FLSA Rules For Exempt Employees During Snow Days

With winter weather arriving, many employers will soon face questions about whether certain employees are entitled to be paid when the office closes for the day or the employee can’t make it to work.

The answer is tricky when it comes to employees who are “exempt” from the normal minimum wage and overtime requirements of the Fair Labor Standards Act. “Exempt employees” are generally salaried employees who work in a bona fide executive, administrative, or professional capacity.

Salary Requirements

According to 29 C.F.R. § 541.602, whether the company can deduct money from an employee’s salary depends on whether the company is closed for the day, the employee decided he or she could not make it to work, and whether the employee misses a full day or something less than that.

The general rule is that employers can deduct from an exempt employee’s pay when the employee is absent from work for one or more full days for personal reasons other than sickness or accident. But if an employee is “ready, willing, and able to work,” the employer cannot make deductions when work is not available.

In the context of inclement weather, that means that if the office closes and the employee would have been “ready, willing, and able to work,” the business cannot deduct from the exempt employee’s salary. However, if the business is open but the employee cannot get there, the employer can deduct from the salary because the employee is missing work for a “personal reason” other than sickness or accident.

If, however, the employee misses less than a full day, the company cannot deduct from the employee’s salary.

PTO Requirements

Many employers wonder whether they can require an employee to use PTO or vacation time when the office has to close or the employee cannot make it to work.

The FLSA does not require employers to provide vacation time or PTO to employees. Notably, this means that there is no prohibition on an employer giving an employee vacation time and later requiring that such vacation time be taken on a specific day.  See DOL Opinion Letter (Oct. 24, 2005).

Therefore, as long as an employer does not reduce the employee’s guaranteed salary, the employer can reduce the accrued leave someone has acquired. This is true even if the employee will be left with a negative PTO/vacation time balance. This is also true even if the company makes the decision to close the office for the day, or the employee is absent from work for less than a full day.

Takeaway:  Employers need to make sure to follow the FLSA’s rules for paying exempt employees on snow days.  For more information about the FLSA’s requirements for weather-related closures, click here.

11th Circuit Rejects Overbroad EEOC Subpoena Against Cruise Ship

Although the EEOC’s subpoena authority is broad, a recent 11th Circuit Court of Appeals case shows that it has limits.

In EEOC v. Royal Caribbean Cruises, Ltd., the 11th Circuit affirmed the lower court’s holding that an EEOC subpoena was overbroad and unenforceable. The case began when a single employee from the cruise ship filed a charge of alleged disability discrimination with the EEOC. The employer defended its decision not to re-hire the employee by arguing that it could not employ the employee due to standards developed by the Bahamas Maritime Authority (BMA). After the charge was filed, the EEOC issued an administrative subpoena that requested the employer to produce the following information:

  1. A list of all employees who were discharged or whose contracts were not renewed due to a medical reason since August of 2009;
  2. For each employee identified in response to request number 1, the employee’s name, citizenship, employment contract, position title, reason for and date of discharge, a copy of the separation notice and the last known contact information for each individual;
  3. For each employee listed in response to request number 1, the employee’s employment application and related correspondence, interview notes, the identity of the person who hired the employee, how the employee obtained the position (e.g., online, in person, recruiter), the location where the employee was interviewed, and the identity and location of the person who made the final hiring decision;
  4. A list of all persons who applied for a position but were not hired within the relevant period due to a medical reason; and
  5. For each employee listed in response to request number 4, the employee’s citizenship, employment application and related correspondence, interview notes, the identity of the person who hired the employee, how the employee obtained the position (e.g., online, in person, recruiter), the location where the employee was interviewed, and the identity and location of the person who made the final hiring decision.

The district court refused to enforce the subpoena on the grounds that the information sought was not relevant to the underlying charge of discrimination, and the EEOC appealed.

The 11th Circuit explained that when investigating a charge of discrimination, the EEOC is entitled to subpoena information that “is relevant to the charge under investigation.” 42 U.S.C. § 2000e-8(a). Although courts have interpreted relevancy broadly in this context, it is not limitless.

The 11th Circuit held that it was not clear “why company-wide data regarding employees and applicants around the world with any medical condition, including conditions not specifically covered by the BMA medical standards or similar to [the employee’s medical condition], would shed light on [the employee’s] individual charge . . . .” The court noted that because the employer admitted terminating the employee due to his medical condition, as required by BMA standards, there was no need for statistical data to determine whether the employer’s reason for the termination was a pretext for discrimination – that issue was settled. The court further explained that it would be unduly burdensome for the company to comply with the subpoena given its company-wide scope and the extensive requests for supporting documentation. As a result, the 11th Circuit affirmed the lower court’s refusal to enforce the subpoena.

Takeaway: The EEOC’s subpoena power is broad, but not unlimited. If information sought by an EEOC subpoena is not relevant to the underlying charge of discrimination, there may be a basis for an employer to oppose the subpoena. But employers need to act quickly when they receive an EEOC subpoena because EEOC regulations only give employers a limited period of five days to object to a subpoena.

Minnesota School Activities Leave

As the new school year is now well underway, employees may be requesting time off with greater frequency to attend activities related to their children. These requests may involve school conferences with teachers or advisors, school-related sporting events, or school concerts or play performances. Employees with children receiving child care services or attending a prekindergarten regular or special education program may also seek time off from work to attend a conference or activities, or to observe and monitor the services or program.

As an important reminder, eligible Minnesota employees are entitled to up to 16 hours of school-related activities leave during any 12-month period to attend such conferences or events which cannot be scheduled during non-work hours. Minn. Stat. § 181.9412. To receive this unpaid leave the employee must have worked for the employer for at least 12 consecutive months immediately preceding the leave request. The employee should provide reasonable notice of the leave request and make a reasonable effort to schedule the leave so as not to unduly disrupt the employer’s operations.

It is important to note that these activities must be school related. The Minnesota law does not apply, for example, to community or private programs such as youth hockey, gymnastics, or private music lessons or performances.

Takeaway: Employers should make sure to grant eligible employees the unpaid leave to which they are entitled to attend school-related activities.

Can Employers Use Paid Meal Breaks to Offset Unpaid Donning and Doffing Time Under the FLSA?

Yes – according to a recent federal court decision in Pennsylvania, an employer can take an offset for payments for non-working meal breaks against any claims for unpaid donning and doffing time.

In Smiley v. E.I. Du Pont De Nemours and Co., the plaintiffs alleged that they were not paid for donning and doffing time before and after their shifts in violation of the Fair Labor Standards Act (FLSA). No. 3:12-cv-2380 (M.D. Pa., Nov. 5, 2014). The employees typically worked 12-hour shifts, during which they received three thirty-minute meal breaks, which the employer paid even though it was not required to do so under the FLSA. The employer argued that because the paid meal breaks exceeded any amount of payment allegedly due for donning and doffing, it could not be held liable. The court agreed.

The court explained that, although the FLSA does not specifically authorize offsets of paid non-work time for unpaid work time, offsets are only precluded in two circumstances. First, an employer may not take an offset for any payment that is excluded from the employee’s “regular rate of pay” for purposes of calculating overtime. Second, an employer cannot take an offset if the parties agreed to treat the non-work time as “hours worked” for FLSA purposes. If neither of these conditions applies, an offset may be permissible.

In Smiley, the court held that an offset was permissible for the paid meal breaks. There was no dispute that the employer included the paid meal breaks in the employee’s regular rate of pay, nor was there any evidence that the parties agreed to treat the meal breaks as hours worked. Because the paid meal break time exceeded the amount of time the employees spent donning and doffing, the court determined there was no liability under the FLSA and granted the employer’s motion for summary judgment.

Takeaway: In limited circumstances, an employer may take an offset for paid non-work time against unpaid work time, precluding liability under the FLSA.

Court Denies EEOC’s Motion For Preliminary Injunction Against Honeywell’s Wellness Program

The U.S. District Court for the District of Minnesota recently denied a motion for a preliminary injunction against aspects of Honeywell’s wellness program.

In EEOC v. Honeywell International, Inc., the EEOC challenged certain surcharges that Honeywell imposes on employees who participate in the Company’s High Deductible Health Plan and do not participate in a wellness program with required biometric screenings. No. 14-4517 ADM/TNL (D. Minn., Nov. 6, 2014). In order to be eligible for a Health Savings Account, employees who participate in the wellness program are required to be screened for blood pressure, height, weight, waist circumference, and cholesterol, glucose and nicotine levels. Employees who do not participate are subject to a $500 annual surcharge. Employees and their spouses may also be subject to $1,000 annual surcharge if they are tobacco users. Employees and spouses who refuse to be screened are presumed to be tobacco users, unless they establish that they are tobacco free in another way. When employees agree to the testing, Honeywell receives the data in aggregate form, but does not receive individual results.

The EEOC alleges that Honeywell’s wellness program violates the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act (GINA) and sought a preliminary injunction against the imposition of surcharges while the case is pending. The court denied the motion for a preliminary injunction.

In order to obtain a preliminary injunction, the EEOC needed to show four things: (1) the threat of irreparable harm; (2) that the balance of harms favored the injunction; (3) the likelihood of success on the merits; and (4) that the public interest favored the injunction. The court found that the EEOC failed to prove irreparable harm, explaining that the three employees represented by the EEOC had already agreed to the biometric testing and did not demonstrate any potential violation of their privacy. The court also found that the balance of harms did not favor the injunction because the injunction would likely result in increased costs for Honeywell’s healthcare program and would create problems for the administration of the health plan.

With respect to likelihood of success on the merits, the court did not analyze the issue in-depth, but identified some potential problems for the EEOC’s case. First, the Court noted that Honeywell’s wellness program may qualify for the safe harbor provision of the ADA, which allows companies to establish or administer “the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with state law.” 42 U.S.C. § 12201(c)(2). Second, the court noted that Congress specifically approved of surcharges in a provision of the Affordable Care Act, which provides that “the absence of a surcharge” may be used as a reward in a wellness program. Third, the court noted that the biometric screening may not constitute a “genetic test” for purposes of GINA, which is defined as “analysis of human DNA, RNA, chromosomes, proteins, or metabolites, that detects genotypes, mutations, or chromosomal changes.” 29 U.S.C. § 1191b(d)(7).

The court concluded by stating that “great uncertainty persists in regard to how the ACA, ADA and other federal statutes such as GINA are intended to interact.” As a result, the Court refused to issue a preliminary injunction against Honeywell’s wellness program.

Takeaway: The Honeywell case is an important test case regarding the viability of wellness programs with financial surcharges. The Court’s initial denial of the EEOC’s motion for a preliminary injunction is a positive sign that the practice may be permissible, but it is not a final decision on the merits.

2015 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 23, 2014, the Internal Revenue Service announced the 2015 cost-of-living adjusted amounts for certain retirement plan limitations. Earlier in 2014, the Internal Revenue Service announced the 2015 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 22, 2014, the Social Security Administration announced the 2015 cost-of-living adjustments related to Social Security benefits.

A list of the most significant of these cost-of-living adjusted amounts is available here.

NLRB Challenges Federal Circuit Courts to a Duel Over Class-Action Waivers

The National Labor Relations Board (NLRB) recently re-affirmed a ruling that has been rejected by multiple federal circuit courts, holding that an arbitration agreement cannot require employees to waive their rights to proceed as a class or collective action.

In D.R. Horton and Michael Cuda, the NLRB first held that an employment agreement violates an employee’s Section 7 rights under the National Labor Relations Act (NLRA) when it precludes them from “filing joint, class, or collective claims addressing their wages, hours or other working conditions against the employer in any forum, arbitral or judicial.”

The Fifth Circuit Court of Appeals overturned the NLRB’s decision in D.R. Horton, reasoning that it conflicted with the Federal Arbitration Act (FAA) and the U.S. Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, 131 S.Ct. 1740 (2011).  Later, both the Eighth Circuit and the Second Circuit agreed that the Fifth Circuit was right, and the NLRB was wrong. See Sutherland v. Ernst & Young LLP, 726 F.3d 290, 297 n.8 (2d Cir. 2013); Owen v. Bristol Care, Inc., 702 F.3d 1050, 1052–54 (8th Cir. 2013).

Perhaps due to its recent losing streak, the NLRB decided that it’s not going to take it anymore.  In Murphy Oil USA, Inc., the NLRB re-affirmed its holding in D.R. Horton and held that the position adopted by the federal circuit courts “violates the long-established understanding of the [NLRA] and national labor policy.”  361 NLRB No. 72 (NLRB, Oct. 28 2014). The NLRB referred to the circuit courts’ analysis as “unpersuasive,” and remarked that “scholarly support for the Board’s approach, by contrast, has been strong.”

The primary argument made by the NLRB in Murphy Oil was that the NLRA creates a substantive legal right for employees to participate in class or collective actions, not just a procedural right to do so.  The NLRB explained that “[b]ecause mandatory arbitration agreements like those involved in D.R. Horton purport to extinguish a substantive right to engage in concerted activity under the NLRA, they are invalid.”  This is contrary to the position of the Fifth, Second, and Eighth Circuits, which regard the right to participate in an FLSA collective action as a procedural right, which may be waived.

Given the Fifth, Second, and Eighth Circuit opinions rejecting the approach adopted by the NLRB in Murphy Oil, there is a strong incentive for the employer to appeal the Murphy Oil decision.  If that happens,  the NLRB’s reasoning will once again be tested by the circuit courts, and potentially the U.S. Supreme Court, hopefully resolving the issue once and for all.

Takeaway:  Look for another showdown between the NLRB and the federal circuit courts regarding class-action waivers in the near future.

Ten Ways To Maintain the Secrecy of Trade Secrets

One of the requirements for information to qualify as a trade secret is that the information must be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Here are ten ways that employers can maintain the secrecy of trade secrets:

  1. Physical Protections: Keep trade secrets in a locked room, cabinet, or vault. Employers can also use access rights (like key cards) to restrict who has physical access to the trade secret information, or they can maintain a log of individuals who had access to it and when.
  2. Digital Protections: When trade secret information is stored digitally, user accounts and passwords can be used to control who has access to the information. If the information is transmitted via email or download, consider using encryption to prevent unauthorized disclosures.
  3. Label Information as “Confidential.” Although not absolutely necessary, including a label on any documents or information to make clear that it is “Confidential” is helpful.
  4. Destroy Old Documents or Data. Trade secret information should not be placed in publicly accessible dumpsters or recycling bins in readable form. Instead, shred it before disposal. If trade secret information is stored on a computer or hard-drive, the computer or hard-drive should be wipe-cleaned or rendered inaccessible before disposal, too.
  5. Confidentiality Agreements: Require employees who have access to trade secrets to sign confidentiality agreements. Confidentiality agreements should clearly define what information may not be disclosed and should authorize the employer to seek injunctive relief and damages in the result of a breach.
  6. Non-Disclosure Agreements: For vendors or other third-parties who may have access to trade secrets, an employer can require the outside party to sign a non-disclosure agreement. Like a confidentiality agreement for employees, a non-disclosure agreement should clearly define what information is protected and authorize injunctive relief and damages in the event of a violation.
  7. Require Departing Employees To Return Company Property. Employees who terminate their employment with the company should not be permitted to take company data with them. Instead, employment policies or agreements should clearly inform employees that all company data, whether in digital or hard-copy format, must be returned upon termination.
  8. Monitor Employee Emails or File Transfers. Employees should not be permitted to email trade secret data to third-parties or personal email accounts or to copy trade secrets to external devices without authorization. Periodically monitoring employee emails, either using software to detect key terms or via manual monitoring, is one way to detect unauthorized disclosures.  Software is also available that can alert employers when files are copied to external devices.
  9. Don’t Get a Patent. Getting patent protection for an invention requires publicly disclosing how it works. If the protections of trade secret law are more valuable to a company than the limited monopoly provided by a patent, don’t get a patent.
  10. Set a Good Example. If employers want employees to protect the confidentiality of trade secrets, then the leaders and supervisors in the company should set a good example for the employees. If the leaders of the company are careless with trade secrets, the employees will likely be careless, too.

Takeaway: For trade secret protection to apply, an employer must use reasonable efforts to maintain the information’s secrecy. What is reasonable for a particular employer will vary depending on the information protected as well as the nature of the business and the workforce.

One-Armed Security Guard Wins ADA Case

A jury in Miami recently found that an employer discriminated against a one-armed security guard on the basis of disability when it fired him following a customer complaint.

According to the EEOC’s press release, the security guard lost his arm in a car accident. Subsequently, the president of the community association where the security guard was stationed complained to his employer that “The company is a joke. You sent me a one-armed security guard.” After receiving this complaint, the employer removed the security guard from his post, ending his employment.

The EEOC filed suit on the security guard’s behalf, arguing that his removal and termination violated the Americans with Disabilities Act (ADA). The EEOC’s primary argument was that reliance on discriminatory customer preferences and stereotypes about what individuals with disabilities can and cannot do violates the ADA. The jury agreed with the EEOC and awarded the security guard $35,922 in damages. To reach this result, the jury had to determine that the security guard could perform his essential job functions, with or without accommodation.

Takeaway: Employers cannot rely on customer preferences to justify discriminatory actions. In this case, the employer likely should have engaged in the interactive process to determine whether the employee could perform the essential functions of the job.

Election Requirements for Employers in Minnesota

There’s an election coming up on Tuesday, November 4, 2014.  Here are the two things that employers in Minnesota need to know about the upcoming election:

  1. Voting Leave: Minnesota law permits employees to take voting leave “for the time necessary to appear at the employee’s polling place, cast a ballot, and return to work on the day of that election.”  For more information about voting leave, click here.
  1. Election Judge Leave: Minnesota law permits certain employees who serve as election judges to be absent from work for the purpose of serving as an election judge without penalty.  For more information about election judge leave, click here.

What Health Care Employers Can Learn From the Ebola Response in Dallas

The recent Ebola case at Texas Health Presbyterian Hospital in Dallas, Texas, provides some important lessons for health care employers.  As of today, only 3 cases of Ebola have been diagnosed in the United States (which has a population of approximately 319 million), so there is no need for alarm at this time.  The experience in Dallas shows that preparation, education, and training can go a long way in helping a health care employer maintain readiness and a positive working relationship with its staff.

Last week, CNN reported that the National Nurses’ Union raised concerns about an alleged lack of safety protocols for the Ebola response at Texas Health Presbyterian Hospital. Specifically, the nurses’ union complained that:  (i) the Ebola patient was not immediately isolated; (ii) nurses were not provided with appropriate protective gear; (iii) nurses did not have proper supplies to dispose of hazardous waste; and (iv) nurses were not required to attend training about Ebola.

Regardless of whether these claims are true, they identify a potentially significant problem for health care employers – failure to maintain a good working relationship with the medical and nursing staff on the frontlines of an Ebola response can significantly impair a health care providers’ ability to respond effectively.  In a worst case scenario, a walk-off or strike could jeopardize a health care provider’s ability to operate or negatively impact public safety.

So what can a health care employer do now to avoid such a scenario?  While the answer to that question will vary depending on the nature of the clinic or hospital and its risk profile, here are some initial thoughts:

  • Designate an Ebola Leadership Team: Health care employers can designate a leader or leadership team to develop an emergency response plan, direct any necessary response for Ebola, ensure adequate preparation and supplies, and to answer any questions from employees.  The individuals designated should be responsible for staying up-to-date with respect to reported Ebola cases as well as the latest guidance from the Center for Disease Control (CDC) and other health organizations.
  • Ensure Adequate Supplies: Health care employers should make sure that they have adequate protective gear on hand in case a patient is diagnosed with Ebola, including personal protective equipment and supplies for disinfecting and disposing of hazardous waste.  It is important that employees know how to access these supplies if needed or how to request additional supplies.
  • Provide Training and Education: Health care employers should consider providing education and training to employees about how to recognize Ebola symptoms, how to respond to suspected cases (including where and when patients should be isolated), how to properly don and doff any required protective gear, how to interact with patients, or how to dispose of hazardous waste.  Because hands-on education is usually most effective, it may be helpful to run simulations so that employees can get first-hand experience and build their confidence.
  • Maintain Good Communication With Employees Or Union Representatives: Health care employers should maintain open lines of communications with employees or their union representatives to make sure that employee concerns are addressed.  For example, employers could establish a system for employees or union representatives to ask questions, make suggestions, report concerns, or identify additional training or guidance that would be helpful.  Alternatively, employers could establish an intranet site or another system to provide employees with up-to-date information about Ebola and the employer’s procedures.

Some resources for health care employers to learn about Ebola and how to respond suspected cases include the following:

Takeaway:  The current Ebola situation in the United States remains limited in scope and should not be a significant concern for the vast majority of employers.  For health care employers, however, investing in preparation, education, and training could be useful to help prepare the employer’s workforce to respond to an Ebola patient, if necessary, and to maintain a good working relationship with employees.  For more general information about Ebola and its employment implications, click here.

Court Dismisses EEOC Lawsuit Regarding CVS Settlement Agreements . . . On A Technicality

A court recently dismissed the Equal Employment Opportunity Commission’s lawsuit against CVS Pharmacy concerning allegedly overbroad settlement agreements, but not for the reason you might think.

The EEOC filed its lawsuit against CVS last spring.  The case was alarming to employers because it challenged a number of provisions that are fairly routine in employee settlement agreements (e.g., confidentiality, non-disparagement, etc…).  Many were awaiting a court decision addressing the merits of the EEOC’s arguments to see what implications it might have for employment settlement agreements.

Unfortunately, the court dismissed the case on a technicality, without addressing the merits of the EEOC’s claims.  Specifically, the court dismissed the case on the grounds that the EEOC failed to attempt to conciliate the matter with CVS before bringing its lawsuit, as required by 42 U.S.C. § 2000e-5(b).  Because it was undisputed that the EEOC did not first attempt to conciliate the matter, the court held that the EEOC was not authorized to bring the lawsuit and dismissed the case.

Takeaway:  Because the CVS case was dismissed on a technicality, employers will need to wait longer to find out whether courts will find any merit in the EEOC’s aggressive new approach to settlement agreements.