Guess What? The EEOC Does the Same Thing It Tells Employers Not to Do

In a poignant example of the pot calling the kettle black, the Sixth Circuit Court of Appeals recently rejected the EEOC’s argument that an employer’s use of credit checks for hiring caused a disparate impact, pointing out that the EEOC does the exact same thing.

The first sentence in the court’s opinion in EEOC v. Kaplan Higher Education Corp. says it all: “In this case the EEOC sued the defendants for using the same type of background check that the EEOC itself uses.” No. 13-3408 (6th Cir., Apr. 9, 2014). The opinion goes on to describe how the EEOC’s personnel handbook recites that “[o]verdue just debts increase temptation to commit illegal or unethical acts as a means of gaining funds to meet financial obligations,” and how because of that concern, the EEOC runs credit checks on applicants for 84 of the agency’s 97 positions. Nevertheless, the EEOC sued an employer, arguing that the employer’s use of credit checks for hiring had a disparate impact in violation of Title VII.

In rejecting the EEOC’s claim, the court held that the expert witness testimony offered by the EEOC to prove that a disparate impact occurred was unreliable and admissible. First, the expert’s methodology did not meet the requirements of Federal Rule of Evidence 702 because it relied on an untested methodology and was not peer-reviewed. Second, the expert admitted that his results were not based on a statistically representative sample size. Without admissible expert testimony to prove a disparate impact based on race, the court concluded that the EEOC could not prove its claim of disparate impact discrimination.

Takeaway: The Kaplan decision suggests that the EEOC may have an uphill battle in proving that an employer’s reliance on credit checks for hiring results in a disparate impact, particularly given the EEOC’s own policies on the subject. However, the EEOC may one day succeed in finding a reliable expert with a tested methodology to prove this type of claim. Therefore, it’s a good idea for employers to continue to use credit checks for hiring only when doing so is defensible as a matter of business necessity.

Temporary Impairments Under the ADAAA

At our recent Safeguarding Employers in 2014 seminar, we updated employers regarding how courts are applying The ADA Amendments Act of 2008 (ADAAA) to temporary or transitory impairments. The observed trend among courts decisions is toward determining that temporary impairments are covered ADA disabilities.

The ADAAA became effective on January 1, 2009, with the express purpose of reinstating a broad scope of protection. While prior to the ADAAA temporary, non-chronic impairments were generally not considered disabilities, courts are now holding otherwise.

These decisions often cite the Equal Employment Opportunity Commission (EEOC) interpretive regulations, which were issued in 2011. Those regulations and the Appendix accompanying them state that impairments that last only a short period of time – particularly less than six months – may be covered disabilities if sufficiently severe.

In Summers v. Altarum Institute, the 4th Circuit became the first federal Court of Appeals to address this issue. 740 F.3d 325 (4th Cir. 2014). The employee had fallen at a train station on the way to work and severely, but temporarily, impaired both of his legs. The District Court granted the employer’s motion to dismiss, reasoning that the employee was not disabled under the ADA because his condition was only temporary. The Court of Appeals reversed and determined that the employee had set forth a covered disability.

Since the ADAAA became effective, other types of temporary impairments that courts have found may constitute covered ADA disabilities include hernias, vision problems, broken ankles, herniated discs, and pregnancy complications.

Takeaway: Employers should be aware that temporary or transitory impairments can constitute ADA covered disabilities. Accordingly, employees with temporary impairments may be entitled to reasonable accommodations to address their situations, including a possible leave of absence beyond any available FMLA leave.

Briggs 2014 Client Seminar – Thank You

Thanks to the over 100 busy professionals who spent a half-day with your Briggs Employment, Benefit and Labor Team in the 2014 “Safeguarding the Employer” client seminar held on April 10th.  And a special call-out to our guest speaker Brian McClung of McClung Communications and Public Relations for his presentation on crisis management.

The seminar covered the following topics:

  • “Legislative Overview for 2013 and 2014”
  • “The NLRB is Back At Full Strength – And Employers Should Be Concerned”
  • “Introducing the Elephant in the Room: How Discovery Impacts You”
  • “Employee Benefits Update”
  • “The ADAAA Aftermath” (including our Temporary Disability Chart)
  • “Communicating Effectively in a Crisis”

If you weren’t able to make the seminar this year but would like the materials, please let Dena Edmiston know at 612-977-8581 or dedmiston@briggs.com or contact a Briggs attorney in the Employment, Benefits and Labor section (for contact info, click here).

We’ll be presenting again in 2015 and, of course, we are at your service in the meantime.

Neal Buethe, Section Head

Briggs and Morgan’s Employment, Benefits and Labor Law section

Minnesota Minimum Wage Increase Becomes Law

On April 14, 2014, Governor Dayton signed a bill that will raise Minnesota’s minimum wage beginning in August of 2014.  See H.F. 2091.  Here’s what employers need to know about the new minimum wage law:

Large Employers:  “Large employers” – whose gross annual volume of sales made or business done is $500,000 or more – will need to pay a minimum wage of at least $8.00 per hour beginning on August 1, 2014.  The minimum wage for large employers will increase to $9.00 per hour on August 1, 2015 and will increase again to $9.50 per hour on August 1, 2016.

Small Employers:  “Small employers” – whose gross annual volume of sales made or business done is less than $500,000 – will need to pay a minimum wage of at least $6.50 per hour beginning on August 1, 2014.  The minimum wage for small employers increase to $7.25 per hour on August 1, 2015 and will increase again to $7.75 per hour on August 1, 2016.

Exception for Employees Under the Age of 18:  The new law allows “large employers” to pay employees under the age of 18 a lower minimum wage rate of at least:  (i) $6.50 per hour beginning on August 1, 2014; (ii) $7.25 per hour beginning on August 1, 2015; and (iii) $7.75 per hour beginning on August 1, 2016.

Exception for Employees Under the Age of 20:  During the first 90 days of employment, any employer may pay an employee under the age of 20 a lower minimum wage rate of at least:  (i) $6.50 per hour beginning on August 1, 2014; (ii) $7.25 per hour beginning on August 1, 2015; and (iii) $7.75 per hour beginning on August 1, 2016.

Exception for Certain Summer Work Travel Employees:  An employer that is considered a “hotel or motel,” “lodging establishment,” or “resort,” as defined by Minnesota law, may pay a lower minimum wage rate to employees working under a summer work travel exchange visitor program nonimmigrant visa, if the employer also provides a food or lodging benefit to the employee.  For employees who qualify for this exception, the minimum wage will be:  (i) $7.25 per hour beginning on August 1, 2014; (ii) $7.50 per hour beginning on August 1, 2015; and (iii) $7.75 per hour beginning on August 1, 2016.

Prohibition of Displacement:  The new law prohibits employers from displacing other employees to take advantage of the lower minimum wage rates for employees under the age of 18, employees under the age of 20, or employees who qualify for the summer work travel exception.  This prohibition includes total displacement of employees as well as partial displacement through a reduction in hours, wages, or employment benefits.

Annual Adjustments for Inflation:  Beginning in 2018, the Commissioner of Labor and Industry will adjust the minimum wage rates applicable to all employers and employees to account for inflation, up to a maximum of 2.5% per year.  Beginning in 2017, the new minimum wage rates for the upcoming year will be announced by August 31st.  However, the Commissioner may choose not to adjust the minimum wage rates for inflation if economic indicators indicate the potential for a substantial economic downturn.

Can Employers Tell Employees to “Be Nice” to Each Other?

“Be Nice” is acceptable in the sand box, but perhaps not in an employer handbook, according to a recent National Labor Relations Board (NLRB) ruling. See Hills and Dales General Hospital, 360 NLRB No. 70 (April 1, 2014 – it was not an April Fool’s joke).

In the matter before the NLRB, the employer hospital issued employee standards of conduct that prohibited “gossip” or “negative comments” about fellow team members and required that the employee represent the employer in a “positive and professional manner.” These seemingly innocuous rules of basic social interaction did not survive the NLRB scrutiny because they could, according to the NLRB three-member majority, be construed by employees as interfering with their National Labor Relations Act (NLRA) rights. Under Section 7 of the NLRA, employees have rights to engage in protected concerted activities for their mutual aid or protection relating to the terms and conditions of employment. The NLRB held the employer’s “be nice” rules could inhibit criticism among employees of management and attempts to address terms and conditions of employment. There was a strong dissent. The ruling affects all employers, not just collective bargaining situations.

Takeaway: The NLRA’s protection of concerted activities related to the terms and conditions of employment can work unexpected results. When reviewing handbook provisions and employer policies on employee communication and interaction, this protection needs to be part of an employer’s review checklist. This is even more the case if the employer needs to take disciplinary or corrective action. It is a good idea to work with legal counsel to make sure there is no reasonable chance of interfering with NLRA concerted protected activities when drafting or enforcing policies requiring employees to “be nice.”

Ban the Box Guidance for Multi-State Employers

A recent frequently-asked-questions (FAQ) from the Minnesota Department of Human Rights provides useful guidance for multi-state employers concerning Minnesota’s Ban the Box law.

The Ban the Box law provides that most public and private employers “may not inquire into or consider or require disclosure of the criminal record or criminal history of an applicant for employment until the applicant has been selected for an interview by the employer or, if there is not an interview, before a conditional offer of employment is made to the applicant.”  Minn. Stat. § 364.021.  The new FAQ answers two important questions about how this requirement applies to employers with multi-state operations.

Does Ban the Box Apply to Out-of-State Employers With Operations in Minnesota?  Yes.  The FAQ clarifies that the law “applies to the Minnesota operations of companies that operate in multiple states.”

How Can Minnesota Employers With Multi-State Operations Comply With the Law?  The FAQ explains that a multi-state employer can continue to use a single employment application for all potential employees, even if the application asks about an applicant’s criminal history.  However, in order to comply with the law for applicants in Minnesota, the application form must include “language on the application that is clear and unambiguous that Minnesota law provides that applicants don’t have to answer criminal background history questions.”

Supreme Court Holds That Severance Payments Are Taxable Wages

In a recent case, the U.S. Supreme Court addressed the issue of whether severance payments made to employees who were involuntarily terminated as part of a Chapter 11 bankruptcy were taxable wages. U.S. v. Quality Stores, Inc.,No. 12-1408 (U.S. Mar. 25, 2014).

In the case, Quality Stores, Inc. paid severance payments to employees and initially withheld taxes required under the Federal Insurance Contributions Act (FICA). Later, believing that the payments should not have been taxed as wages under FICA, Quality Stores sought a refund from the Internal Revenue Service (IRS) on behalf of itself and about 1,850 former employees. After the IRS neither allowed nor denied the refund, Quality Stores initiated proceedings in the Bankruptcy Court, which granted summary judgment in Quality Stores’ favor on the issue. The district court and Sixth Circuit affirmed, concluding that the severance payments were not wages under FICA. However, the Supreme Court reversed, holding that the severance payments were wages subject to FICA tax because they were “remuneration made only to employees in consideration for employment.”

Takeaway: When paying severance to an employee, an employer should give careful consideration to whether the severance payments are taxable wages for purposes of FICA.

Reminder – April 10, 2014 Presentation: Safeguarding Employers in 2014

On April 10, 2014, employers from the Employment, Benefits, and Labor Section at Briggs and Morgan, P.A. will present “Safeguarding Employers in 2014 – Changes in Employment, Benefits, and Labor Law” at Windows on Minnesota in the IDS Center in Downtown Minneapolis.  A description of the topics that will be covered at the presentation is available here.

The presentation is free to attend.  Continental breakfast and lunch will be provided.  CLE and HRCI credits will be applied for.

It’s not too late to register to attend the presentation.  If you are interested in attending, please RSVP to Dena Edmiston at (612) 977-8581 or dedmiston@briggs.com.

EEOC Challenging National Pharmacy Over Terms of Severance Agreements

On February 7, 2014, the EEOC filed suit in the United States District Court for the Northern District of Illinois in Chicago against the large prescription and healthcare related services provider, CVS, contending that its actions concerning severance benefits violate Title VII of the Civil Rights Act of 1964. Specifically, this law provides the EEOC with the ability to seek immediate redress to remedy any potential injury which would result from an employer attempting to prohibit communication to the agency to address discrimination.

The EEOC based this Complaint on the theory that CVS was conditioning the receipt of severance benefits on an agreement which it interpreted to “interfere with employees’ rights to file discrimination charges and/or communicate and cooperate with the EEOC,” including limitations on the departing parties ability to cooperate, non-disparagement clauses, and non-disclosure of confidential information. Additionally, the Separation Agreements included general releases of claims, covenants not to sue, and consequences for breach. In the Complaint, the EEOC stresses the policy consideration that any conduct taken by an employer to limit employees’ access to report violations is unlawful. The EEOC’s stated concern is to “preserve access to the legal system” and to ensure that employees remain “free from fear of adverse consequences” if they are to report potential unlawful action.

Takeaway: The timeline for resolution of the CVS lawsuit could be a few months or take several years. In the interim, employers should evaluate whether severance, benefits, or contractual agreements with their employees limit the rights to seek federal intervention for unlawful acts undertaken by the employer to avoid running afoul of the EEOC’s policy mandate outlined in the CVS lawsuit.

Eleventh Circuit Holds that Employee’s Depression Does Not Qualify for FMLA Leave

The Eleventh Circuit Court of Appeals recently reversed a jury verdict for an alleged violation of the Family Medical Leave Act (FMLA) based, in part, on the determination that the employee was not entitled to FMLA leave for his depression.

In Hurley v. Kent of Naples, Inc., the plaintiff alleged that he was terminated after requesting 11 weeks of vacation time over the course of two years and explaining to his employer that he needed the time off due to depression.  At trial, the jury found in the plaintiff’s favor, and the court awarded the plaintiff over $1 million in damages and attorneys’ fees.

The Eleventh Circuit vacated the district court’s findings based, in part, on the conclusion that his request for leave did not qualify for protection under the FMLA.  The court explained that “the FMLA does not extend its potent protection to any leave that is medically beneficial leave simply because the employee has a chronic health condition.”  Rather, the FMLA only authorizes leave for “any period of incapacity or treatment for such incapacity due to a chronic serious health condition.”  29 C.F.R. § 825.115(c).  As a result, even though the plaintiff’s depression likely qualified as a chronic health condition and, therefore, as a “serious health condition” under the FMLA, the plaintiff was ineligible for FMLA leave because there was no evidence that he needed the leave because of a “period of incapacity or treatment for such incapacity” due to his depression.

Takeaway:  The Hurley case shows that even if an employee may have a chronic health condition, that does not necessarily mean he or she is entitled to FMLA leave.  Instead, an employee will only be eligible for FMLA leave for a “period of incapacity or treatment for such incapacity due to a chronic serious health condition.”

Why You Probably Should Not Lie About Punching A Certain Former Governor/Professional Wrestler

A federal district court in Minnesota recently denied a motion for summary judgment seeking to dismiss a defamation claim brought by former Governor of Minnesota and professional wrestler, Jesse “The Body” Ventura.

In the lawsuit, Ventura alleges that he was defamed in a New York Times Bestseller written by former Navy Seal, Chris Kyle.  In Kyle’s autobiography, American Sniper, the Autobiography of the Most Lethal Sniper in U.S. Military History, Kyle described a physical altercation with Mr. Ventura — whom he refers to as “Scruffy Face” — in a subchapter entitled “Punching Out Scruffy Face.”  Kyle wrote that, after exchanging words with Ventura on an evening in 2006, “I laid him out.”  Although he did not name Ventura in the book, he later admitted in various media interviews that the “Scruffy Face” in question was indeed the Former Governor of Minnesota.

Kyle brought a motion for summary judgment seeking to dismiss Ventura’s defamation claim on the grounds that there were no genuine issues of material fact regarding whether:  (i) the account in the book was materially false; and (ii) whether the account in the book was written with “actual malice,” as required for a defamation claim against a public figure.

On March 19, 2014, the court denied Kyle’s motion for summary judgment, reasoning that Ventura provided sufficient evidence that the statements in “Punchy Out Scruffy Face” were false that a jury could find in his favor.  The effect of the court’s denial of the motion for summary judgment will be that, unless the case settles, Ventura’s defamation claim against Kyle will go to trial and be decided by a jury.

Takeaway:  Unless you’ve got solid proof, it’s probably not a good idea to claim that you “laid out” Jesse Ventura.  You may also want to avoid suggesting that Ventura has time to bleed.

President Obama Proposes Changes to Salary Basis Requirements for FLSA Overtime Exemptions

On March 13, 2014, President Obama signed a presidential memorandum directing the U.S. Department of Labor to update regulations to make more employees eligible for overtime under the Fair Labor Standards Act (FLSA).

One of the primary ways that the new regulations would make more employees eligible for overtime is by increasing the salary thresholds for the FLSA’s salary basis requirements.  Currently, in order to qualify for the executive, administrative, learned professional, or creative professional exemptions under the FLSA, most employees need to be paid at least $455 per week on either a salary basis or fee basis.  The last time this amount was updated was in 2004.  Employees who are paid the minimum amount of $455 per  week to qualify for an exemption earn an annual salary of $23,660.

Because the presidential memorandum does not specify a new amount for what the salary threshold for FLSA exemptions should be, the Department of Labor will have to address that issue when it issues proposed regulations on the subject.  According to the Washington Post, administration officials are considering setting the new threshold somewhere between $550 per week ($28,600 per year) and $970 per week ($50,440 per year).  If the $455 amount established in 2004 had kept pace with inflation, it would currently be $553 per week ($28,756 per year).  It is estimated that if the salary threshold was raised to $553 per week to keep pace with inflation, approximately 3.1 million workers would become eligible for overtime under the FLSA.

Takeaway:  Employers should pay close attention when the Department of Labor issues proposed regulations for updating the FLSA’s salary basis requirements.  Once the new threshold is established and takes effect, certain employees will either need to receive a raise or begin receiving overtime pay.

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