and recover.” Therefore, because of these “inconsistencies and contradictions” a jury should decide whether the employer’s explanation was a pretext for retaliation.     It is my understanding that the employer advised Jones that it was terminating him for “abusing and misusing FMLA leave by engaging in activities, posted on his Facebook page that demonstrated his ability to have earlier returned to work.” Must it expressly rely on a written policy (social media or otherwise)? Must a company have a policy forbidding employees on FMLA leave from traveling or vacationing? By taking an FMLA leave for one’s own serious health condition, an employee certifies the inability to work, or the inability to perform at least one essential function of the job). If vacation photos posted to Facebook suggest that the employee had recovered and no longer needed to be out on medical leave, how is the employee not abusing his FMLA leave? And how is an employer not justified in firing the employee for this lie?

Ultimately, it does not matter! Please do not take any action against an employee on leave or coming back from an extended leave. This is just another case supporting my position. It is too risky especially if it goes in front of a jury.

Please follow me on Twitter to get the latest immediate updates! https://twitter.com/JimPottsAuthor