Wage and Hour Cases in the News

Posted on August 11, 2009 by Patrick Smith

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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What's New This Week

Posted on August 3, 2009 by Patrick Smith

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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Wage Discrimination Amendments Signed Into Law

Posted on May 1, 2009 by Patrick Smith

On April 28, 2009, Governor Culver signed into law Senate File 137, entitled an Act "Providing that Wage Discrimination is an Unfair Employment Practice under the Iowa Civil Rights Act and Providing an Enhanced Remedy.”   This law (available here) amends the Iowa Civil Rights Act to expressly provide that pay differentials among employees are unlawful if they are based upon the employee's age, sex, disability, and several other protected characteristics.   Local media coverage of Governor Culver's signing can be found here.

You might ask, isn't pay discrimination already unlawful under the Iowa Civil Rights Act?   The answer is yes, but this amendment appears to be an attempt to make Iowa law consistent with recently enacted federal legislation governing pay discrimination, known as the "Lilly Ledbetter Fair Pay Act of 2009", which was signed into law in January.  It also incorporates provisions of the federal Equal Pay Act, first enacted in 1963.

The law amends the Iowa Civil Rights Act, Iowa Code Chapter 216, in three significant ways:

First, it makes an unfair or discriminatory employment practice to pay an employee in a protected class at a rate less than the rate paid to other employees who are employed within the same establishment for equal work on jobs, the performance of which requires equal skill, effort, and responsibility, which are performed under similar working conditions.  Protected classes under the law include age, race, creed, color, sex, sexual orientation, gender identity, national origin, religion, or disability.

Second, it provides that an unfair or discriminatory practice occurs not only at the time a discriminatory pay decision is implemented, but also each time wages, benefits, or other compensation is paid that results in whole or in part from the discriminatory decision.

Third, it provides an “enhanced” remedy. That is, an employee is entitled to recover two times the wage differential paid to another employee compared to the complainant for the time period of the discrimination, or three times the differential in the case of willful violations.

Iowa Employer should take note of several importance aspects of this law that create potential risk and exposure to employee lawsuits:

First, these Amendments actually provide greater protection than Federal law, which applies only to employers with fifteen or more employees.  The Iowa Civil Rights Act applies if an employer has four or more employees (although family members are not considered employees for this purpose). 

Second, to determine whether pay is discriminatory, the law allows an employee's pay to be compared not only to others who have similar jobs, but to those whose job functions may be very different , but require "equal skill, effort, and responsibility", or are performed under "similar working conditions".  This provision should cause employers more than ever before to have detailed and accurate job descriptions.  To the extent pay is different among different job categories, employers should develop objective rationales for such differentials.

Third, the fact that each paycheck can constitute a discriminatory practice may lead to litigation over pay decisions that were made years or even decades ago, but which are discovered only recently. 

Finally, the enhanced remedy provides not only additional damages, but also applies to the entire time the employee has been discriminated against.   This is a greater protection than available under the federal law, which limits recovery of back wages to two years. 

Given the enhanced protection provided under the Iowa Civil Rights Act as compared to federal law, employers can expect claims under this law to be filed in State instead of Federal Court.

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