Employer Express November/December 2014 Newsletter
November/December 2014

Key developments in the Employer Express November/December 2014 newsletter include:

How To Avoid “The Nightmare Before Christmas”
Recent Federal Guidance Limits ACA Compliance Options for Employers Come Jan. 1
New York/New Jersey: Pending Minimum Wage Changes and Notice Reminders
Paid Sick Leave Availability Expands in the New Year
OSHA’s Revised Injury Reporting and Recordkeeping Rules Effective Jan. 1
State Survey - Minimum Wage Increases for 2015
Supreme Court Hears Argument in Young v. UPS - Will Decide Whether Employers Must Accommodate Pregnancy
Intern Cases Continue – Be Careful About Treatment of “Interns”
Federal Court Finds that Employers Can Offset Unpaid Work Time against Paid Non-Work Time To Avoid FLSA Liability
7th Circuit Rules that Time Spent Changing Into Work Gear During Lunch Break is Non-Compensable
Employer Who Terminated Applicant for Disclosing Medical Marijuana Use Faces Lawsuit
Record Verdict of $185 Million in Punitive Damages in AutoZone Gender Bias Suit
Is the NLRB’s Position on Facebook “Rants” Softening?
NLRB Reaffirms D.R. Horton Decision Regarding Enforceability of Arbitration Agreements
NLRB Holds that Employer Must Continue To Pay Raises after CBA Expires
EEOC and NLRB Caution Employers on Use of Social Media in Hiring Process

HOLIDAY FESTIVITIES

How To Avoid “The Nightmare Before Christmas”

‘Tis the season for work holiday parties and office merriment. These gatherings can be a great way to show employees your appreciation, spread holiday cheer, and give everyone a chance to have fun and unwind at the end of the year. However, they also can be a significant source of legal liability. Employers do not need to be Mr. Grinch and cancel all holiday parties. But, they must recognize the risks associated with hosting holiday parties and take steps to minimize their exposure.

Employer Liabilities

Remember the Party Is an Extension of Your Workplace - Always remember that an employer-sponsored holiday event is an extension of the workplace. This applies to formal holiday parties as well as informal gatherings in bars and restaurants if hosted by a manager and/or paid for by the company. An employer may be responsible for misbehavior at these events in the same way it is responsible for such behavior in the workplace, especially if management is present.

Don’t Drink and Drive - The consumption of alcohol may pose another major concern for employers. If an employer sponsors a party, it is responsible for employee safety during the event and, to some degree, after it concludes. This is particularly an issue if alcohol is served. The “social host” doctrine, which imputes liability to noncommercial providers of alcohol for injuries and damage stemming from an intoxicated guest, has been extended to employer-employee functions in several jurisdictions.

As an application of this doctrine, if an intoxicated employee leaves your party and subsequently gets into a car accident, an employer potentially could be liable for injuries sustained not only by the employee but also any third party.

Three Simple Steps

There are a three simple steps that all employers can take to minimize the risks associated with hosting a holiday gathering.

  1. Inappropriate behavior will not be tolerated
  2. Before the party, all participants (and managers, in particular) should be reminded about expected rules of conduct at these social gatherings. Issue a simple statement reminding employees of your conduct and anti-harassment policies and stating that professional behavior is expected and inappropriate behavior will not be tolerated.

  3. Managers must be on guard
  4. Remind managers and supervisors that they should be on watch during the party and should try to identify and stop any potentially inappropriate or harassing behavior.

  5. Don’t let employees drink and drive
  6. At a party where alcohol is being served, an employer should take steps to make sure that employees who have been drinking have a safe way of getting home and should not, under any circumstances, permit employees to drink and drive. Employers should consider establishing a “safe-ride” program where the company will reimburse employees for the cost of their cab rides home from holiday parties.

Holiday parties can be great fun, if they are managed correctly. Have a great party and Happy New Year!

HAPPY NEW YEAR—REMINDERS AND CHANGES FOR EMPLOYERS IN 2015

Recent Federal Guidance Limits ACA Compliance Options for Employers Come Jan. 1

With the Affordable Care Act’s (ACA) “play-or-pay” rules taking effect on January 1, 2015, employers with 100 or more “full-time equivalents” have been preparing strategies for compliance. Over the past year, consultants in the field have touted different strategies to capitalize on apparent loopholes in the law and potentially achieve cost savings. However, the Department of Labor (DOL) and the Internal Revenue Service (IRS) recently issued federal guidance eliminating some of the workarounds. This guidance comes in the midst of uncertainty surrounding the law’s livelihood as the U.S. Supreme Court will—sometime in 2015—weigh in on the most recent challenge to the legislation.

The ACA’s employer mandate goes into effect on January 1, 2015. Under the mandate, covered employers may be subject to penalties if they do not offer affordable coverage with a minimum level of benefits to all full-time employees and their dependents. For some time it was thought that employers might be able to comply with the mandate and avoid the applicable penalties by offering employees low-cost “skinny plans” that—although technically in accordance with the final regulations governing “minimum value” requirements—offered only minimum preventive services and little or no hospitalization benefits or physician services.

On November 4, 2014, however, the IRS issued a notice that nipped this lower-cost compliance strategy in the bud. In the notice, the IRS indicated that it will soon be issuing proposed regulations providing that plans that do not offer hospitalization and/or physician service benefits do not constitute “minimum value” coverage under the ACA.

Another strategy that some employers hoped to implement was to eliminate group health coverage and simply reimburse full-time employees for all or part of the premiums incurred to purchase an insurance policy in the individual marketplace. But again, in November the DOL issued guidance that an employer cannot avoid the ACA requirements by implementing a reimbursement plan. Notably, such alternative arrangements must still comply with ACA provisions governing, among other things, free preventative care and no annual or lifetime limits.

On the judicial front, the ACA continues to face challenges. The U.S. Supreme Court granted certiorari to consider the question of whether tax credits or subsidies are available to consumers shopping on the ACA’s federal marketplaces. The ACA provides that subsidies are allowed for exchanges “established by the state” – however, the statute does not make clear whether the subsidies are similarly available to exchanges established by the federal government. In complying with the legislation, many states opted to defer to federal exchanges rather than establish their own. Depending on the Court’s decision, consumers in these states who purchased insurance on the federal exchange face the loss of their subsidies. Were the Court to find that subsidies are not available for consumers purchasing on the federal exchanges, it could present a crippling blow to the landmark law, from which it might not recover.

Kelley Drye will continue to monitor the legal landscape surrounding the ACA and will update you on any developments in this area.

New York/New Jersey: Pending Minimum Wage Changes and Notice Reminders

New Jersey employers must comply with minimum wage and annual notice obligations by January 1.

Effective January 1, 2015, the state minimum wage will increase to $8.38 per hour. The New Jersey Department of Labor recently issued a new Wage and Hour Law Abstract poster that reflects the increased minimum wage. The poster must be posted beginning January 1, 2015; until then, the poster reflecting the current minimum wage should remain on display.

New Jersey employers should also remember that state law imposes two annual notice requirements that must be complied with by year’s end.

First, New Jersey employers with 10 or more employees must distribute to their employees a copy of the “Conscientious Employee Protection Act” notice. This notice must be displayed in the workplace and distributed to employees once each year, either electronically or in hard copy, and in both English and Spanish.

In addition, employers with 50 or more employees must provide all NJ-based employees with a copy of the “Right To Be Free of Gender Inequity” notice upon hire and on or before December 31 of each year. Employers should obtain a signed acknowledgement from all employees, either in writing or electronically, confirming that the notice has been received.

New York: WTPA Notices must go out. The bill which attempted to repeal the WTPA (Wage Theft Prevention Act) has not been signed into law; the statute is still in effect. Thus, all employees are reminded that annual WTPA Notices must still go out in 2015.

Paid Sick Leave Availability Expands in the New Year

Paid sick leave is becoming an increasingly common topic of discussion in this newsletter and around the country. Just this year, New York City; Washington, D.C.; and Passaic, New Jersey had laws go into effect requiring employers to provide employees with up to 40 hours of paid sick leave annually. Voters in several other state and local jurisdictions recently passed paid sick time laws.

During the November elections, voters in Massachusetts; Montclair and Trenton, New Jersey; and Oakland, California approved ballot initiatives enacting paid sick time laws. These new laws are summarized below.

Massachusetts: In passing a statewide paid sick time law, Massachusetts joins Connecticut and California  as the third state to guarantee paid sick time to its workers. (California’s paid sick leave law takes effect July 1, 2015.) The Massachusetts law requires public and private employers with 11 or more employees to provide up to 40 hours of paid sick time per calendar year to each employee. Massachusetts employers with fewer than 11 employees must provide unpaid sick time. The new law is set to take effect on July 1, 2015.

Montclair and Trenton, NJ: The paid sick time laws newly adopted in Montclair and Trenton, New Jersey largely parallel ordinances previously enacted by other New Jersey cities, including East Orange, Irvington, Jersey City, Newark, Passaic, and Paterson. Employers with 10 or more employees must provide of up 40 hours of paid sick time annually. Employees who work for employers with fewer than 10 employees are guaranteed only 24 hours of paid sick time. Sick time begins to accrue for these employees on March 4, 2015. In the interim, a bill providing for statewide paid sick benefits continues to advance through the New Jersey legislature.

Oakland, CA: Under the new Oakland, California ordinance, employees who work at least two hours per week within the city limits are guaranteed paid sick time. Employers with more than 10 employees must provide up to 72 hours of paid sick leave per year. Employers with fewer than 10 employees must provide up to 40 hours of paid sick time annually. Under the ordinance, paid sick time begins to accrue on March 2, 2015.

In addition to the jurisdictions referenced above, San Francisco; Seattle; and Portland, Oregon have paid sick leave laws currently in effect. In the face of this national trend, 10 states have taken the opposite tack and have enacted laws prohibiting local jurisdictions from passing paid sick time laws. These states are: Arizona, Florida, Georgia, Indiana, Kansas, Louisiana, Mississippi, North Carolina, Tennessee, and Wisconsin.

There are jurisdictional differences among the paid sick leave laws in terms of, among other things, leave accrual, use, covered absences, notice requirements, carry-over, forfeiture, and employee education. Employers should consult with legal counsel to ensure that they are complying with applicable law.

OSHA’s Revised Injury Reporting and Recordkeeping Rules Effective Jan. 1

The Occupational Safety and Health Administration’s new rules requiring expedited reporting of serious on-the-job injuries and illnesses and revising recordkeeping requirements will soon take effect.

OSHA’s revised rule is effective January 1, 2015, and retains the current requirement to report all work-related fatalities within 8 hours. However, the rule adds the requirement that employers notify OSHA within 24 hours when an employee suffers a work-related hospitalization, amputation, or loss of an eye. Although there are some exceptions to the reporting requirements, this is a significant departure from the current regulations, which do not require an employer to report single hospitalizations to OSHA unless three or more employees are hospitalized. Employers can report to OSHA by phone, in person, or using an online form that has yet to become available.

The new rules also modify requirements regarding recordkeeping related to on-the-job injuries and illnesses. In particular, OSHA has updated the list of industries that are exempt from the requirement to routinely keep OSHA injury and illness records (the OSHA 300 Log). Notably, bakeries, car dealers and auto parts stores, wine and liquor stores, museums and historical sites, performing arts companies, ambulatory care establishments, and community food and housing services, which had previously been exempt from recordkeeping, are now required to keep injury and illness logs. Conversely, “low-hazard industries” such as clothing stores, full-service restaurants, colleges and universities, and newspaper publishers are now exempt and not required to keep injury and illness records.

The revised rules retain the recordkeeping exemption for any employer with 10 or fewer employees, regardless of industry classification.

OSHA has stated that the new rule will allow it to “focus its efforts more effectively to prevent fatalities and serious work-related injuries and illnesses.” It is expected that OSHA will use the increased data they collect to target specific industries and establishments for on-site inspections and investigations.

In advance of January 1, employers should review their safety and injury protocols to ensure that they are prepared to comply with OSHA’s new reporting and recordkeeping requirements.

State Survey - Minimum Wage Increases for 2015

Numerous states around the country will see minimum wage increases during 2015. A survey of state changes is outlined below.

Alaska: In the November 2014 elections, voters agreed to raise the minimum wage from $7.75 to $8.75 per hour effective Jan. 1, 2015. State law does not allow tip credit.

Arizona: Tied to the Consumer Price Index, the minimum wage will increase from $7.90 to $8.05 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $5.05 per hour, and the maximum tip credit will remain unchanged at $3.00 per hour.

Arkansas: Voters approved a ballot measure to increase the minimum wage from $6.25 to $7.50 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will remain $2.63 per hour, but the maximum tip credit will increase to $4.87 per hour.

Colorado: The Colorado Department of Labor and Employment has announced a proposed Jan. 1, 2015 increase in the state minimum wage from $8.00 to 8.23 per hour and an increase in the minimum wage for tipped employees to $5.21 per hour. The proposed minimum wage is still under consideration by the state legislature.

Connecticut: The minimum wage will increase from $8.70 to $9.15 per hour effective Jan. 1, 2015. The maximum tip credit varies depending on the tipped employee’s position.

Delaware: The minimum wage will increase from $7.75 to $8.25 per hour effective June 1, 2015. For tipped employees, the cash wage will remain unchanged at $2.23 per hour, and the maximum tip credit will increase to $6.02 per hour.

District of Columbia: The minimum wage will increase from $9.50 to $10.50 per hour effective July 1, 2015. For tipped employees, the minimum cash wage will remain $2.77 per hour, and the maximum tip credit will increase to $7.73 per hour.

Florida: The minimum wage will increase from $7.93 to $8.05 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $5.03 per hour, and the maximum tip credit will remain unchanged at $3.02 per hour.

Hawaii: The minimum wage will increase from $7.25 to $7.75 per hour effective Jan. 1, 2015. For tipped employees, the maximum tip credit increases to $0.50 per hour. Under state law, however, the tip credit can only be taken if wages and tips result in an employee earning at least $7.00 more than the minimum wage—or $14.75 per hour in 2015.

Illinois: During the November 2014 election, voters answered a nonbinding advisory question that calls on the state legislature to approve an increase in the minimum wage from $8.25 to $10 per hour by Jan. 1, 2015. The advisory question is pending before the Illinois legislature.

Maryland: The minimum wage will increase from $7.25 to $8.00 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will remain unchanged at $3.63 per hour, but the maximum tip credit will increase to $4.37 per hour. A second minimum wage change will take effect on July 1, 2015, when the minimum wage rate increases to $8.25 per hour. The maximum tip credit also will increase to $4.62 per hour.

Massachusetts: The minimum wage will increase from $8.00 to $9.00 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $3.00 per hour, and the maximum tip credit will increase to $6.00 per hour.

Minnesota: Effective Aug. 1, 2015, the minimum wage for employees of large companies with annual gross sales of at least $500,000 will increase from $8.00 to $9.00 per hour. For small employers, the minimum wage will increase from $6.50 to $7.25 per hour. The state does not allow tip credits.

Missouri: The minimum wage will increase from $7.50 to $7.65 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $3.83 per hour, and the maximum tip credit will increase to $3.825 per hour.

Montana: The minimum wage will increase from $7.90 to $8.05 per hour effective Jan. 1, 2015. For businesses with annual gross sales of $110,000 or less, the minimum wage will remain $4.00 per hour. Tip credits are prohibited by state law.

Nebraska: Following a state-wide vote, the minimum wage will increase from $7.25 to $8.00 per hour effective Jan. 1, 2015. The minimum cash wage will remain $2.13 per hour, and the maximum tip credit will increase to $5.87 per hour.

New Jersey: The minimum wage will increase from $8.25 to $8.38 per hour effective Jan. 1, 2015.

New York: The minimum wage will increase from $8.00 to $8.75 per hour effective Dec. 31, 2014. The minimum wage for tipped workers and the maximum tip credit will increase for employees in certain industries. In addition, the minimum weekly salary for exempt executives and administrators will increase from $600.00 to $656.25 on Dec. 31, 2014. A second increase will take effect on Dec. 31, 2015, when the minimum wage increases to $9.00 per hour.

Ohio: Effective Jan. 1, 2015, the minimum wage will increase from $7.95 to $8.10 for workers 16 and older working for employers with annual gross receipts of at least $297,000. For smaller companies and employees under 16, the minimum wage is $7.25 per hour. For tipped employees, the minimum cash wage will increase to $4.05 per hour, and the maximum tip credit will increase to $4.05 per hour.

Oregon: The minimum wage will increase from $9.10 to $9.25 per hour effective Jan. 1, 2015. Oregon prohibits tip credits.

Rhode Island: The minimum wage will increase from $8.00 to $9.00 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will remain $2.89 per hour, and the maximum tip credit will increase to $6.11 per hour.

South Dakota: In the November 2014 election, voters agreed to increase the minimum wage from $7.25 to $8.50 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $4.25 per hour. The maximum tip credit will decrease from $5.12 to $4.25 per hour.

Vermont: The minimum wage will increase from $8.73 to $9.15 per hour effective Jan. 1, 2015. For tipped employees, the minimum cash wage will increase to $4.58 per hour, and the maximum tip credit will increase to $4.57 per hour.

Washington: The minimum wage will increase from $9.32 to $9.47 per hour effective Jan. 1, 2015. Washington law does not allow tip credits.

West Virginia: The minimum wage will increase from $7.25 to $8.00 per hour effective Dec. 31, 2014. For tipped employees, the minimum cash wage will increase to $2.40 per hour, and the maximum tip credit will increase to $5.60 per hour. The minimum wage will further increase to $8.75 effective Dec. 31, 2015.

SUPREME COURT UPDATE

Supreme Court Hears Argument in Young v. UPS - Will Decide Whether Employers Must Accommodate Pregnancy

On December 3, the Supreme Court heard argument in  Young v. UPS, a case which could redefine employers’ legal obligations to accommodate pregnant employees.

Reports from the oral argument were mixed, with observers unsure of where the Court would go. However, it seemed clear that several of the female justices were skeptical of UPS’s claim that its policy of refusing to accommodate women who were pregnant was lawful.

UPS counsel was peppered with eight minutes of questioning by Justices Elena Kagan and Ruth Bader Ginsburg.  Justice Ginsburg seemed to take a clear stance in favor of Young and pregnant women. Justice Kagan likewise asked of UPS at one point:

“…the PDA was supposed to be about removing stereotypes of pregnant women as marginal workers. It was supposed to be about ensuring that they wouldn’t be unfairly excluded from the workplace. And what you are saying is there is a policy that accommodates some workers, but puts all pregnant women on one side of the line.”

However, all of the judges seemed to struggle over the legal question of where to draw the line, and when to require an employer to accommodate a pregnant employee. Thus, the result is still one that cannot be predicted.

Background – In 2006, plaintiff Young, a UPS delivery driver, became pregnant and her doctor certified that she should not lift more than 20 pounds. UPS policy required that its drivers be able to lift packages weighing up to 70 lbs., although the company contractually agrees to provide temporary alternate work, or “light duty,” to employees who sustain on-the-job injuries, have permanent disabilities, or have their drivers’ licenses suspended. Ms. Young put in a request for light duty, but the company deemed her ineligible because the restrictions were a product of her pregnancy, not an on-the-job injury or permanent disability. Ms. Young was forced to take unpaid leave and ultimately lost her medical coverage. 

After being put on leave by UPS, Young took a job with a florist, and reported that she regularly lifted packages that were more than 20 pounds. She also claimed that her UPS packages were usually small and light, and that it would have been easy for other workers to occasionally assist her, if she was confronted with a heavy package.

Ms. Young sued UPS, arguing that its policy of providing light duty to only certain employees runs afoul of the Pregnancy Discrimination Act of 1978 (PDA), which requires employers to treat pregnant employees the same as “other persons not so affected but similar in their ability or inability to work.” Construing this phrase has been a central issue of the case. 

The District of Maryland granted summary judgment for UPS after finding that Ms. Young had failed to identify any “similarly situated [non-pregnant] comparator who received more favorable treatment than she did.” The Fourth Circuit agreed, noting that while under the PDA it is clearly discriminatory to “treat pregnancy-related conditions less favorably than other medical conditions,” the UPS policy at issue was “pregnancy-neutral.” As the Fourth Circuit saw it, Ms. Young was asking for something more than what was legally required. Her pregnancy was akin to an off-the-job injury, for which any employee—male or female, pregnant or not—would not be guaranteed alternative work. To find otherwise, the court said, would re-interpret the PDA as a mandate for “preferential treatment” of pregnant employees. 

Since the Supreme Court’s July decision to hear the case, the plot has thickened substantially. In July 2014, the EEOC issued revised enforcement guidance on pregnancy discrimination, which effectively requires employers to accommodate their pregnant employees. Many critics see the EEOC’s new position as an attempt to hijack the Court’s determination. The guidance states: “Someone who, because of a back-impairment, has a 20-pound lifting restriction that lasts for several months would be an individual with a disability under the ADA . . . The same individual would be an appropriate comparator for PDA purposes to a woman who has a similar restriction due to pregnancy.”

The EEOC guidance has employers crying foul and scrambling to react. Meanwhile, many state and local legislatures, including New York City, have chosen to take matters into their own hands, passing laws that require employers to offer pregnant employees alternative work arrangements and other accommodations. And UPS, facing a public relations firestorm, has voluntarily changed its policy to allow alternative work for its expectant deliverywomen, though it maintains it had no legal obligation to accommodate Ms. Young.

With millions of Americans working while pregnant every year, savvy employers in every industry will be watching the Court’s Dec. 3rd arguments in Young v. UPS, which will have to resolve the mixed messages sent by the Fourth Circuit and the EEOC. Kelley Drye’s Labor & Employment Practice can help employers navigate today’s complex and ever-changing workplace regulations.

WAGE AND HOUR LITIGATION UPDATE

Intern Cases Continue – Be Careful About Treatment of “Interns”

This year, fashion companies like Calvin Klein, Marc Jacobs, Oscar De La Renta, and Coach have been hit with class action lawsuits alleging that an unpaid internship violated state and federal wage and hour laws. Publishing and entertainment companies have also seen an increase in these suits.

This is just a reminder that if you use unpaid interns during winter break, make sure that your internship meets applicable legal criteria so that you do not run afoul of the labor laws. Otherwise, liability can be significant. In fact, on November 13, Conde Nast announced a $5.8 million settlement of its own intern class action lawsuit.

Kelley Drye can help you structure your internship program so it complies with federal and state law. We will also be speaking on this topic at IN FASHION, Kelley Drye’s Fashion & Retail Law Summit. For more details, click here.

Federal Court Finds that Employers Can Offset Unpaid Work Time against Paid Non-Work Time To Avoid FLSA Liability

On November 5, 2014, a Pennsylvania federal court granted summary judgment to employer DuPont on unpaid work time claims presented by plant employees. The court ruled that employers are allowed to use paid non-work time to offset unpaid work time, thus significantly limiting DuPont’s overtime liability under the Fair Labor Standards Act (FLSA).

In Smiley v. E.I. Du Pont De Nemours & Co., hourly plant workers employed by DuPont were assigned to work 12-hour shifts. The plant workers filed suit against their employer seeking overtime wages, claiming that DuPont failed to compensate them for time worked before the start and after the end of their 12-hour shifts – namely, time they spent putting on or taking off their uniforms and protective gear. Donning and doffing cases are not uncommon, but here comes the twist…

During each shift, DuPont compensated it employees for three 30-minute meal breaks – which are not considered work time under the FLSA. DuPont argued that any liability for not paying employees for time they were working should be offset by the time it voluntarily paid employees for time spent not working. DuPont also argued that the employees were not owed any backpay for unpaid overtime since the paid non-work time exceeded the unpaid work time.

The FLSA does not expressly allow employers to use paid non-work time to offset unpaid work time. On the other hand, it does preclude offsetting when paid non-work time is excluded from the regular rate of pay or when the parties have agreed to treat non-work time as “hours worked” and such time is included in the regular rate of pay. Here, however, neither scenario barred offsetting: DuPont included the meal breaks in the employees’ regular rate of pay.

The court agreed with DuPont, finding that since neither conditions were present, the offset was permissible. The court rejected the employees’ argument that the meal period policy in the employee handbook converted the meal periods into hours worked and held that the meal periods were non-compensable because the employees were not performing activities for the employers’ benefit during those periods. Further, since the meal break time exceeded the amount of time the employees spent putting on or taking off their uniforms and protective gear, the court determined there was no liability under the FLSA. Summary judgment was granted for DuPont.

Given the recent flurry of FLSA overtime claims, the decision should come as a welcome surprise to employers. While the success of the offsetting argument is dependent on the specific facts involved, employers may have an additional defense available to them to thwart overtime claims if they pay employees for non-work time.

For assistance with any such analysis, or questions on compliance with the FLSA, reach out to Kelley Drye’s Labor and Employment practice group.

7th Circuit Rules that Time Spent Changing Into Work Gear During Lunch Break is Non-Compensable

In Mitchell v. JCG Industries, Inc., the United States Court of Appeals for the 7th Circuit recently rendered a decision in favor of an employer in an action brought by employees under the Fair Labor Standards Act (FLSA) and the Illinois Minimum Wage Law (IMWL). The Plaintiffs had appealed the United States District Court for the Northern District of Illinois grant of summary judgment for the employer. Plaintiffs employed in a poultry processing plant in Chicago were seeking compensation for time spent donning and doffing (“changing”) their required protective work gear (sterilized jacket, plastic apron, cut-resistant gloves, plastic sleeves, earplugs, and a hairnet) on top of the employee’s street clothes. The plaintiffs were line workers represented by a union with a collective bargaining agreement with the employer which made the entire meal period non-compensable. The principle issue was whether the time spent changing during the lunch break was time that must be compensated. This opinion may be influential nationwide as federal district courts in Tennessee and Indiana have cited this case, but distinguished  Mitchell’s facts from the facts of the case at hand.

With respect to the FLSA claim, the 7th Circuit analyzed the issue through (i) statutory construction of the FLSA and whether a “workday” could be interpreted to include time spent changing work gear during a bona fide 30-minute lunch break, and (ii) the effect of the collective bargaining agreement between the union and employer, and in conjunction with the de minimis doctrine. Although the FLSA excludes from measured working time and compensation any time spent in changing clothes at the beginning or at the ending of each workday, the plaintiffs asserted that the lunch break does not take place at the beginning or end of the period in which the employees are at the plant, and should be compensable. The 7th Circuit found an exception to the regulation that defines “workday,” to allow for the exclusion of a bona fide lunch break from compensation, as there are identical considerations for time spent changing at the beginning and end of a meal break as at the beginning and end of a “workday.”

The 7th Circuit also cited to a U.S. Supreme Court case interpreting the FLSA, finding that compensability of time spent changing clothes or washing is a subject appropriately committed to collective bargaining. Under the collective bargaining agreement, the Plaintiffs’ union and the employer agreed that the changing of work gear was not work- time, and thus not compensable. The court provided an alternative reason, through the de minimis doctrine, to exclude plaintiff’s time spent changing work gear from compensation under the FLSA. Since the plaintiffs do not spend the vast majority of time during their lunch breaks changing, the entire period would not qualify as time spent changing clothes under the FLSA. The 7th Circuit, however, combined the de minimis doctrine with the collective bargaining agreement when it found that the consequence of dispensing with the intricate exercise of separating the minutes spent changing clothes from the minutes devoted to other activities is not to prevent compensation for the uncovered segments, but merely to leave the issue of compensation to the process of collective bargaining.

With respect to the Illinois Minimum Wage Law, the Court looked to an Illinois appellate decision that applied the de minimis doctrine to small amounts of time that workers took to change protective equipment at the beginning and end of their workday. The Court also looked to an Illinois regulation that states “an employee’s meal period . . . are compensable hours worked when such time is spent predominately for the benefit of the employer, rather than for the employee.” Although it was not argued, the Court reasoned that if changing clothes took a big chunk of time, leaving inadequate time for eating, the meal break would no longer be bona fide. Ultimately, the Court found that under Illinois law time spent changing clothes during a meal break was not compensable because (i) it was de minimis, and (ii) did not fulfill the predominance test in the regulation.

MEDICAL MARIJUANA IN THE NEWS

Employer Who Terminated Applicant for Disclosing Medical Marijuana Use Faces Lawsuit

Currently, 23 states and the District of Columbia have enacted laws legalizing medical marijuana. In the face of this trend of legalization, questions often arise as to the rights of medical marijuana users in the workplace. A recent Rhode Island lawsuit asks this question.

Earlier this month, the Rhode Island chapter of the American Civil Liberties Union filed suit on behalf of an applicant for an internship who alleges that she was unlawfully denied the position after disclosing that she used medical marijuana.

In the complaint, the applicant alleges she lawfully carried a medical marijuana card, which was issued to her because of debilitating migraine headaches. The applicant alleged that she applied for an internship position and had numerous formal discussions with the employer about the nature and logistics of the program. According to the complaint, the position was effectively hers, even though a formal offer had not been extended.

She alleges, however, that after she disclosed her medical condition and status as a cardholder under the state’s medical marijuana law, she was rejected for the internship. She alleges that the employer told her it could not hire her because of her current status as a medical marijuana patient. Even after the applicant explained that she would not bring medical marijuana onto the premises or come to work after having used marijuana, she was denied the position.

The lawsuit alleges violations of the state medical marijuana law, which prohibits employers from refusing to employ a person solely because of his or her status as medical marijuana cardholder. (Notably absent from the lawsuit are claims under the Americans with Disabilities Act, likely because medical marijuana is not lawful under federal law.)

A handful of other states with medical marijuana laws impose similar nondiscrimination requirements, including Arizona, Connecticut, Delaware, Illinois, Maine, Minnesota, Nevada and New York. However, the medical marijuana laws of many states—including California, Connecticut, Massachusetts, and New Jersey—expressly provide that an employer has no obligation to (1) accommodate an employee’s medical marijuana use or (2) permit employees to report to work under the influence.

Given that state medical marijuana laws afford employees differing levels of protection, employers should be cautious before taking adverse action against employees and job applicants because of such use. At the same time, though, employers should remember that simply because an employee has a medical marijuana card does not necessarily excuse poor performance, workplace misconduct, or violation of drug policies.

EMPLOYER LIABILITY

Record Verdict of $185 Million in Punitive Damages in AutoZone Gender Bias Suit

In November, AutoZone was hit with a record $185 million punitive damages verdict after a former store manager brought a lawsuit alleging she was fired after giving birth and in retaliation for having complained about discrimination.

The plaintiff, Rosario Juarez, joined AutoZone in 2000 and, in 2001, was promoted to parts sales manager. Upon being promoted, Juarez noticed a gender disparity within upper management at AutoZone. She alleged as much in her lawsuit, which claimed AutoZone had a “glass-ceiling” policy that effectively barred female promotions in the company. At the time of her promotion, only 10 of the 98 stores in the San Diego-area had female store managers.

Juarez herself was finally promoted to store manager in October 2004, but only after she complained about discrimination. In November 2005, Juarez advised AutoZone of her pregnancy and thereafter was urged to step down because she would not be able to simultaneously juggle the responsibilities of running the store and being pregnant. Juarez claimed the discrimination continued after her son was born. She alleged that she continued to complain about discrimination and was ultimately demoted in 2006.

Juarez filed a charge with the California Department of Fair Employment and Housing in 2007. Juarez claimed the company then retaliated against her for filing the complaint by concocting a scheme to terminate her in 2008, blaming Juarez when a customer service representative misplaced $400 in cash from the register. At trial, the company’s loss prevention officer – who has since filed a gender discrimination suit of her own - testified that she never suspected Juarez of any wrongdoing and that the company was indeed targeting her. Another district manager testified that he was at one point offered a promotion if he fired all the women in his stores.

The jury found AutoZone liable for gender and pregnancy discrimination, retaliation, and failure to prevent harassment and awarded Juarez a total of $872,719 in compensatory damages for lost earnings and emotional distress. Finding that AutoZone was acting out of malice in terminating Juarez, the jury also awarded Juarez $185 million in punitive damages. The amount is staggering and is believed to be the largest employment law verdict for any individual in U.S. history.

The verdict has already been challenged, and could well be reduced on appeal.

The verdict should serve as a cautionary tale for employers – gender bias is currently at the forefront of American discourse and government agencies, courts, and juries alike are unforgiving of employers on this front. Employers are well-advised to review their current promotion policies and statistics to ensure that promotions and other employment decisions are uniformly applied and justified by legitimate, non-discriminatory reasons. Now is also a good time to reinforce employee training to ensure the message on the ground is consistent with employer policy.

Reach out to Kelley Drye for an audit of your current practices or for counsel in handling employee discrimination complaints.

NLRB UPDATE

Is the NLRB’s Position on Facebook “Rants” Softening?

After 5 years of decisions criticizing discipline of employees who “speak out” about their employer on Facebook, the NLRB (finally) seems to be recognizing that there are limits to the concept of employee protected activity on social media.

In Richmond District Neighborhood Center, 361 N.L.R.B. No. 74 (Oct. 28, 2014), the NLRB considered a Facebook exchange between two employees working at an after-school program at a California high school. The employees engaged in a discussion about work that was riddled with profanity and included comments like: “I’ll be back…ordering sh-t, having crazy events…I don’t want to ask permission,” “field trips all the time to wherever the f--k we want!,” “Let’s f--k it up,” and “teach the kids how to graffiti up the walls.” The employees made it clear they intended to ignore school rules, “take advantage” of their new supervisor, and neglect their job duties.

Another employee of the after-school program took screen shots of the conversation and sent it to management. Based on the Facebook posts, the program then rescinded offers extended to the two offending employees for the following school year. The employees filed an NLRB charge alleging their Facebook statements were protected by law.

The NLRB disagreed, finding the Facebook exchange to be “objectively so egregious as to lose the [National Labor Relations] Act’s protection and render the [employees] unfit for further service.” Specifically, the Board noted that the Facebook comments, which contained numerous detailed statements advocating insubordination, went beyond mere jokes and hyperbole. The Board held that in light of the magnitude and detail of insubordinate acts advocated, the employer was reasonable in being concerned that the employees would act on their plans and had no obligation to wait until the employees committed such acts before taking disciplinary action.

While the NLRB’s holding confirms that not all Facebook comments are protected, employers should be careful when disciplining employees based on social media activity. The Labor and Employment team at Kelley Drye can provide legal guidance on appropriate discipline in situations where protected activity may be involved..

NLRB Reaffirms D.R. Horton Decision Regarding Enforceability of Arbitration Agreements

In its 2012 D.R. Horton decision, the NLRB took the position that arbitration agreements with class and collective action waivers that are required as a condition of employment violate the National Labor Relations Act and are unenforceable. Although the Board’s decision was rejected by numerous federal courts, the NLRB recently indicated it will not budge from its position.

In Murphy Oil USA, Inc., 361 NLRB No. 72 (Oct. 28, 2014), the employer required that all employees sign an arbitration agreement that included a waiver of the employee’s right to commence a class or collective action claim relating to employment issues in arbitration or any other forum.

In June 2010, four Murphy Oil employees filed a collective action in federal court alleging violations of the FLSA. Murphy Oil moved to dismiss the claim in its entirety and to compel the employees to arbitrate their claims on an individual basis. The employees responded by filing an unfair labor practice charge alleging that Murphy Oil’s mandatory arbitration agreement’s class action waiver consisted an infringement on their rights to engage in protected concerted activity in violation of the National Labor Relations Act (NLRA).

The district court granted Murphy Oil’s motion to compel individual arbitration and stayed the court proceedings pending arbitration. In light of the court’s decision to enforce the agreement, Murphy Oil asked the NLRB to overturn its ruling in D.R. Horton, which had been rejected by the Fifth Circuit last year and other federal courts considering the issue.

The Board refused, holding that the right to engage in collective action under the NLRA includes the right to engage in collective legal action. Therefore, according to the NLRB, Murphy Oil’s arbitration agreement was unenforceable, notwithstanding the court’s decision.

Two members of the Board issued strong dissents, including one that noted: “…with this decision, the majority effectively ignores the opinions of nearly 40 Federal and State courts that, directly or indirectly, all recognize the flaws in the Board’s … reading of the National Labor Relations Act in order to both override the Federal Arbitration Act and ignore the commands of other federal statutes. Instead, the majority chooses to double down on a mistake that, by now, is blatantly apparent.”

Given the strong disagreement among NLRB members and between the NLRB and numerous federal courts, this area is far from clear and employers may face significant hurdles to enforcing mandatory arbitration agreements with class and collective action waivers. Employers would be wise to have legal counsel review mandatory arbitration agreements to ensure that they include important safeguards in the event a class or collective action waiver is found unenforceable.

NLRB Holds that Employer Must Continue To Pay Raises after CBA Expires

It is well-established that an employer has an obligation to maintain the status quo after the expiration of a collective bargaining agreement. A recent case before an NLRB administrative law judge confirmed that an employer must continue wage increases after a contract has expired, unless language in the contract clearly provides otherwise.

The case in question involved a CBA between a Pennsylvania hospital and a nurses union. The Hospital and union had entered a two-year contract, which expired on April 30, 2013. The parties began negotiating a successor agreement in February 2013, but were unable to reach an agreement that year.

Under the terms of the CBA, nurses were paid a base hourly rate commensurate with their years of experience. Nurses were eligible for two types of wage increases: an across-the board annual raise and periodic longevity-based wage increases as the nurse progressed from one experience level to the next. Both raises were paid on January 27 of each year.

In January 2014, nine months after the contract expired but while negotiations over the successor contract were ongoing, the hospital failed to pay the longevity-based raises to the nurses.

Earlier this month, an administrative law judge ruled that the hospital violated federal labor law by failing to pay the raise. The judge held that the hospital had no contractual obligation to pay the longevity-based wage increase in January 2014. However, because nothing in the contract addressed the wage increases after the contract expired, the National Labor Relations Act required it operate as if the provision were still in effect. The judge noted that the outcome would be different if there was language in the CBA “specifically limiting the applicability of the provision for wage increases … to the term of the contract.”

Employers should consult legal counsel if they have questions about their obligations upon the expiration of a union contract. Kelley Drye’s labor attorneys have significant experience reviewing contracts, negotiating with unions, and representing employers facing unfair labor practice charges.

SOCIAL MEDIA

EEOC and NLRB Caution Employers on Use of Social Media in Hiring Process

At a panel discussion held at the National Constitution Center in Philadelphia in November, officials from the U.S. Equal Employment Opportunity Commission (EEOC) and the National Labor Relations Board (NLRB) cautioned employers about using social media in the hiring process. They noted that laws barring the improper use of information still apply, even when individuals post personal details online.

Often, employers use social media in two ways when hiring: to recruit candidates by publicizing job openings and to conduct background checks to confirm a candidate’s qualifications for a position. Using social media to confirm an applicant’s background and qualifications can be a legal landmine. Hiring managers can look at applicants’ personal details or opinions that are posted online, but they cannot use those details or opinions when making hiring decisions. For instance, if a hiring manager looks at a candidate’s social media profile, they should not make comments on an aspect of it during the interview. If the candidate isn’t hired, he or she can then use anything that was on the profile—even if not discussed in the interview—as grounds for action against the would-be employer. 

Thus, social media provides a good opportunity for HR and employment lawyers to retrain hiring managers on what they can legally consider when making a hiring decision. If you take one thing away from this short warning, remember: it is illegal for an employer to base hiring decisions on stereotypes and assumptions about a person's race, color, religion, sex (including pregnancy), national origin, age (40 or older), disability or genetic information, even if the employer learns about these characteristics on social media.