Author Archives: Michael Miller
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.
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.
No – the Minneapolis City Attorney recently published a legal opinion stating that a ballot initiative cannot be used to enact a new minimum wage in the City of Minneapolis.
In June of 2016, a group called 15 Now Minnesota submitted a petition with 20,000 signatures to the City of Minneapolis. The petition sought to include a ballot initiative in the upcoming November election, which would amend the Minneapolis City Charter to increase the minimum wage. The proposed amendment would have gradually raised the minimum wage in Minneapolis over time so that it would reach $15.00 per hour by August of 2022.
On July 28, 2016, the Minneapolis City Attorney issued a legal opinion that concluded that the proposed amendment to the city charter was not a proper subject for a ballot initiative. The City Attorney reasoned that, under Minnesota law, city charters may only be used for the “establishment, administration or regulation of city government.” See Minn. Stat. § 410.07. In contrast to a charter amendment governing the administration of city government, a legislative ordinance may only be implemented through ballot initiative if specifically authorized by the city charter. See Minn. Stat. § 410.20.
The City Attorney concluded that the proposed minimum-wage amendment was “legislative in nature” and did not relate to the establishment, administration or regulation of city government. Because the Minneapolis City Charter does not specifically authorize the implementation of legislative ordinances through the ballot initiative process, the City Attorney further concluded that “the proposed amendment is not a proper subject for a charter amendment and the Council should decline to place the provision on the ballot.”
Takeaway: The 20,000 signature petition seeking to amend the Minneapolis City Charter to increase the minimum wage is likely not a valid means of enacting a higher minimum wage within the City of Minneapolis.
When an employer purchases another company or facility with a workforce covered by a collective bargaining agreement, it should pay careful attention to whether it is either a “successor employer” or a “perfectly clear successor employer” under the National Labor Relations Act (NLRA). Here’s what employers need to know about these two different statuses:
Successor Employers: A “successor employer” is a new employer that continues its predecessor’s business in substantially unchanged form and hires employees of the predecessor as a majority of its workforce. An employer who qualifies as a successor employer has an obligation to bargain with the union that represented the employees while they were employed by the predecessor. Because it is not usually evident whether the union will retain majority status in the new workforce, however, the duty to bargain with the union does not normally arise until after the successor establishes the initial terms and conditions of employment. This means that a new employer who is merely a “successor employer” typically has an opportunity to change the terms and conditions of employment before the duty to bargain with the union arises.
Perfectly Clear Successor Employers: If it is “perfectly clear” that a new employer will retain all of the employees of the bargaining unit, the obligation to bargain with the union may arise before the new employer sets the initial terms and conditions of employment. A new employer is deemed to be a “perfectly clear successor employer” if it has either: (i) actively or, by tacit inference, misled employees into believing they would all be retained without change in their wages, hours, or conditions of employment; or (ii) failed to clearly announce its intent to establish a new set of conditions of employment prior to inviting former employees to accept employment. Thus, to avoid becoming a perfectly clear successor employer, the new employer must clearly announce its intent to establish a new set of conditions prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.
The National Labor Relations Board (NLRB) discussed these two concepts in detail in its recent decision in Nexeo Solutions, LLC, 364 NLRB No. 44 (July 18, 2016). In Nexeo Solutions, LLC, the NLRB held that the new employer was a “perfectly clear successor employer” because it informed the predecessor’s bargaining unit employees that they would be transferred to the new business, and then, a day later, advised them that they would be retained with equivalent salaries and benefits comparable to those provided by the predecessor. The new employer did not announce an intent to change the terms and conditions of employment until three months after these initial communications were made. Because of the initial communications, the NLRB reasoned that the union’s majority status in the new work force was “essentially guaranteed,” and the new employer was a perfectly clear successor who had a duty to bargain before imposing new conditions of employment.
Takeaway: To avoid becoming a “perfectly clear successor employer,” an employer involved in an acquisition should clearly announce its intent to establish a new set of terms and conditions of employment for the acquired workforce prior to, or simultaneously with, its expression of intent to retain the predecessor’s employees.
There are four problematic behaviors, which employers should avoid to stay in compliance with the National Labor Relations Act (NLRA). These behaviors are commonly abbreviated as T.I.P.S. and consist of the following:
- Threats: Employers may violate the NLRA if they make threats against employees who support unions or unionization efforts. Impermissible threats may take a variety of forms, such as threatening to close a facility, to cut employees’ pay, or to fire employees.
- Interrogation: Employers may violate the NLRA if they interrogate employees about union activities or unionization efforts. For example, employers should not ask employees which of their co-workers are union sympathizers or whether they are voting in support of the union.
- Promises: Employers may violate the NLRA if they promise benefits to employees who oppose a union. For example, an employer should not offer a one-time bonus to any employee who votes against a union.
- Surveillance/Spying: Employers may violate the NLRA if they spy on employees or conduct surveillance regarding the employees’ union activities. For example, employers should not attempt to record employee meetings about forming a union or photograph employees who are engaging in union activity.
Takeaway: Employers can reduce the risk of unfair labor practice charges by following these T.I.P.S.
Does an Employer Need to Obtain a Judgment on the Merits to Recover Attorneys’ Fees Under Title VII?
No – the U.S. Supreme Court recently held that a defendant need not obtain a favorable ruling on the merits to recover attorneys’ fees under Title VII.
Title VII provides that district court has discretion to award a “prevailing party” reasonable attorneys’ fees and costs in litigation arising under the statute. 42 U.S.C. § 2000e-5(k). In CRST Van Expedited, Inc. v. EEOC, the Supreme Court addressed the question of whether a “prevailing party” must obtain a favorable ruling on the merits to recover attorneys’ fees or whether a non-merits-based favorable ruling may suffice. No. 14–1375 (May 19, 2016).
In CRST, a single employee filed a charge of discrimination against her employer alleging sexual harassment. After investigating, the EEOC determined there was probable cause to support the charge. The EEOC further found that there was probable cause to show that the employer subjected a class of current and prospective employees to sexual harassment. The EEOC later filed a lawsuit against the employer on behalf of over 250 allegedly aggrieved female employees. The district court, however, dismissed the lawsuit on the basis that the EEOC failed to adequately investigate or attempt to conciliate its claims. Following the dismissal, the EEOC awarded the employer over $4 million in fees. The Eighth Circuit Court of Appeals eventually reversed the fee award, holding that a Title VII defendant can only be a “prevailing party” by obtaining a “ruling on the merits.”
The U.S. Supreme Court disagreed with the Eighth Circuit’s requirement that a ruling on the merits was a prerequisite to an award of attorneys’ fees under Title VII. The Court explained that:
The defendant, of course, might prefer a judgment vindicating its position regarding the substantive merits of the plaintiff ’s allegations. The defendant has, however, fulfilled its primary objective whenever the plaintiff ’s challenge is rebuffed, irrespective of the precise reason for the court’s decision. The defendant may prevail even if the court’s final judgment rejects the plaintiff ’s claim for a nonmerits reason.
The Court noted that one purpose of the fee-shifting provision was to deter litigation that was “frivolous, unreasonable, or groundless” and requiring a merits-based determination could undermine this objective. For example, litigation might be frivolous if it was barred by non-merits-based determinations, such as state sovereign immunity or mootness.
Takeaway: A defendant need not obtain a favorable ruling on the merits to recover attorneys’ fees as the prevailing party under Title VII.
Yesterday, former Fox News TV host, Gretchen Carlson, filed a sexual harassment lawsuit against Roger Ailes, the CEO of Fox News. The allegations in the lawsuit serve as a roadmap of the kinds of behavior to avoid in the workplace. Here are five lessons about what not to do in the workplace that can be learned from the case:
- Don’t tell subordinate employees that “I think you and I should have had a sexual relationship a long time ago” and that “sometimes problems are easier to solve” that way.
- When an employee reports sexual harassment, don’t call her a “man hater” and say that she needs to learn to “get along with the boys.”
- Don’t ask a female (or male) employee to turn around so that you can ogle her posterior.
- Don’t comment that certain outfits enhance an employee’s figure and urge her to wear those outfits every day.
- Don’t boast to others that you always stay seated when a woman walks over so that she has to “bend over” to say hello.
Takeaway: Whether these allegations are true are not, they are good examples of the kinds of behavior that employers, managers, and employees should avoid in the workplace to reduce the risk of liability.
Last week, the President of the St. Paul Area Chamber of Commerce, Matt Kramer, published a public letter in opposition to the proposed “earned sick and safe time ordinance” under consideration by the St. Paul City Council. The ordinance currently under consideration in St. Paul is similar in many respects to the ordinance recently passed in Minneapolis.
The letter asserts that the proposed ordinance is based on “little data,” “driven by emotion,” and will likely be implemented “with little calculation as to the multi-million dollar impact this will have on the business community.” The letter strongly questions the asserted public health benefits of the proposed ordinance. It notes that there is no available data that shows a correlation between paid sick leave and public health. The letter also discusses the negative impact that the ordinance will likely have on small employers and raises various other concerns with the proposed ordinance. A copy of the letter is available here.
Takeaway: Despite opposition from the business community, the St. Paul City Council is expected to pass a paid sick leave ordinance similar to the one recently adopted in Minneapolis in the near future.
No – the Fifth Circuit Court of Appeals recently held that a driver who does not satisfy the requirements for commercial drivers established by the U.S. Department of Transportation (DOT) is a not a qualified individual with a disability under the Americans with Disabilities Act (ADA).
In Williams v. J.B. Hunt Transport, Inc., the plaintiff was a commercial truck driver who fainted at his home one day and was later diagnosed with syncope and an irregular heartbeat. No. 15-20610 (5th Cir. June 20, 2016). Following this diagnosis, the plaintiff’s DOT medical certification was rescinded. In response, the employer sent a letter to the plaintiff requesting more information and a return-to-work date. The plaintiff never provided this information. After the plaintiff’s medical leave expired, the employer terminated his employment, and the plaintiff sued for alleged violation of the ADA.
In analyzing the plaintiff’s claims, the Fifth Circuit noted that several other federal circuit courts – the Sixth, Seventh, and Eighth Circuits – have each held that a commercial driver who does not satisfy DOT requirements is not a qualified individual with a disability. The court agreed with this reasoning and concluded that “[b]ecause he lacked the DOT certification required by federal law, J.B. Hunt could not let him return to driving, and the company’s administrative termination of Williams did not violate the ADA.”
Takeaway: Employees who are not qualified to perform the essential functions of their jobs, such as complying federal DOT regulations, with or without accommodation, are generally not able to bring successful ADA claims.
The 7th Circuit recently disagreed with other federal courts of appeals and sided with the National Labor Relations Board (NLRB) by holding that class-waiver provisions in arbitration agreements violate the National Labor Relations Act (NLRA). The ruling creates a circuit split that can only be resolved by the U.S. Supreme Court.
Whether arbitration agreements with class-waiver provisions violate the NLRA has been sharply disputed. The NLRB has consistently held that such limitations on an employee’s ability to file a class or collective action violate the NLRA, even in the face of federal judicial decisions holding otherwise. The majority of other circuit courts that have addressed the issue have rejected the NLRA’s reasoning. See e.g., Murphy Oil USA, Inc. v. NLRB, 808 F.3d 1013, 1018 (5th Cir. 2015); 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).
The 7th Circuit’s decision in Lewis v. Epic Systems Corporation is a departure from the approach taken by other federal circuit courts. No. 15-2997 (7th Cir. May 26, 2016). In Lewis, the 7th Circuit based its decision on Section 7 of the NLRA, which protects the rights of employees to engage in “concerted activities for the purpose of collective bargaining or other mutual aid or protection . . . .” 29 U.S.C. § 157. The court held that Section 7 protects the rights of employees to engage in class, representative, and collective legal proceedings because Congress was aware of those procedures when it enacted the NLRA and because “[t]he plain language of Section 7 encompasses them . . . .” Since the arbitration agreement did not permit employees to utilize class or collective procedures, the court concluded that the agreement violated the NLRA and was not enforceable under the Federal Arbitration Act.
Takeaway: The 7th Circuit’s decision in Lewis provides support for the NLRB’s continued efforts to challenge class-waiver arbitration agreements, and it creates a circuit split regarding the enforceability of those agreements.
On May 27, 2016, the Minneapolis City Council passed the “Sick and Safe Time” Ordinance. Prior to its passing, several amendments were incorporated into the ordinance. The final ordinance, as amended, is available here.
Here are the key points that employers should know about the final ordinance:
When will the paid sick leave ordinance take effect? The effective date of the ordinance will be July 1, 2017.
What employers will be subject to the ordinance? The ordinance will apply to all employers. For employers with 5 or less employees, the sick and safe leave required by the ordinance may be unpaid. For employers with 6 or more employees, the sick and safe leave required by the ordinance must be paid. For established businesses, the number of employees will be determined based on the average number of employees during the previous year. For new businesses, the number of employees will be determined based on the average number of employees during the first 90 days after the business’s first employee begins to work.
Is there an exception for new businesses? During the first 5 years after the ordinance goes into effect, new businesses (other than chain establishments) will only be required to provide unpaid sick and safe leave during their first 12 months after the hire date of the employer’s first employee, but will not be required to provide paid sick and safe leave during that time. This exception does not apply to “chain establishments,” which is defined to include any establishment doing business under the same trade name used by two or more establishments, or under the same ownership and doing the same business, whether such other establishments are located in the city or elsewhere and regardless of the type of ownership of each individual establishment.
What employees will be covered by the ordinance? Any employee (exempt, non-exempt, part-time, or temporary) who performs work for an employer within the geographic boundaries of the City of Minneapolis for at least 80 hours in a year will be covered by the ordinance. To administer this requirement, the ordinance will require that employers with employees who occasionally work in Minneapolis must track and keep records of the hours that those employees work within the City. The ordinance will not apply to independent contractors. For the construction industry, the ordinance states that employers can satisfy the ordinance by paying employees the required prevailing wage or apprentice wages. For health care employees (such as doctors, nurses, and emergency room personnel) who are paid at least four times the federal minimum wage, sick and safe leave may only be used when the employee is scheduled to work.
How much sick and safe leave will the ordinance require? The ordinance will require that employees must accrue a minimum of one hour of sick and safe leave for every 30 hours worked, up to a maximum of 48 hours in a calendar or fiscal year. Employees may carry over unused sick leave from year to year, but may not accrue more than a total of 80 hours of sick and safe leave unless the employer agrees to a higher amount. The sick leave begins to accrue at the beginning of an employee’s employment (or July 1, 2017 when the ordinance will take effect), but it may not be used until 90 calendar days after the commencement of employment.
When can employees use sick and safe leave? Employees may use sick and safe leave for a variety of reasons, including but not limited to: (i) an employee’s health condition or need for treatment or preventive care; (ii) the care of a family member with a health condition or who requires treatment or preventive care; (iii) absences due to the domestic abuse, sexual assault, or stalking of the employee or an employee’s family member; (iv) the closure of a business by a public official due to a health issue; (v) the closure of the school of an employee’s family member’s school or place of care by a public official due to a health issue; or (vi) the closure of the school of an employee’s family member’s school or place of care due to inclement weather, loss of power, loss of heating, loss of water, or other unexpected closure. The ordinance will prohibit employers from retaliating against employees for the use of sick and safe leave.
Can employers require advance notice or documentation for sick and safe leave? For foreseeable leave, an employer can require up to seven days advance notice of the need to use paid sick leave. For unforeseeable leave, the employer can require the employee to provide notice as soon as practicable. The employer may require reasonable documentation of the need for paid sick leave only if paid sick leave is used for an absence of more than three consecutive days.
How will the ordinance be enforced? The ordinance will be enforced by the Minneapolis Department of Civil Rights. An employee may report a violation to the Department within one year of its occurrence. After receiving a report, the Department will investigate and determine whether a violation occurred. During the investigation, the employer will have the opportunity to provide a written position statement in response to the alleged violation. If the Department determines that a violation occurred, the employer will have a right to appeal by requesting a hearing with an administrative hearing officer within 21 days. After that, the employer may seek a writ of certiorari to appeal the matter to the Minnesota Court of Appeals. The Department of Civil Rights may also refer the matter to the Minneapolis City Attorney, who can seek to enforce the ordinance through a civil lawsuit in district court.
What are the potential penalties for violations? During the first 12 months after the ordinance takes effect, the Department of Civil Rights will only have authority to mediate disputes, issue warnings, and issue notices to correct. After the first 12 months, the Department will be able to impose the following forms of relief and penalties: (i) reinstatement and back pay; (ii) crediting of sick time accrued but not credited plus payment for that sick time multiplied by two, or $250, whichever is greater; (iii) payment of sick pay unlawfully withheld plus payment for that sick time multiplied by two, or $250, whichever is greater; (iv) a $1,500 administrative penalty payable to the employee; or (v) an administrative fine payable to the City of up to $50.00 for each day during which the violation continued following written notice to the employer of the violation with a period of no less than 5 business days to comply.
What notice requirements will apply? The ordinance will require employers to post a notice of employee rights relating to paid sick leave in the workplace. The notice will be developed and published by the Department of Civil Rights. Employers who provide employee handbooks also must include in their handbooks a notice of employee rights and remedies under the ordinance. In addition, each time an employer pays wages to an employee, the employer must provide a written statement to the employee regarding the amount paid sick leave available to them and the amount of paid sick leave that they have used. The employer can include this information on a pay stub or may develop an online system for employees to access the information.
What recordkeeping requirements will apply? Employers will be required to maintain accurate records of accrued and used paid sick leave and must allow an employee to inspect the records relating to that employee at a reasonable time and place. In addition, an employer with employees who occasionally perform work within the City of Minneapolis will need to track hours worked in the City by each employee to determine whether they are covered by the ordinance.
Will paid sick leave need to be paid out to terminated employees? No. The ordinance does not require employers to pay terminated employees for accrued, but unused paid sick leave.
Here are four potential ways that employers can respond to the DOL’s new overtime rule with respect to exempt employees who currently earn less than the new $913 per week threshold:
- Increase the Employee’s Pay To Maintain the Exemption: One way to deal with the DOL’s new overtime rule is to increase exempt employee’s pay to make sure that the new $913 per week threshold will be satisfied when the new rule takes effect on December 1, 2016. This approach will ensure that the employee remains exempt from the FLSA’s overtime provision.
- Treat the Employee As Non-Exempt and Prohibit Overtime: If an employer wants to avoid giving an employee a raise to meet the new threshold and wants to avoid paying overtime, the employer can begin treating the employee as non-exempt, monitor his or her worktime closely, and prohibit the employee from working more than 40 hours per week. The potential downside of this approach is that it may reduce the employee’s productivity and could require the employer to hire additional staff.
- Treat the Employee As Non-Exempt and Adjust His or Her Pay Rate To Avoid Increased Costs: Another way that employers can keep their costs equal following implementation of the new rule is to begin treating the employee as non-exempt, but adjust his or her pay rate so that, even with overtime, the employee’s annual earnings are approximately the same as when he or she was exempt. One potential downside of this approach is that the employee’s weekly pay may decrease below his or her prior salary level during weeks when no overtime work is performed. These fluctuations in pay should even out over time provided that the employee’s work hours stay roughly the same, but they may create retention issues for the employer.
- Treat the Employee As Non-Exempt and Start Paying Overtime: The final way for employers to respond to the DOL’s new overtime rule is for employers to keep the employee’s rate of pay approximately the same, but also start paying time-and-a-half overtime. This is likely the most costly approach for employers to respond to the DOL’s new overtime rule. For employees who will earn at least $913 per week on average with this additional overtime, it likely makes more sense for the employer to increase the employee’s salary and keep the employee as exempt.