Author Archives: Michael Miller

California Law and Venue for California Employees

Companies that have employees in various states often seek uniformity in developing employment agreements by using choice of governing law and venue provisions based on the state in which the company is headquartered or registered. For example, a Minneapolis-based company might select Minnesota law to govern its employment agreements, even though some of those employees are located in other states.

Employers who seek this consistency should be aware of a new California law which provides that employees who primarily reside and work in California cannot as a condition of employment be required to (1) adjudicate outside of California a claim arising in California or (2) be deprived of the substantive provisions of California law with respect to a controversy arising in California. This law applies to contracts entered into, modified, or extended on or after January 1, 2017.

Any provision of a contract violating this new prohibition is voidable at the request of the employee, after which any disputes will be governed by California law and will be adjudicated in California. This option to void contrary choice of law or venue provisions does not apply to contracts in which the employee was in fact individually represented by legal counsel in negotiating the terms of the agreement. A court may award reasonable attorney fees to an employee who must enforce their rights under this new law.

Takeaway: Employers based outside of California should be aware that contracts with California employees with choice of governing law and venue provisions outside of California are voidable and should measure expectations accordingly.

Duty to Indemnify Bars Negligence Claim for Damages

Employees will on occasion negligently perform their duties and as a consequence can often be discharged. But what about any damages caused by their negligence? Who pays the bill for that?

This issue was recently decided by the Minnesota Court of Appeals which held that the employer was not allowed to seek damage payment from the employee. First Class Valet Services, LLC v. Gleason, No. A16-1242 (Minn. Ct. App. March 20, 2017).

In First Class, the employee twice negligently caused damage to customer cars in his position as a parking valet. After reimbursing the car owners for their damages, the company filed a negligence lawsuit against the employee seeking to recover those payments. While prior Minnesota common law suggested that an employer could bring a claim against an employee to recover such payments, the Minnesota Court of Appeals determined that the valet company’s claim was barred by its duty to indemnify the employee for the negligent performance of his duties.

In 1993, the Minnesota Legislature enacted Minn. Stat. § 181.970 which generally requires an employer to defend and indemnify its employee against damages if the employee was acting in the performance of his duties. Although this statute did not expressly abrogate the common law rule, the First Class court held that the common law was indeed abrogated by necessary implication. The court reasoned that indemnification means to “hold harmless” in all respects and that permitting the employer to bring a claim against the employee might lead to the absurd result of the employee circularly seeking indemnification from the company regarding its own claim.

Takeaway: If a claim for damages results from an employee’s negligent performance of his or her job duties, and the employee is not guilty of intentional misconduct, willful neglect of the duties of their position, or bad faith, then the employer is statutorily obligated to indemnify the employee. As a result, an employer claim against the employee to recover payment of those negligently caused damages is barred by the duty to indemnify.

Reminder: New I-9 Form Beginning January 22, 2017

Happy New Year! As a reminder of a previous post, employers must use the new I-9 form beginning January 22, 2017. A copy of the original post is below:

On November 14, 2016, the U.S. Citizenship and Immigration Services (USCIS) published a new Form I-9. The following are key changes in the revised form:

  • The new form is available in paper or hardcopy form or in a fillable computer form.
  • Completion of the form on a computer is now enhanced by prompts, drop-down menus and calendars.
  • While this new “smart” form makes completion on a computer easier, the form as provided cannot be electronically signed. Instead, it must be printed for signature.
  • The instructions for completion have been separated from the form itself. Employers should not forget to make the instructions available to employees when they are completing Section 1.
  • The form is a bit longer. The reformatting created a new “Additional Information” space in Section 2 in which employers can note comments that were previously squeezed into margins.
  • A separate page has been created for the preparer and/or translator certification and may be completed by multiple individuals.

Beginning January 22, 2017, employers must only use the new form. In the meantime, employers may use either the prior or new version.

Takeaway: The USCIS has published a new Form I-9 which MUST be used as of January 22, 2017. Employers should familiarize themselves with the new form and plan for implementation.

New Form I-9 Released

On November 14, 2016, the U.S. Citizenship and Immigration Services (USCIS) published a new Form I-9. The following are key changes in the revised form:

  • The new form is available in paper or hardcopy form or in a fillable computer form.
  • Completion of the form on a computer is now enhanced by prompts, drop-down menus and calendars.
  • While this new “smart” form makes completion on a computer easier, the form as provided cannot be electronically signed. Instead, it must be printed for signature.
  • The instructions for completion have been separated from the form itself. Employers should not forget to make the instructions available to employees when they are completing Section 1.
  • The form is a bit longer. The reformatting created a new “Additional Information” space in Section 2 in which employers can note comments that were previously squeezed into margins.
  • A separate page has been created for the preparer and/or translator certification and may be completed by multiple individuals.

Beginning January 22, 2017, employers must only use the new form. In the meantime, employers may use either the prior or new version.

Takeaway: The USCIS has published a new Form I-9 which MUST be used as of January 22, 2017. Employers should familiarize themselves with the new form and plan for implementation.

Department of Labor Appeals Overtime Injunction

The new Department of Labor (DOL) overtime regulations increasing the minimum salary threshold for white collar exemptions to an annualized $47,476 were set to become effective December 1, 2016. However, on November 22, 2016, a Texas Federal District Court issued a nationwide preliminary injunction blocking the new rules from becoming effective.

The DOL has now appealed the Court’s injunction decision to the Fifth Circuit Court of Appeals. The timing for such an appeal typically stretches over several months. The DOL does have the option, however, of requesting that its appeal be considered on an expedited basis, but such requests are not automatically granted. The DOL may also file a motion requesting that the injunction be stayed while its appeal is pending. Granting a stay would reinstate the new overtime regulations. Doing so would of course create a potentially cumbersome scenario of implementing significant overtime changes which might only be reversed once the 5th Circuit rules on the DOL appeal.

Takeaway: At least for now, and unless a motion to stay is made and granted, the DOL new overtime regulations remain without effect. Accordingly, employers are not at this time obligated to adjust employee salaries to maintain their exempt status.

Minnesota Supreme Court Affirms Wage Claim Penalties

Employees who believe they have been improperly denied payment of wages or commissions owed when separated from employment may make a claim against their employer seeking full payment. Particular statutory provisions apply depending on whether the employee was terminated or voluntarily resigned.

In either situation, the employee may be entitled to a penalty payment, in addition to full payment of the owed wages or commissions. That penalty is “equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever rate is greater, for every day, not exceeding 15 days in all” until such payment is made. An employee is not entitled to the penalty payment unless the claim results in the employee obtaining an amount greater than the amount of wages or commissions already paid by the employer in good faith.  Minn. Stat. § 181.14, subd. 3.

The Minnesota Supreme Court recently decided whether non-wage related amounts owed by the employee to the employer can be offset against the wages or commissions recovered in determining whether the employee is entitled to the penalty payment.

In Toyota Lift of Minnesota, Inc. v.  American Warehouse Systems, LLC, a lawsuit resulted in the employee being awarded more than $100,000 in disputed commissions. However, the employer’s counterclaim resulted in a more than $800,000 unrelated judgment against the employee. The Minnesota Supreme Court held that the unrelated counterclaim judgment could not be offset against the employee’s wage claim recovery. While the statute is silent as to whether such an offset is expressly permissible or not, the Court concluded that, when each part of the statute is read in context, such an offset was not authorized by the Minnesota Legislature.

Takeaway: Unrelated amounts owed to the employer cannot be offset against wages or commissions owing to the employee to avoid the statutory penalty payment. Employers should be aware that the possibility of such a penalty remains regardless of the merits of their counterclaims against the employee.

Lawsuits and Congress Attempt to Stop New DOL Overtime Rules

In May 2016, the federal Department of Labor issued its final rules amending the overtime regulations applicable to white collar exemptions. In principal part, these new regulations increase the minimum salary threshold amount necessary for the exemptions to apply from $455 per week ($23,660 annually) to $913 per week ($47,476 annually). The DOL also increased the minimum salary threshold amount applicable to the highly compensated employee exemption from $100,000 per year to $134,004 per year. These minimum salary amounts are subject to automatic updates every three years.  The new overtime rules become effective December 1, 2016.

The DOL estimates that these new regulations will affect at least 4.5 million workers and employers are scrambling to determine whether to significantly increase the base salary paid to those white collar workers or to forfeit the applicable overtime exemption.

In an effort to block enforcement of the new DOL rules, two lawsuits were filed in Texas federal court on September 20, 2016. In Nevada v. United States Department of Labor, 21 states have sought a declaratory judgment that the new regulations were improperly implemented and an injunction preventing their enforcement. In Plano Chamber of Commerce v. Perez, several Chambers of Commerce and other business organizations filed a similar lawsuit seeking the same type of relief.

Congress is also seeking to block enforcement of these new overtime regulations. On September 28, 2016, the House of Representatives voted 246 to 177 in favor of the “Regulatory Relief for Small Businesses, Schools, and Nonprofits Act” to delay enforcement of the new DOL rules until June 1, 2017.

Takeaway: While efforts are fast and furious to block – or at least delay – enforcement of the new DOL overtime rules, the current December 1, 2016, effective date is fast approaching. Employers should reach out to their legal counsel with any questions they have regarding how to comply with these new rules and any updates on the above-noted actions.

Minnesota Supreme Court Rejects Minneapolis Minimum Wage Ballot Initiative

On August 31, 2016, the Minnesota Supreme Court issued an order agreeing with the Minneapolis City Attorney that a ballot initiative could not be used to enact a new minimum wage in the City of Minneapolis.

In late July of this year, the Minneapolis City Attorney issued a legal opinion that concluded that a petition with 20,000 signatures in support of a ballot initiative to amend the City Charter to include a $15 minimum wage was not a proper subject for a ballot initiative.  Following the City Attorney’s advice, the City Council agreed not to include the ballot initiative on the ballot for the upcoming election in November.  Labor activists then challenged the City’s position in Hennepin County District Court.  Last week, the district court disagreed with the City and ruled that the $15 minimum wage should be included on the ballot in this November’s election.  The City appealed the district court’s decision.

On appeal, the Minnesota Supreme Court reversed the district court and sided with the City.  The Court reasoned that city charters may or may not provide for the enactment of an ordinance through the ballot initiative and that the Minneapolis City Charter does “not authorize the proposed charter amendment.”  Vasseur et al. v. City of Minneapolis, et al., No. A16-1367 (Minn. Aug. 31, 2016).

Takeaway:  The $15 minimum wage ballot initiative for the City of Minneapolis will not appear on the ballot this November.

Massachusetts Limits An Employer From Asking Applicants About Salary History

An applicant’s wage history is often a factor employers consider in making hiring decisions. In fact, it is not uncommon for an employment application to ask how much a candidate made at their previous positions.  Various good faith reasons may support this question.  For example, how much an applicant was paid may indicate, beyond job title, how significant his or her job duties and experience have been.

Past wage history may also determine how much the new employer is willing to offer the candidate to entice their employment. The Massachusetts legislature recently considered this issue and determined that setting compensation based on wage history can unfortunately perpetuate market wage disparities based on gender or race.  In response, Massachusetts enacted a new pay equity law that prohibits employers from seeking wage history information from applicants.  A copy of the new law can be found here.

Pursuant to this new law, it will considered an unlawful act for an employer to:

  • Screen job applicants based on their wage, including benefits or other compensation or salary histories, including by requiring that an applicant’s prior wages, including benefits or other compensation or salary history satisfy minimum or maximum criteria; or request or require as a condition of being interviewed, or as a condition of continuing to be considered for an offer of employment, that an applicant disclose prior wages or salary history.
  • Seek the salary history of any prospective employee from any current or former employer; provided, however, that a prospective employee may provide written authorization to a prospective employer to confirm prior wages, including benefits or other compensation or salary history only after any offer of employment with compensation has been made to the prospective employee.

This new law will not be effective until January 1, 2018.

Takeaway: Employers hiring applicants in Massachusetts should be aware of this new law and take steps to edit their employment application forms and processes as necessary prior to January 2018.  Employers should continue to monitor this issue as similar laws might well be enacted in other states.

Do Employees Need to Have Final Hiring and Firing Authority to Qualify for the FLSA’s Executive Exemption?

Not necessarily – a recent decision from the Eighth Circuit Court of Appeals illustrates that employees may qualify for the executive exemption under the Fair Labor Standards Act (FLSA) even if they do not have final authority over hiring and firing decisions.

In Garrison v. ConAgra Foods Packaged Foods, LLC, the issue before the court was whether the plaintiffs’ recommendations relating to hiring and firing decisions were given sufficient weight to qualify for the executive exemption.  Nos. 15-1177, 15-1428 (8th Cir. Aug. 15, 2016).  It was undisputed that the other requirements of the executive exemption were satisfied.

The parties agreed that the plaintiffs did not have final authority over hiring and firing decisions, but disputed whether they nevertheless qualified as exempt because their “recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.” 29 C.F.R. § 541.100(a)(4).  The court held that the evidence established that the plaintiffs’ recommendations concerning hiring and firing decisions were given “particular weight” because:

  • The plaintiffs were responsible for appraising performance and reporting good or poor performance for probationary employees;
  • Two of the plaintiffs recommended the discharge of one probationary employee and that recommendation was followed;
  • Some employees were demoted based on evaluations and feedback from the plaintiffs;
  • The plaintiffs were able to fill temporary vacancies by moving employees from one classification to another; and
  • The plaintiffs recommended discipline for employees and management followed those recommendations most, if not all, of the time.

Because the Eighth Circuit agreed that the plaintiffs’ recommendations concerning hiring and firing decisions were given particular weight, the court affirmed summary judgment in favor of the employer on the grounds that the employees were exempt from the FLSA.

Takeaway: Employees may qualify for the FLSA’s executive exemption even if they do not have final authority over hiring and firing decisions, provided that their recommendations concerning hiring and firing are given particular weight.

How To Take Credit For Bonuses and Commissions Under the DOL’s New Salary Basis Rules

The Department of Labor’s new salary basis rules, which are set to go into effect in December of 2016, permit employers to use bonuses, incentives, and commissions to satisfy part of the salary requirements for exempt employees under the Fair Labor Standards Act (FLSA).  Here’s what employers need to know about this aspect of the DOL’s new rules:

  • Employers can use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% (or $91.30 per week) of the new $913 per week salary requirement for exempt employees.
  • To qualify, the nondiscretionary bonuses, incentives, or commissions must be paid quarterly or more frequently.
  • Because the employer can only take credit for up to 10% of the $913 per week salary requirement, the employer still must pay affected employees a minimum of $821.70 per week to ensure the salary basis requirements are satisfied.
  • If by the last pay period of the quarter, the employee’s salary plus his or her nondiscretionary bonuses, incentives, or commissions do not equal at least 13 times the weekly salary requirement (or $11,869), the employer may make one final “catch-up” payment sufficient to achieve the required amount.
  • Any catch-up payment made by an employer must be paid no later than the next pay period after the end of the quarter and must count only toward the prior quarter’s salary amount (not toward the salary amount for the quarter in which it was paid).

Takeaway:  Employers may use nondiscretionary bonuses, incentives, and commissions to satisfy up to 10% of the FLSA’s salary basis requirements for exempt employees, provided that they follow the above-listed rules.

Eighth Circuit Court of Appeals Reinstates NFL’s Punishment of Adrian Peterson

The NFL’s 2014 punishment of Adrian Peterson has been a rollercoaster ride.  After a district court vacated the punishment, the Eighth Circuit Court of Appeals has now reinstated it.

The NFL suspended Peterson and fined him the equivalent of six games worth of pay after he entered a plea of no contest in November 2014 to a misdemeanor charge of reckless assault against one of his children.  Peterson challenged the punishment under the NFL Players Association’s collective bargaining agreement, but an arbitrator initially upheld the punishment as valid.

Next, Peterson challenged the decision in federal court.  Because federal courts are generally very deferential to arbitration decisions, Peterson had a difficult legal standard to meet to vacate the decision.  However, in February of 2015, the district court agreed with Peterson and vacated the punishment on the grounds that:  (i) the punishment violated the collective bargaining agreement because it applied a new NFL personal conduct policy retroactively in violation of a previous decision regarding Ray Rice; and (ii) the arbitrator exceeded his authority by considering whether the punishment could be sustained under the NFL’s previous personal conduct policy.  The NFL then appealed the district court’s order to the Eight Circuit Court of Appeals.

In National Football League Players Association v. National Football League, the Eighth Circuit Court of Appeals reversed the district court and reinstated the NFL’s punishment of Peterson as valid.  No. 15-1438 (8th Cir. August 4, 2016).  In reaching this decision, the court first reasoned that the district court’s disagreement with the arbitrator’s conclusion regarding retroactive application of the new NFL policy was not a valid basis to vacate the arbitrator’s decision.  Rather, the arbitrator’s decision needed to be upheld so long as the arbitrator was “at least arguably construing or applying the contract, including the law of the shop.”  Because the arbitrator “undoubtedly construed” the previous Ray Rice decision, the Eighth Circuit held that this requirement was satisfied and that the arbitrator’s decision on the issue should not be second-guessed by the courts.

The Eighth Circuit also disagreed that the arbitrator exceeded his authority by considering whether the discipline could be upheld under the NFL’s old personal conduct policy.  With respect to this issue, the NFL Players Association argued that the only question presented to the arbitrator was whether the NFL could retroactively apply its new policy to Peterson.  The Eighth Circuit pointed out, however, that the NFL characterized the issue more broadly as “Is the discipline appropriate?”  The NFL Players Association also raised arguments during the arbitration concerning whether the discipline was permitted under the NFL’s old policy.  As a result, the Eighth Circuit concluded that the arbitrator was at least arguably acting within the scope of his authority when he considered the previous policy, so that his decision must be upheld.

Takeaway:  The Eighth Circuit’s decision concerning Adrian Peterson is a reminder that courts are very deferential to arbitration decisions and that it is generally difficult to vacate an arbitration decision in federal court.