Iowa Employment Law Blog : Iowa Employment Lawyer & Attorney : Patrick Smith : Bradshaw Fowler Proctor & Fairgrave Law Firm : Des Moines, Central IA Discrimination & Labor Law

On the Friday before Thanksgiving, Vice-President Biden announced at a Middle Class Task Force event the creation of a collaboration between the U.S. Department of Labor and the American Bar Association.   According to the press release associated with the event, the purpose the collaboration is to “help workers resolve complaints received by DOL’s wage and hour division.

Beginning December 13, 2010, people with unresolved complaints under the Fair Labor Standards Act (FLSA) or Family and Medical Leave Act (FMLA) will be sent a letter explaining their rights, and providing a toll-fee number that will connect them with an ABA approved lawyer referral service in their area. These are complaints that the Department of Labor is otherwise charged with investigating but apparently cannot because of what the Secretary of Labor described as the Department’s “limited capacity.”

While this collaboration may be good for the business of lawyers, it is doubtful it will be good for anyone else, most especially the business community and the middle class employees the program purports to help.   The unspoken assumption of programs like this one is that lots of employers are violating employment laws and short changing their employees.   Indeed, Labor Secretary Solis’ statement that “our nation’s workers deserve full and fair compensation” implies that they are not.  

Contrary to the assumptions underlying this program, in my experience and that of other employer side lawyers I know, the lion’s share of companies are conscientious about complying with the employment laws. The high cost of defending employee claims and the risk of an adverse outcome, regardless of the merits of the suit, give employers an economic incentive to comply with the law.   Nor is the federal government and the ABA encouraging more employment litigation likely increase the income of middle class employees. In fact, it may have the opposite result, as more and more resources are devoted to defending and settling these cases rather than increasing wages and benefits of employees generally.    In a 2008 study by Estreicher and Yost, the median gross settlement in 179 collective or class action employment lawsuits studied was $8,500,000.   This does not include the thousands of individual claims and settlements every year. 

Remarkably, the ABA touts this program as an opportunity to improve the image of lawyers. I don’t know who the ABA thinks this will impress, but it is not likely to be the business community or the majority of the general public who are cynical about lawyers.  If the Department of Labor believes employer compliance with FLSA and FMLA is lacking, there are more constructive ways to address the problem than increasing their litigation risk.

For a thoughtful view on the other side of this issue, see Dan Schwartz’s post at the Connecticut Employment Law Blog.

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Last week a mother quit her job soon after returning from maternity leave because she claims her employer denied her access to a lactation room for three days (See Des Moines Register story here).    Apparently, the employer had a lactation room on the premises as required by federal law. But, according to a complaint filed with the Iowa Civil Rights Commission, a company nurse told the employee she had to fill out paperwork and then wait three days before she could access the room.

The health care law signed into law on March 23, 2010 contained the requirement that employers provide nursing mothers with reasonable unpaid breaks to express breast milk, and a location other than a bathroom where they can so.    Such breaks must be provided for up to one year after their child’s birth. Employers with fewer than fifty employees are exempt if the requirements “would impose an undue hardship by causing the employer significant difficulty or expense.”

With due respect to the late Paul Harvey, what is most striking about this claim is there must be a “rest of the story” out there.   Most notably, the publicity relating to this event was generated by a complaint filed with the Iowa Civil Rights Commission.  However, the requirements governing breaks and locations for breastfeeding mothers are contained in the federal Fair Labor Standards Act (FLSA).   If an employee is seeking to enforce the FLSA, there is no need to file a complaint with the ICRC.  In fact, that state agency has no jurisdiction over FLSA claims.   Perhaps there are other issues involves with this employee, but these allegations were simply the most sensational and likely to generate publicity.  It did not take too long for this story to circulate on the internet.

The other interesting aspect of the story is the publicity itself.  Normally, Iowa Civil Rights Act complaints are not made public at the time they are filed, unless the filing complainant issues a press release or otherwise takes action to make it public.    This is obviously an important concern for new mothers returning to work, given the large number of comments posted about the story on the Register's website.  Indeed, the employer , Nationwide Advantage Mortgage, had a spokeperson issue a statement to refute the former employee's claims.

Sometimes, plaintiff's attorneys use adverse publicity about a tangential issue as a hammer to persuade an employer to resolve a case quickly rather than defend it on the merits.  Obviously, we don't know if that is what is going on here, but the newspaper story certainly left many unanswered questions.

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Employee Availability After Hours Comes at a Price

The Wall Street Journal reports on a potential boom in lawsuits relating to unpaid overtime.  The culprit--company issued smart phones combined with lean workforces requiring fewer employees who handle more responsibility.   With new technology, employees are capable, and often expected, to handle work related communication anytime and anywhere, whether they are off the clock, sick, or on vacation.   The article reports on two recently filed lawsuits claiming unpaid overtime under the Fair Labor Standards Act (FLSA) .  In one case, retail employees of T-Mobile USA claim they were required to use company issued smart phones to respond to messages and customer complaints after hours.  In the second case, a maintenance employee for CB Richard Ellis alleges he was not paid for after hours time spent sending and receiving messages on his cell phone.

Under the FLSA, whether an employee is who is required to carry an employer issued mobile phone, pager, or smart phone after hours remains on the clock depends upon many factors, including the nature of the job and how frequently the employee actually has to use the device for work related purposes.   Depending upon the number of employees involved, failure to comply with FLSA's overtime requirements can result in substantial financial liability.  To avoid running afoul of these overtime requirements, prudent employers are urged to develop clear practices concerning employee's use of company issued technology.

Company Officers May Be Held Personally Liable for Unpaid Wages

A bankrupt company does not necessarily relieve corporate officers of liability for unpaid wages under FLSA.  So held the U.S. Court of Appeals for the Ninth Circuit in Boucher v. Shaw, decided on July 27, 2009.   In Boucher, a group of former employees of the bankrupt Castaways Hotel, Casino, and Bowling Center in Las Vegas sued the CEO, Chief Financial Officer, and manager in charge of labor relations, claiming the individual officers and managers were liable for their unpaid wages.  Rather than getting in line with other creditors in the bankruptcy proceedings, the plaintiffs decided to pursue the officers individually.

The Court noted that the definition of "employer" under FLSA is not limited by the common law understanding of the term, but "is to be given an expansive interpretation in order to effect FLSA's broad remedial purposes".    The test, according to the Court, is whether the individual exercises "control over the nature and structure of the employment relationship", or "economic control" over the relationship.   In this case, the Court noted that the CEO held 70% of the company shares, the manager in charge of labor relations owned 30%, and the CFO had responsibility for cash management.  Under these facts, the Court held the plaintiff's stated a claim against the individuals under FLSA.   The Court rejected the defendants' argument that any claims for unpaid wages by former employees belonged in the bankruptcy court. 

While there is no similar precedent in the Eighth Circuit, the Boucher case nonetheless should put company officials on notice that wage claims may exist against them individually, even after the corporation is bankrupt or otherwise defunct. 

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As we enter the traditional "dog days" of summer, the world of labor and employment law remains active.  Here are are some highlights of important and interesting news this week:

1.   Furloughs

Although there is some indication the recession is easing, many employers remain concerned about the economy.    Pay reductions and temporary furloughs provide a means by which employers can manage payroll expense while still retaining valued employees.   As we discussed in this post a couple of months ago, however, it is important to plan ahead and understand how the wage and hour laws impact your ability to use furloughs with certain types of employees.  To help employers comply with the wage and hours laws as they relate to furloughs, the Department of Labor Wage and Hour Division recently issued a memo containing many of the frequently asked questions posed to the Division.  The memo is available on the DOL website, or can be accessed here.

Employers are urged to access the DOL memo or consult with counsel before implementing any kind of furlough program, particularly if it involves exempt employees.

(Hat tip: Florida Employment and Immigration Law Blog)

2.  Other Wage and Hour Issues in the News

Speaking of wage and hour problems, the convenience store chain QuikTrip, which has a substantial presence in Iowa, recently agreed to pay 3,800 employees approximately $750,000 in back pay.   A Department of Labor Investigation revealed that the employees had not been paid an overtime premium that was due on certain performance related bonuses.  QuikTrip blamed a computer glitch for the error.  Details of the story can be found here.  

Lesson: it might be wise to audit payroll systems from time to time to ensure your employee records and payroll systems are up to date and accurate.

3.  Proposed EFCA Compromise Is Still Bad News for Employers

As a means of garnering the support of some reluctant Senators, promoters of EFCA have proposed removing the "card check" provision in law the law that would have permitted union certification without a secret ballot election.   For a discussion of the current state of EFCA, including the recently proposed compromise, see Justin Wilson's post here.  However, even in its compromise form, EFCA is still a bad deal.   Even though union interests may be willing to give up on card check, at least for now, they still are demanding the opportunity to hold an election in a shorter period of time after a petition is filed with the National Labor Relations Board than is currently available.   That means employers will have less time to provide information to their employees in response to a union campaign.  Moreover, the binding arbitration requirements of EFCA remain in the compromise legislation, which will provide an incentive for union negotiators not to compromise during the early phases of a negotiations, with the expectation an arbitrator will grant more union demands than would have been granted as part of a good faith negotiating.

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Many businesses in Iowa and elsewhere continue to experience slack demand, lower revenue, and low to non-existent profits.   Economic indicators in Iowa continue to sink.   As a means of trimming payroll expenses while avoiding long term or permanent lay-offs of employees, many employers are looking to voluntary or even mandatory unpaid furloughs.  

Employers should be cautious when implementing an employee  furlough program, particularly when it involves furloughs of professional or administrative employees who are paid a set salary regardless of the number of hours worked.   Such employees are considered "exempt" under the federal Fair Labor Standards Act (FLSA) because they are not entilted to overtime in the event they work more than forty hours per week.   On the other hand, if such an employee works less than forty hours per week because of reductions in business, the employer's right to pay the employee less than his or her regular salary is limited.   

A recent opinion from the Department of Labor purports to clarify when an employer may deduct from an exempt employee's salary because of time off work.   Generally speaking, an employer that requires exempt employees to take mandatory furloughs cannot reduce the employee's pay unless the furlough last at least one week.   Exempt employees who are required to take furloughs of less than one week are still entitled to receive their full salary.  

If the employee's leave of less than one week is truly voluntary, his or her salary may be reduced by an amount proportionate to the time off work (i.e. if the employee takes one day off, the salary paid can be 4/5 of the regular salary).  However, the employee must be off work a minimum of one full day.  In other words, if the exempt employee works part of the day and is off the rest, the employer may not reduce the employee's salary to account for the time off.    It is also critical to note that the employee must be completely free of any obligation to work on the day off--even a requirement to check voice mail or e-mail may trigger the employer's obligation to pay the full salary.

The Department of Labor has promulgated rules on this subject, but the rules are complex and sometimes difficult to understand.  Employers are advised to seek counsel before making furlough decisions about exempt employees.

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