Category Archives: Employment Policies and Agreements

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.

The Next Wave: Minnesota Metro and the $15 Minimum Wage

Moving beyond earned sick leave and safe time ordinances, it is very likely that this year the Minneapolis and St. Paul City Councils will take on the possibility of a $15 minimum wage ordinance. Such a municipal minimum wage exceeds state ($7.75 for small employers and $9.50 for large employers) and federal ($7.25) minimum wage, of course. The municipal earned sick leave and safe time ordinances passed by both cities in 2016 were the first wave in a national movement for employee rights that began in other major cities (such as San Francisco and Seattle) where the $15 minimum wage was then the next wave. Indeed, a task force on the $15 minimum wage ordinance has just formed in Minneapolis. State minimum wage initiatives stalled out in the last legislature sessions, so the major municipalities are taking the initiatives.

Arguments in favor of the $15 an hour minimum wage ordinances sound in quality of life and attraction of entry level employees in a high employment rate economy. And although $15 an hour may not be a realistic living wage, especially for a family, it reduces the need of low wage employees to work several jobs, creating a very human reason for metropolitan areas to have a higher minimum wage. Indeed, many Twin Cities metropolitan area employers already pay a minimum of $12 plus an hour, so the change is not extreme.

And the possibility of such ordinances passing as a second wave of employee rights municipal legislation has likely increased with the employer community’s inability to hold back the first wave sick leave and safe time ordinances in 2016. Having spent a lot of effort unsuccessfully in 2016 in broad opposition to the first wave, it is a strong possibility that employers opposing the second wave of the $15 minimum wage in 2017 will need to focus their efforts on exemptions and credits. Tip credits, student work study, training wages, gradual phase-in periods are examples of such possible exemptions in the ordinances that reduce the impact of this next wave.

Takeaway: Minneapolis and St. Paul employers are wise to anticipate in their business models, budgets for payroll and benefits and staff planning the passage of a $15 municipal minimum wage ordinance and follow closely the passage and specific provisions of this next wave of employee-protection ordinances. You don’t want to wind up like the old story of King Canute who tried to order the waves to hold back (unsuccessfully). Minnesota Employer will keep you updated.

Look Out St. Paul Employers: Here Comes the ESST!

Minnesota Employers operating in the East Metro need to be aware of the impending deadlines in the St. Paul Earned Sick and Safe Time Ordinance (“ESST”) which requires employers with St. Paul-based employees to provide paid sick leave and safe time to those employees. For employers with 24 or more full or part-time St. Paul area-based employees, the ESST is effective July 1, 2017 and for smaller employers the effective date is Jan. 1, 2018. A good summary of the ordinance and its impact on St. Paul employers is available at the St. Paul Chamber of Commerce website.

While there is currently litigation contesting the legality of the similar Minneapolis ordinance, that litigation does not directly affect the St. Paul ESST. St. Paul area employers should assume it will come into being. The Minneapolis ordinance has similar effective dates and there is no current injunction (more about the Minneapolis ordinance in an upcoming Minnesota Employer Blog post).

The implementation of the St. Paul ESST raises corollary questions about uniformity of company-wide PTO policies for employers with employees inside and outside St. Paul proper. It may be easier to administer a uniform rather than a fractured PTO policy for such employers.

Takeaway: The impending ESST Ordinance effective dates require employer action and, perhaps, a broader review of PTO policies with legal counsel. ESST is going to happen so affected employers should prepare!

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.

2017 Cost-of-Living Adjusted Amounts for Employee Benefit Plans

On October 27, 2016, the Internal Revenue Service announced the 2017 cost-of-living adjusted amounts for certain retirement plan and fringe benefit limitations. Earlier in 2016, the Internal Revenue Service announced the 2017 cost-of-living adjustments affecting health savings accounts and high deductible health plans, and on October 18, 2016, the Social Security Administration announced the 2017 cost-of-living adjustments related to Social Security benefits.

A list of the cost-of-living adjusted amounts that most commonly affect employer-sponsored benefit plans is available here.

No Employee Defections on the Day of Elections

All Minnesota Employers are statutorily obligated to provide employees, “the right to be absent from work for the time necessary to appear at the employee’s polling place, cast a ballot and return to work” without a pay or PTO deduction or any direct or indirect interference.  Minn. Stat. §204C.04. This applies to any time of day and to exempt and non-exempt employees scheduled to work during the time the polls are open. Violation is a misdemeanor.

Is this potentially a citizen’s “senior skip day?” No. The statute rests on a rule of reasonableness regarding the scheduling of time off, and the amount of time off. The employer has the right to be told when the employee will be gone and ask that absences be coordinated (but can’t so require). An employee who just doesn’t show up for work on November 7th can’t count on a statutory free pass.

How can an employer handle a suspected abuse? Preemptive, pro-active measures are likely not the best path to follow since warning and rules could well look to be prohibited indirect attempts to thwart the statutory time-off requirement. But after-the-fact, carefully handled individual investigations of suspected abuse can be consistent with the statute and its rule of reasonableness. The previous version of the statute allowed for the morning off and that may be a reasonable rule of thumb.

Takeaway:  An employer suspecting employee abuse, especially wide-spread abuse, of the paid time off to vote statute can, after the fact, determine if the employee(s) actually complied with the statutory rule of reasonableness. But proceed cautiously given the statute’s prohibition against indirect interference. Advice of legal counsel would be particularly helpful when the employer seeks to make sure election day doesn’t become defection day.

The “Back-Stop” Release

There are times when a departing employee who is getting a severance package in exchange for a release isn’t departing immediately. If the employee signs the release and then continues to work for a period before departure, what is the legal effect of the release?

Under Minnesota law (and general principles of common law) an employee cannot release a future claim. So if the employee signs a release effective day one, but works through day twenty-one, the release is effective only for claims that arose before day one. That is, the employer still has potential exposure for claims that could arise between days one to twenty-one even though it paid severance for a release. And since such a stay-over can have its stresses and employees can get “settlement remorse”, having “tail exposure” may be a real concern for the employer.

A common solution is the “back-stop” release; that is, a second release required by the separation agreement signed upon the day of departure that covers the “tail” period.  The back-stop is cumbersome and somewhat duplicative, but it is the safest course – especially when there is a realistic possibility of a claim arising during the “tail” period.

Takeaway:  If an employer is looking to keep a departing employee for a period of time after a separation agreement and release is signed, consult legal counsel to discuss a “back-stop” second release as part of the separation package. Otherwise, the employer may not be getting what it thought it bargained for – a complete and comprehensive release.

7th Circuit Holds that Class-Waiver Arbitration Agreements Violate the NLRA

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.

Prohibitions Against Employee Recording and the NLRB

A recent case involving Whole Foods demonstrates the ever-increasing importance to the National Labor and Relations Board of protecting Section 7 concerted activity under the National Labor Relations Act.  Section 7 protects activities of employees when exercising their rights under the National Labor Relations Act to collective action.  Both unionized and non-unionized employees are protected under Section 7.

Whole Foods had in its employee handbook a rather innocuous-sounding prohibition against employees recording conversations, phone calls, images or company meetings without a prior approval from management and without the consent of all the parties to the conversation.  The reasons given to Whole Foods for this policy was to encourage “open atmosphere” and “employee trust” – which are certainly understandable reasons.  The NLRB saw it differently.  Whole Foods Market, Inc., 363 NLRB No. 87, 2015 NLRB Lexis 949 (Dec. 24, 2015).

What the NLRB saw was a blanket prohibition with “broad and unqualified language” that could have a chilling effect upon employees’ exercise of their Section 7 activities to act in concert to protect or pursue collective bargaining rights.  In the eyes of the NLRB, the prohibitions were worded broadly enough to include protected concerted activities such as recording images and picketing, documenting unsafe working conditions and recording evidence for later use in administration or judicial proceedings.  The NLRB found there to be a “chilling” effect in such broad language and struck the handbook provisions.

Takeaway:  Employers need to be increasingly careful about provisions in their handbooks and policies that effect employees’ right to communicate among each and now to record such conversations.  Even with the best of intentions, such blanket prohibitions could have a chilling effect on the employees’ right to engage in concerted activities to protect their NLRA-guaranteed right to engage in collective action.  Employers should seek good legal counsel to refine employee communication policies so that they can meet their legitimate objectives without creating a chilling effect on Section 7 rights.

Five Reasons Why Employee Handbooks Benefit Employers

Here are five reasons why employers should consider adopting an Employee Handbook, if they have not already done so:

  1. Creating a Workplace Culture: Employee Handbooks can play a role in defining the culture of the workplace. For example, a Handbook can reinforce themes of openness, innovation, or respect in the workplace.
  2. Setting Expectations: Employee Handbooks can help set expectations for employees about what rules apply to their employment, how the employment relationship works, and how to address situations that may arise in the workplace.
  3. Establishing Procedures: Employee Handbooks can codify procedures that an employer and its employees can use. For example, the Handbook can explain how to update an employee’s personnel information, how to utilize employee benefits, or how to notify the Company of inappropriate workplace behavior.
  4. Supporting Terminations: In the event that an employee challenges the basis for his or her termination, a list of workplace rules in an Employee Handbook can be useful in justifying the termination.
  5. Creating Legal Defenses: In some cases, an Employee Handbook can create a legal defense for an employer. For example, if the Handbook defines employment as at-will, creates a procedure for reporting discrimination or harassment, or clearly notifies an employee not to expect privacy in his or her emails, these policies can be used to help defend an employer in subsequent litigation. For language condensing these three key policies into haiku format, click here.

Is a Blanket Savings Clause Sufficient To Protect an Employer’s Policies Under the NLRA?

Probably not – in a recent case, an administrative law judge (ALJ) for the National Labor Relations Board (NLRB) rejected an employer’s argument that a savings clause added to the beginning of its employee handbook shielded the employer from liability.

The focus of the dispute in Macy’s, Inc. was whether the employer’s policies were unlawfully overbroad under Section 7 of the National Labor Relations Act (NLRA). No. 1-CA-123640 (May 12, 2015). The Union and the NLRB General Counsel argued that a number of the employer’s policies chilled the exercise of employees’ Section 7 rights. The ALJ agreed that many of the policies violated the NLRA for reasons similar to those discussed in the recent advice memorandum from the NLRB Office of General Counsel regarding employment policies. For example, the confidentiality provision was overbroad because it prohibited disclosure of “the personal information of the Company’s employees and customers.” In addition, the intellectual property policy prohibited the use of the Company’s logo or trademark, which the ALJ concluded may discourage employees from using the Company’s logo or trademark in Union materials.

After finding the employer’s policies violated the NLRA, the ALJ analyzed whether the employer’s savings clause neutralized the employer’s policies. Specifically, the employer sent its employees a message in April of 2014, notifying them that it added the following disclaimer as an introductory page to its handbook:

Nothing in the Code or the policies it incorporates, is intended or will be applied, to prohibit employees from exercising their rights protected under federal labor law, including concerted discussion of wages, hours or other terms and conditions of employment. This Code is intended to comply with all federal, state, and local laws, including but not limited to the Federal Trade Commission, Endorsement Guidelines and the National Labor Relations Act, and will not be applied or enforced in a manner that violates such laws.

The ALJ explained that in order to repudiate unlawful policies effectively, a savings clause must be “timely, unambiguous, specific in nature to the coercive conduct, and untainted by other unlawful conduct.” The ALJ determined that the employer’s savings clause was too generic in contrast to the specificity of the unlawful policies, and it did not specifically reference those policies. In addition, the savings clause was not added until 17 months after the promulgation of the rules at issue. Therefore, the ALJ concluded that the savings clause was ineffective.

Takeaway: A blanket savings clause at the introduction of an employee handbook may not be sufficient to bring overbroad employment policies into compliance with the NLRA.

3 Ways That Employers In Minnesota Can Cut Costs and Save Money

Here are three easy things that employers can do to cut costs and save money in Minnesota:

(1) Don’t Pay Out Unused PTO To Terminated Employees:  Under Minnesota law, whether a terminated employee is entitled to payment for unused PTO or vacation depends on the terms of the agreement between the employer and the employee.  As a result, an employer who adopts a policy stating that unused PTO or vacation will not be paid out at the time of termination is not required to pay those benefits to a terminated employee.

(2) Pay Pro Rata Salaries In the Initial and Terminal Weeks of Employment:  Many of the exemptions from minimum wage and overtime requirements require that an employee must be paid on a “salary basis,” which means that the employee must receive a predetermined salary that is “not subject to reduction because of variations in the quality or quantity of the work performed.”  However, this requirement does not apply to the initial or terminal weeks of employment.  See 29 C.F.R. § 541.602(b)(6).  As a result, employers may pro-rate an exempt, salaried employee’s wages during the first and last weeks of employment.

(3) Deduct Credit Card Processing Fees From Gratuities:  Currently, the law allows an employer to deduct a service charge from a gratuity paid by a customer using a credit or charge card so long as the “percentage deducted from the tip [is] in the same ratio as the percentage deducted from the total bill by the service company.”  Recently, legislation has been introduced to ban this practice in Minnesota, but it has not yet passed into law.  For the time being, it remains lawful in Minnesota.

Takeaway:  These strategies will not yield large savings right away, but over time, the savings can add up, particularly for employers with a large number of employees or a high turnover rate.