Monthly Archives: May 2013

Wage and Hour Lawsuits: Tips, Overtime, and Hours Worked Top the List

This month’s issue of Corporate Counsel includes an interesting article on wage and hour lawsuits brought under the Fair Labor Standards Act. The article includes a graph showing that the number of FLSA cases filed in federal court has risen steadily over the last five years. More than 7,700 cases were filed in the 12 months that ended on March 31, 2013, a new record.

According to Noah Finkel, a partner at Seyfarth Shaw who was interviewed for the article, the cases fall into three categories:

  • overtime exemptions, particularly employees who are paid a salary but believe they are entitled to overtime. 
  • hours worked cases, in which employees claim that they were not paid for all of their work time, and
  • disputes about the tip credit.

Finkel said he’s seen an increase in tip credit cases recently. Not all states allow a tip credit. In states that allow it, a tip credit lets employers pay less than the minimum hourly wage, as long as the tipped employee earns enough in tips to make up the difference. (The credit is the amount the employer doesn’t have to pay. For example, if a state’s minimum wage is $7.25, and the state allows employers to pay tipped employees a minimum wage of $4.25, the tip credit is $3.)

In 2011, the Department of Labor issued revised regulations on tip credits. Among other things, these regulations clarify the rules for tip pooling and require employers to give employees notice if they will be subject to a tip credit. Often, new regulations lead to more lawsuits, as employees and their attorneys test how the new rules will play out in practice. So, I guess the increase in tip credit cases isn’t much of a surprise. (For more on the rules, see our update Labor Department’s Final Regulations Clarify Tip Credit Rules.)

Bad Credit Could Cost You a Job

Over the weekend, the New York Times published a chilling article about employer reliance on credit reports, The Long Shadow of Bad Credit in a Job Search. The main character was a poor guy who couldn’t find work as a shoe salesman after he couldn’t pay medical bills incurred for an injury he suffered after getting laid off (and losing his insurance).

The article points out that employers are actually a bit less likely to check credit reports on applicants than they have been in the past. While previous surveys (conducted by our friends at SHRM) have found that about 60% of employers check credit reports on applicants, that number is now down to about 50%. At the same time, however, many people have seen their good credit ratings go down the tubes in the last five years. So fewer employers are checking, but they may be dinging a higher percentage of candidates for poor credit.

Why do employers check credit reports, anyway? For certain positions, a credit report might reveal pertinent information. You may not want an employee who never pays bills on time to manage a department budget, prepare economic forecasts, or have free access to a company credit card. In many situations, however, poor credit reveals no more than bad luck: high medical bills, divorce, and job loss account for many financial woes. Although there are certainly some people who run up huge debts on luxury items, never planning to pay for them, there are many whose debts are based on sadder — and more mundane –circumstances.

Rejecting these applicants for jobs puts them in a Catch-22: They lost a job, which hurt their credit, which will prevent them from getting a job, and so on. In recognition of this, states are starting to step in and prohibit employers from using credit reports in making hiring and other job decisions. Nine states have passed these laws so far, and more are considering similar legislation. You can find our articles on these laws in State Laws on Employer Use of Credit Reports; for more information on the rules for using applicant credit reports in hiring, including notice and consent requirements, see Can Prospective Employers Check Your Credit Report?

Dogs at Work, Part II


Temporary Office Dog: Richmond

A few years ago, I posted about some of the benefits of bringing dogs to work, including higher productivity, lower stress, better social cohesion, and better teamwork. A recent article in USA Today cites even more research to prove what dog owners instinctively know: Pets decrease stress in a tangible way, by lowering cholesterol and blood pressure levels. They increase our opportunities to socialize and exercise.

In fact, the article cites a 2012 study conducted at a single workplace in North Carolina, which revealed that workplace stress levels of employees who brought their dogs to work decreased by 11% as the day progressed. Employees who didn’t bring their dogs (or didn’t have dogs to bring) saw stress levels rise a whopping 70% in the same timeframe.

All of these benefits help explain the continuing office trend to allow dogs at work. Surveys show that about one in five employers allow employees to bring dogs to work, including the Daily Show and Google. (Those who consider themselves “dog people ” rather than “animal people” have to love their gentle rebuff of the feline: “we like cats, but we’re a dog company.” Me too, The Google; me too.)


Former Office Visitor: Flora

And those are just the human benefits: For the dogs, the benefits might be even greater. Dogs get to enjoy the company of their human companions for more of the day. They get to scrounge scraps from coworkers. They get treats, belly rubs, and head scratches from office dog lovers. And, for some dogs, the opportunity to go to work lowers their stress as much as it lowers ours; it may even save their lives.

Pet ownership is at an all-time high, according to the American Pet Products Association. Almost half of all households in this country have a dog. But it can be hard to take care of a dog when you’re a working stiff. Dogs need to use the facilities, exercise, socialize, and get their mental stimulation, just like we do. If a family member, friend, or paid helper isn’t available to meet these needs, dogs will figure out other ways — ways less friendly to furniture, carpets, and possibly neighbors — to get things done. Older dogs may be fine on their own all day, with the help of some chew toys and a doggie door. But for younger dogs and recently acquired dogs, more supervision is better.


No alarm clock today

That’s my personal angle on the dogs at work issue: It’s a great way to help more dogs get adopted and stay that way. My employer has been dog-friendly for its entire 40+ year history. Once a week, one of my dogs comes to work. Every once in a while, I stop by the office while walking a dog from our municipal shelter, Berkeley Animal Care Services, like red-headed beauty Flora. And recently, I was able to help a friend and her newly adopted dog get over the “home alone” hump by bringing teenage heartthrob Richmond to work with me for a few days. This allowed Richmond to socialize with lots of new people, get used to behaving calmly in a new environment, and have some time to settle in with his new family; now, he’s a successful stay-at-home companion to canine siblings (including little Bimo, pictured above) and human grandparents. (And my own dogs didn’t seem too sad about the opportunity to sleep in.)

Looking for your own dog to bring to work? Visit your local shelter! If you’re in one of the counties that participates in Maddie’s Fund Pet Adoption Days (San Francisco and Alameda County are), you can adopt your pet free on the first weekend in June — and be all set for Take Your Dog to Work Day on June 21.


NLRB Poster Rule Struck Down, Again

The National Labor Relations Board (NLRB) just can’t win for losing these days. First, the Supreme Court decided that a two-member “rump” (of the usual five-member Board) was not authorized to conduct NLRB business. This threw about 600 decisions into doubt, as they were issued after the terms of the other three members had expired. Next, federal courts held up the NLRB’s efforts to make rules that would require employers to post a notice of union rights and would speed up union elections. Then, the D.C. Circuit Court of Appeals decided that President Obama’s effort to solve that two-member problem by making three recess appointments to the Board had failed, and that the Board still lacked the necessary quorum (at least three members) required to do any business.

The Obama administration recently appealed that last decision to the Supreme Court, but the D.C. Circuit wasn’t finished yet: Yesterday, that Court struck down the NLRB’s posting requirement as a violation of employer free speech rights. This requirement had been on hold while the Court heard arguments and made its decision, so the opinion hasn’t changed the status quo. It will take a Supreme Court opinion (in favor of the NLRB, quite unlikely) to get these posters up in the workplace.

The Court of Appeals opinion focused mainly on the Board’s methods of enforcing the posting requirement. The Court found that the Board didn’t have the authority to penalize the employer for failing or refusing to put up the poster (by, for example, making failure to post an unfair labor practice, creating a legal presumption that failure to post showed an anti-union bias, or extending the statute of limitations for employees to file a charge with the NLRB if their workplace had no poster informing them of their rights). The basis for this holding was employer free speech. The NLRB is not allowed to penalize employers for saying what they wish about unions, as long as no coercion or threats are involved. By the same token, the Court reasoned, the NLRB can’t force employers to “speak” by punishing them for failing to hang the poster.

It’s interesting to me how much firepower has been levied against the NLRB lately, especially about something so basic as a workplace rights poster. Employers are already required to hang posters about health and safety, discrimination laws, the minimum wage, and more, so I would have thought this type of requirement wouldn’t raise much employer ire. Because they are such a routine feature of the workplace landscape, most employees ignore them, in my experience. So why all the uproar about adding one more poster to the bulletin board?

Based on all of the recent activity against the NLRB, as well as the fights in the past couple of years over public employee unions, right to work laws, collective bargaining rights, and so on, it seems clear that the opposition to the NLRB is about more than posters. These lawsuits haven’t been brought by individual employers, but by large employer advocacy groups, such as the National Association of Manufacturers and the Chamber of Commerce. This agency — and the rights it enforces — are under sustained attack by business groups. The Board has been prevented from issuing regulations, issuing opinions, or stepping in to resolve disputes over elections. The recess appointments and two-member rump strategy were efforts to continue doing business despite Congress’s continued failure to confirm new Board members. President Obama has responded by nominating a bipartisan package of five members (the Board is bipartisan by design), but Congress still hasn’t taken action. With insufficient members and such fierce opposition, it’s unclear at this point what the Board can do to get back on its feet.

Do You Really Want to Contest Unemployment Benefits?

The unemployment rate is gradually declining, but my own personal barometer — based on the admittedly unscientific measurement of questions people ask me because they know I’m an employment lawyer — shows that interest in unemployment remains high. Employers and employees want to know the same thing: What reasons for leaving a job disqualify someone from getting benefits?

Here in California, the rules about eligibility for unemployment are among the most generous in the country. An employee who quits a job for good cause can still get benefits. Good cause includes not only job-related reasons (such as dangerous working conditions or harassment) but also circumstances wholly apart from work. For example, if you quit your job because you need to relocate with your spouse, escape domestic violence, or care for an ailing family member, you will likely be eligible for unemployment benefits.

Employees who are fired can get benefits unless the termination was based on misconduct. If that sounds like a low standard, that’s only because you haven’t heard how California defines the term. An employee has committed misconduct only if all of the following are true:

  • The employee owed a material duty to the employer, such as showing up for work.
  • The employee substantially breached that duty: A minor or one-time transgression isn’t enough to meet this requirement.
  • The employee showed a wanton or willful disregard for that duty. In other words, the employee wasn’t just careless or thoughtless but, instead, intentionally violated the duty or showed a reckless disregard for the consequences of your breach of the duty. Inefficiency, inability to perform the job, or good faith errors in judgment don’t meet this standard and won’t render someone ineligible for benefits.
  • The employee’s breach tends to materially harm the employer’s business interests.

That third factor is the key that unlocks benefits for many fired employees. Poor performance, mistakes, and even incompetence are not supposed to be enough to deny benefits: The intention requirement in the standard means the employee must have been making a choice, either to engage in wrongdoing or to perform poorly. An employee who really can’t do the job is supposed to get benefits. (For comprehensive — and comprehensible — information on unemployment in California, check out the Unemployment Insurance page at the website of the always awesome Employment Law Center.)

Some of the questions I’ve been asked lately (on the employer side) kind of remind me of that old Mad Magazine cartoon, “Unclear on the Concept.” Here are a couple of examples:

Can we ask employees to waive the right to collect unemployment in a severance agreement? Only if you don’t mind breaking the law. In California, unemployment benefits may not be waived. A contractual agreement by an employee to give up the right to apply for or collect unemployment is void and invalid. What’s more, severance pay ordinarily doesn’t count as “wages,” and so doesn’t reduce the amount of benefits a former employee can collect. (If severance is paid out over time as if it were wages, the employee may have to delay collecting benefits.)

Can we ask employees to agree that failing to meet our performance standards constitutes a voluntary quit? Same answer. It really doesn’t matter what you require employees to agree to: Employees are entitled to benefits when they lose their jobs unless they commit misconduct, as defined above, or quit without good cause, also as defined above. The EDD doesn’t care how you redefine these terms in a performance improvement plan or employment contract. If an employee is terminated because of poor performance, that is not a voluntary quit. In fact, employers who try this strategy might be facing more problems than an increase in unemployment claims: Requiring employees to sign a contract that you know you can’t enforce could arguably constitute an unfair business practice, which takes an employer into territory where huge damages can be awarded.

To return to the title of this post, it is almost never in the employer’s interest to try to contest benefits this aggressively. Fighting an employee’s claim on dodgy grounds will turn the employees you still have against you: They will find out about it, and they will not be feeling the love. It will take time and money to appeal employee claims. And you will make a bitter enemy of the employee you fired, one who has every incentive to file a lawsuit against your company. By all means, challenge claims by bad apples who are trying to game the system, who truly committed misconduct, who quit for no good reason, who stopped even trying to do their jobs months before you fired them. But otherwise, it’s generally best to let the system do what it’s supposed to do: provide some help to those who have lost their jobs through no fault of their own, until they can find new work.