By Michele L. Jakubs*
The Fifth Circuit Court of Appeals, in a 3-0 decision, vacated the Department of Labor’s (“DOL”) 2021 Final Rule that restricted when an employer could apply a tip credit, finding it arbitrary and capricious. Under the Fair Labor Standards Act (“FLSA”), an employer may take a tip credit, paying tipped employees at a rate below the applicable minimum wage in anticipation of tips making up the difference. In 2021, the DOL issued a Final Rule limiting when an employer could utilize the tip credit to time for work that directly produced tips (i.e., work that directly supported tips provided that work did not exceed 20% of the work time and did not exceed thirty consecutive minutes). The Fifth Circuit found that the “Final Rule is attempting to answer a question that DOL itself, not the FLSA has posed. … The FLSA does not ask whether duties composing that given occupation are themselves each individually tip-producing.”
The Fifth Circuit stated that the “Final Rule replaces the Congressionally chosen touchstone of the tip-credit analysis – the occupation – with one of DOL’s making – the timesheet,” seemingly recognizing the insurmountable burden placed on employers of parsing each minute of time worked by a tipped employee to determine its applicable category. The issue is “only whether the employee is engaged in an occupation in which he receives tips.”
The Fifth Circuit’s decision vacating the Final Rule allows employers to apply the tip credit as intended by Congress – to employees engaged in an occupation in which the employee receives tips. If the employee is performing duties unrelated to that occupation, such as a server fixing the plumbing in a restaurant, however, the employee must receive at least the full minimum wage.
*If you have questions relating to the DOL’s new rule, or any other labor and employment law issues, please contact Zashin & Rich’s Wage and Hour Practice Leader, Michele L. Jakubs (mlj@zrlaw.com) at (216) 696-4441.
Showing posts with label Fair Labor Standards Act. Show all posts
Showing posts with label Fair Labor Standards Act. Show all posts
Monday, August 26, 2024
Thursday, May 27, 2021
EMPLOYMENT LAW QUARTERLY | Volume XXIII, Issue i
- Breathe Easy: With Vaccinations on the Rise, Ohio Rescinds COVID-19 Health Orders on June 2nd
- Coming Soon: Covered Employers Must File EEO-1 Component 1 Reports by July 19, 2021
- Zip It: NLRB Provides Guidance on Confidential Investigations
- To Pay or Not to Pay: DOL’s Opinion On Employee Travel and Training Time
- Z&R SHORTS
Breathe Easy: With Vaccinations on the Rise, Ohio Rescinds COVID-19 Health Orders on June 2nd
On May 12th, Governor DeWine announced that, effective June 2nd, Ohio will rescind the majority of its COVID-19 health orders. Accordingly, with limited exceptions, Ohio will no longer mandate the use of masks and social distancing, nor impose COVID-related capacity restrictions. Despite the State lifting its orders, businesses still may voluntarily continue to require mitigation measures. As Governor DeWine explained, “[l]ifting these health orders will not prevent a business from imposing its own requirements. In fact, based upon the experiences of other states, we expect that many stores or businesses may require social distancing and masking.”
Following Governor DeWine’s announcement, the Centers for Disease Control and Prevention (“CDC”) issued interim recommendations on May 13th (available here) stating that, in non-healthcare settings, fully vaccinated people can resume activities without wearing masks or social distancing. In response, Governor DeWine instructed the Director of Ohio’s Department of Health to amend existing orders in accordance with the CDC’s guidance. That amended order (available here) provides, among other things, that fully vaccinated people are no longer required to wear masks with limited exceptions, e.g. public transportation, and can resume activities without social distancing.
Ohio’s lifting of its COVID-19 health orders is a promising sign that the worst of the pandemic is behind us. However, Ohio employers now must decide what mitigation measures, if any, they wish to maintain. This presents a challenging decision, and employers should consider consulting with counsel on effective approaches for revising and communicating changes to their COVID-19 policies and procedures.
*Scott H. Dehart, a member of the firm’s Columbus office, practices in all areas of labor and employment law. If you have questions about Ohio’s pandemic health orders or the impact of COVID-19 on your workplace, please contact Scott at shd@zrlaw.com or (614) 224-4411.
Coming Soon: Covered Employers Must File EEO-1 Component 1 Reports by July 19, 2021
The Equal Employment Opportunity Commission (“EEOC”) collects annual workforce demographic information from covered employers. However, due to the pandemic, the EEOC did not collect data last year. On March 19, 2021, the EEOC announced it was accepting EEO-1 Component 1 Reports (“EEO-1”) and that covered employers must file their 2019 and 2020 data by July 19, 2021.
What is an EEO-1?
The EEO-1 is an annual report the EEOC requires covered employers to file that includes demographic data for employees sorted by job category, ethnicity, race, and gender. Title VII of the Civil Rights Act of 1964 requires the filing. Last year was the first time the EEOC did not require covered employers to file a report.
Which Employers Are Covered?
The EEOC requires private employers with at least 100 employees to file an EEO-1. In addition, federal contractors with more than 50 employees that are not exempt under 41 CFR 60-1.5 must file an EEO-1.
How Long Will Employers Have to File an EEO-1?
The EEOC is accepting EEO-1s now, and employers must file their EEO-1s by July 19, 2021. This year’s EEO-1 filing period differs from years past, as the EEOC usually only allows employers 10 weeks to file. However, the EEOC recognized the COVID-19 pandemic’s impact on the workforce and extended the deadline by two weeks to ensure employers have time to provide accurate and reliable data.
How do Employers File?
Covered employers should visit the EEOC’s EEO-1 website which can be accessed here. Prior to filing, employers should have received 2019 and 2020 EEO-1 notification letters via U.S. mail that should have contained the “Company ID” and “Passcode” employers need to create user accounts.
Employers can file an EEO-1 either: (1) by entering the data into a secure form available at https://eeocdata.org/eeo1/signin; or (2) by uploading a data file using an EEOC-approved format available at https://eeocdata.org/eeo1.
Employers should be aware that they must file an EEO-1 for each year they were in business and met the filing requirement. Due to the pandemic, this year’s collection includes 2019 and 2020 data. Covered employers must file two EEO-1 reports beginning with 2019. The EEOC will certify the 2019 report and then employers can file their 2020 report.
Employers that have not received notification letters or that have questions about filing an EEO-1, including eligibility, should contact counsel or visit EEO-1 Help for more information.
*Tiffany S. Henderson practices in all areas of labor and employment law. If you have questions about the EEO-1 or any employment law questions, please contact Tiffany at tsh@zrlaw.com or (216) 696-4441.
Zip It: NLRB Provides Guidance on Confidential Investigations
Maintaining confidentiality during a workplace investigation may seem like a common-sense practice to help ensure the integrity of the investigation. Yet, directing employees to do so can give rise to allegations of interference with employee rights under the National Labor Relations Act (“NLRA”). Fortunately, in a recent decision, the National Labor Relations Board (“NLRB”) reinforced employers’ ability to issue reasonable directives to employees on maintaining confidentiality during workplace investigations.
In Alcoa Corp., 370 NLRB No. 107 (2021), an employer received reports that one of its employees made racially offensive comments and engaged in other disrespectful behavior. The employer began an investigation which included interviewing employees. During those interviews, a representative for the employer told each employee “to keep in mind that their interview conversation was confidential, to keep the conversation confidential, including from supervisors and other employees, and to decline to answer if others asked about the conversation.”
Based on the results of the investigation, the employer terminated the employee who made the offensive comments. The union representing the employee subsequently filed an unfair labor practice charge alleging, among other things, that the employer violated the NLRA by instructing employees to keep their interviews confidential.
Initially, an Administrative Law Judge (“ALJ”) found in favor of the union. As to the confidentiality directives, the ALJ held the employer unlawfully interfered with employees’ “right to discuss a workplace disciplinary matter.” The ALJ emphasized that the employer did not expressly advise the employees that they could discuss the interviews once the investigation ended. The employer appealed the ALJ’s decision to the NLRB.
In its decision, the NLRB reversed the ALJ and held the employer’s confidentiality directives were lawful. The NLRB relied on its recent decision in Apogee Retail LLC d/b/a Unique Thrift Store, 368 NLRB No. 144 (2019), which overruled prior holdings prohibiting employers from restricting discussion of ongoing investigations unless they could make “a particularized showing of a substantial and legitimate business justification.” Instead, the NLRB held that investigative confidentiality rules, that by their terms apply only for the duration of any investigation, are categorically lawful.
In support of its finding, the NLRB noted that no evidence or allegation existed that: (1) the employer’s directives were given pursuant to a general company policy or rule; (2) the directives applied to anyone other than the employees interviewed during the investigation; or (3) the directives prevented those employees, or any other employees, from discussing the events giving rise to the investigation. Notably, the NLRB disagreed with the ALJ’s conclusion that the employer had to provide an express statement that employees could talk with others about the interviews once the investigation ended. Under the circumstances, the NLRB found that the employees would have reasonably understood that the confidentiality instruction lasted only through the duration of the investigation.
The NLRB’s decision in Alcoa Corp. reinforces employers’ ability to provide reasonable confidentiality directives to employees that interviewed as part of an internal investigation. In doing so, employers should not restrict employees’ ability to discuss the events giving rise to the investigation, or their ability to discuss the interviews once the investigation has ended. When conducting workplace investigations, employers should consider consulting legal counsel for advice on conducting them effectively while avoiding potential claims by employees or their unions.
*Jantzen D. Mace, a member of the firm’s Columbus office, practices in all areas of labor and employment law. For more information about workplace investigation issues, please contact Jantzen at jdm@zrlaw.com or (614) 224-4411.
To Pay or Not to Pay: DOL’s Opinion On Employee Travel and Training Time
The Department of Labor’s Wage and Hour Division (“WHD”), recently issued two opinion letters interpreting the Fair Labor Standards Act’s (“FLSA”) compensation requirements for work-related travel and voluntary training hours. Specifically, the WHD examined three work-related travel scenarios for a construction company’s non-exempt foremen and laborers, and six voluntary training or continuing education scenarios for a hospice care provider’s non-exempt employee. This article summarizes the WHD’s opinion letters to help employers gain a better understanding of their FLSA obligations in comparable scenarios.
Work-Related Travel
In its recent opinion letter, the WHD addressed the following scenarios:
- Local Job Site: The foremen of a construction company must first retrieve a company truck from the employer’s principal place of business, drive it to a local job site, and then return the truck at the end of the day.
- Remote Job Site (1.5 – 4 hours of travel time): The employer pays for hotel accommodations and per-diem meal stipends for employees working at the job site. Each foreman retrieves a company truck from the employer’s principal place of business at the beginning of the job, drives it to the job site, and returns it at the end of the job. Laborers can drive their personal vehicles to and from the job site at the beginning and end of the job; or they can drive their personal vehicles to the principal place of business and ride to and from the job site with the foremen.
- Remote Job Site (1.5 – 4 hours of travel time): Same facts of the second scenario except the laborers choose to travel to and from the job site each day instead of staying at the hotel.
1) “an intrinsic element” of the employee’s principal activities; and
2) one the employee “cannot dispense [with] if he is to perform his principal activities.”
Integrity Staffing Solution, Inc. v. Busk, 135 S. Ct. 513, 518-19 (2014).
The WHD concluded that in each of the three scenarios, the foremen’s travel time to and from the employer’s principal place of business with the company truck is both integral and indispensable to their principal activities because (1) the employer mandates the pickup and return of the company truck as part of the foremen’s job responsibilities; and (2) the principal activities at the construction site require the company truck. Accordingly, the foremen’s travel time in the company truck to and from the employer’s principal place of business is compensable travel time under the FLSA regardless of jobsite location.
Employer compensation requirements under the FLSA for employee travel time to remote job sites in another city depend on when and how employees travel. If an employee’s travel time is for a special one-day assignment, then the travel is compensable worktime. In these situations, the FLSA permits employers to account for the actual travel time or the average commute time that the employee would have used to travel to their usual work site and deduct it from the compensable travel time. Similarly, if an employer offers transportation but the employee chooses to utilize their own transportation, the employer can calculate compensable travel time with either (1) the amount of time the employee spent traveling; or (2) the amount of time that would have accrued using the employer’s offered transportation. If the travel keeps an employee away from home overnight, then travel that occurs during the employee’s normal working hours, even during typical nonwork days, is compensable work time because the travel is in place of the employee’s normal duties. On the other hand, travel that occurs after the employer relieves the employee for long enough “to use the time effectively for [the employee’s] own purposes” is not compensable, even if the employee uses the time to travel to an employer-provided lodging accommodation or to the employee’s home multiple hours away. 29 C.F.R. § 785.16(a).
Applying these principles to the second scenario, the WHD concluded that the laborer’s travel time to a remote jobsite is not compensable under the FLSA, unless the travel occurs during the laborer’s normal working hours. Further, the FLSA considers the travel time occurring between the jobsite and the hotel at the beginning or the end of the workday as part of the everyday commute, which is not compensable travel time. Additionally, since laborers have the option to travel to and from the job site with the foremen, the employer may choose to calculate the laborer’s compensable travel time using either the time that would have accrued if the laborer rode with the foremen or the laborers actual compensable travel time.
The WHD reached the same conclusion for the laborer’s travel time in the third scenario. When a laborer chooses to forego the hotel accommodation and drive between the remote job site and their home each day, the laborer is traveling during their personal time after the employer has relieved the laborer for the day. Therefore, the laborer’s travel time is not compensable under the FLSA.
Voluntary Training Time
The WHD, in its recently issued opinion letter, states that according to the FLSA, employee “attendance at lectures, meetings, training programs and similar activities” is not compensable working time if it meets all four of the following criteria:
(a) Attendance is outside of the employee’s regular working hours;
(b) Attendance is voluntary;
(c) The course, lecture, or meeting does not directly relate to the employee’s job; and
(d) The employee does not perform any productive work during such attendance.
29 C.F.R. 987 § 785.27. Generally, training time that fails to meet any one of the above four criteria is compensable work time. However, the WHD recognizes two “special situation” exceptions to this general rule even when the training directly relates to the employee’s job. If an employee attends (1) a course offered by an independent bona fide institution of learning related to the employee’s job; or (2) an independent school, college or independent trade school to take courses related to the employee’s job, that time is not compensable for FLSA purposes so long as the other three criteria apply. If an employer mandates training, if the training (voluntary or not) occurs during regular working hours, or the employee performs productive work for the employee’s job duties during the training, then the training is compensable as work time. Employers may, however, establish policies prohibiting employees from participating in training courses during regular working hours.
In each of the following scenarios, the WHD assumed that employee attendance was voluntary, and that the employee did not perform any productive work.
Scenario 1: A nurse participates in an on-demand webinar after working hours that directly relates to the nurse’s job and counts towards professional licensing requirements. The WHD concluded that this scenario is exempt as a special situation for a course offered by an independent bona fide institution of learning related to the employee’s job. Thus, the voluntary training time is not compensable. The WHD also noted that the special exception applies regardless of whether the course is offered by the employer or by a third party.
Scenario 2: An accounting clerk participates in an on-demand webinar after working hours that directly relates to the clerk’s job but has no continuing education component. The WHD stated that it did not have sufficient facts to issue an opinion because it could not determine whether an independent bona fide institution offered the training course. If an independent bona fide institution of learning offered the training course, the employee’s time is exempt as a special situation. Otherwise, the training is compensable for FLSA purposes.
Scenario 3: An accounting clerk participates in an on-demand webinar during working hours that directly relates to the clerk’s job but has no continuing education component. The WHD concluded this is compensable training time because the training takes place during working hours.
Scenario 4: An accounting clerk participates in an on-demand webinar during working hours that does not directly relate to the clerk’s job and has no continuing education component. The WHD concluded this is compensable training time because the training takes place during working hours.
Scenario 5: A nurse participates in an on-demand webinar during working hours that directly relates to the nurse’s job and counts toward professional licensing requirements. The WHD concluded this is compensable training time because the training takes place during working hours.
Scenario 6: A nurse participates in an out-of-state weekend conference that has some topics relating directly to the nurse’s job and professional licensing requirements and some topics that don’t. Travel time to the conference occurs during some of the nurse’s normal work hours, but the conference occurs outside of the nurse’s normal work schedule. The WHD concluded that the training time is exempt as a special situation and not compensable time. Additionally, the WHD stated that since the conference is not compensable work hours, travel to and from the conference is personal non-compensable travel time.
While the above referenced opinion letters provide some helpful interpretation of employer requirements, they are not the law. If you have questions about your obligations, please contact counsel, as even small FLSA compliance errors can create significant liability.
*Lauren M. Drabic regularly advises clients on labor and employment matters, including FLSA compliance. If you have questions about wage and hour issues, please contact Lauren at lmd@zrlaw.com or (216) 696-4441.
Z&R SHORTS
Please join Z&R in congratulating Jzinae N. Jackson
Z&R is proud to congratulate Jzinae N. Jackson, a Stokes Scholar Alumni, on joining the Cleveland Metropolitan Bar Association’s Louis Stokes Scholars Advisory Committee, which is committed to expanding diversity in the legal profession. To learn more about the Stokes Scholars Program and to read a recent feature on Jzinae by Court News Ohio, please click here.Upcoming Speaking Engagements
June 2, 2021
Ryan C. Spitzer presents “CBD Products, Hemp and Employee Positive Drug Tests” for the Ohio Municipal Attorneys Association. Registration information for this webinar can be found via the following link: https://www.anymeeting.com/AccountManager/RegEv.aspx?PIID=E053DC80824F3E
June 26, 2021
Jonathan J. Downes presents “Budgets, Revenues, Expenditures – Oh My!” at the 2021 Ohio Prosecuting Attorneys Association Summer Workshop. Information regarding the OPAA Summer Workshop can be found via the following link: http://www.ohiopa.org/training/summer2021.html
September 14, 2021
Jonathan J. Downes presents “Bargaining for Results: Achieving Agreement while Maintaining Flexibility for Management” for the Ohio Association of Chiefs of Police in Hilliard, Ohio. Information regarding this full-day workshop can be found via the following link: https://oacp.org/bargaining-results2021/
Tuesday, March 24, 2020
FLSA Implications for Employers Considering Reductions in Pay
By Lauren Drabic*
The spread of COVID-19 has already created significant economic downturn in the United States that will undoubtedly have a lasting impact. As the government and private businesses continue to take action to curb the spread of the pandemic, employers will face difficult decisions to address the financial hardships that result. Employers who are considering lowering their employees’ rate of pay during this economic decline must be mindful of the constraints of the Fair Labor Standards Act (“FLSA”) and parallel state wage and hour statutes to ensure that they remain compliant. When it comes to reducing an employee’s rate of pay, what is and is not permissible under the FLSA hinges largely on whether the employee is exempt or non-exempt from the FLSA’s minimum wage and overtime requirements.
Typically, under the FLSA, an employer must pay an exempt employee his or her full, predetermined salary amount for any week in which the employee performs any work, regardless of the number of days or hours the employee works. If an employee performs any work during a workweek, an employer cannot make deductions from the employee’s pay for absences due to changes in the operating requirements of the business. In other words, employees who are ready, willing, and able to work, and perform some work in a workweek, are entitled to their full predetermined salary, even when work is available only on a limited basis. With limited exceptions, an employer that makes such deductions to a salaried employee’s pay loses its entitlement to the exemption under the FLSA.
Despite these general rules, an employer may prospectively reduce an exempt employee’s predetermined salary amount during a business slowdown or economic downturn, so long as the salary change is bona fide and not simply used to evade the FLSA’s requirements. A prospective reduction in an exempt employee’s regular salary is permissible if the reduction is made prior to the employee performing any work in a workweek and the employee receives a salary of at least $684 per week. Employers should implement such a reduction only when it reflects the anticipated long-term needs of the business. Employers should not reduce or change employee salaries on a day-to-day or week-to-week basis based upon their operating requirements. Rather, prospective reductions in salary should remain consistent throughout the period of business need.
The limitations on an employer’s ability to reduce the pay of non-exempt, hourly employees are less stringent. Employers may lower a non-exempt hourly employee’s hourly rate of pay as long the employee receives the controlling minimum wage under federal, state or local law, whichever is higher, provided the employer notifies the employee before any work is performed under the new hourly rate. Likewise, the FLSA does not preclude employers from reducing the number of hours a non-exempt employee is scheduled to work and does not require employers to pay non-exempt employees for hours not actually worked.
Employers should also be mindful that wage and hour laws vary state-by-state and state and local laws may have more stringent requirements than those mandated by the FLSA. Some states and cities have specific notice requirements that employers must comply with prior to implementing a wage reduction.
Z&R will continue to monitor the latest information governing employers and has created a resource center. Previous Z&R articles addressing employer requirements and considerations during the COVID-19 pandemic can be found here:
*Lauren Drabic works in Z&R’s Cleveland office and regularly advises clients on all employment matters. If you have questions regarding the Ohio Department of Insurance Bulletin other employment-related matters, please contact Lauren at lmd@zrlaw.com or 216.696.4441.
The spread of COVID-19 has already created significant economic downturn in the United States that will undoubtedly have a lasting impact. As the government and private businesses continue to take action to curb the spread of the pandemic, employers will face difficult decisions to address the financial hardships that result. Employers who are considering lowering their employees’ rate of pay during this economic decline must be mindful of the constraints of the Fair Labor Standards Act (“FLSA”) and parallel state wage and hour statutes to ensure that they remain compliant. When it comes to reducing an employee’s rate of pay, what is and is not permissible under the FLSA hinges largely on whether the employee is exempt or non-exempt from the FLSA’s minimum wage and overtime requirements.
Reductions in Pay for Salaried, Exempt Employees
Typically, under the FLSA, an employer must pay an exempt employee his or her full, predetermined salary amount for any week in which the employee performs any work, regardless of the number of days or hours the employee works. If an employee performs any work during a workweek, an employer cannot make deductions from the employee’s pay for absences due to changes in the operating requirements of the business. In other words, employees who are ready, willing, and able to work, and perform some work in a workweek, are entitled to their full predetermined salary, even when work is available only on a limited basis. With limited exceptions, an employer that makes such deductions to a salaried employee’s pay loses its entitlement to the exemption under the FLSA.
Despite these general rules, an employer may prospectively reduce an exempt employee’s predetermined salary amount during a business slowdown or economic downturn, so long as the salary change is bona fide and not simply used to evade the FLSA’s requirements. A prospective reduction in an exempt employee’s regular salary is permissible if the reduction is made prior to the employee performing any work in a workweek and the employee receives a salary of at least $684 per week. Employers should implement such a reduction only when it reflects the anticipated long-term needs of the business. Employers should not reduce or change employee salaries on a day-to-day or week-to-week basis based upon their operating requirements. Rather, prospective reductions in salary should remain consistent throughout the period of business need.
Reductions in Pay for Non-Exempt Employees
The limitations on an employer’s ability to reduce the pay of non-exempt, hourly employees are less stringent. Employers may lower a non-exempt hourly employee’s hourly rate of pay as long the employee receives the controlling minimum wage under federal, state or local law, whichever is higher, provided the employer notifies the employee before any work is performed under the new hourly rate. Likewise, the FLSA does not preclude employers from reducing the number of hours a non-exempt employee is scheduled to work and does not require employers to pay non-exempt employees for hours not actually worked.
State and Local Laws May Have Stricter Requirements
Employers should also be mindful that wage and hour laws vary state-by-state and state and local laws may have more stringent requirements than those mandated by the FLSA. Some states and cities have specific notice requirements that employers must comply with prior to implementing a wage reduction.
Z&R will continue to monitor the latest information governing employers and has created a resource center. Previous Z&R articles addressing employer requirements and considerations during the COVID-19 pandemic can be found here:
- Coronavirus Considerations for Employers
- Ohio Provides Some Cover for Employers and Employees in Wake of COVID-19
- Federal COVID-19 response mandates paid leave (for now)
- Application of the Worker Adjustment and Retraining Notification Act (“WARN”) to Closures Caused by the COVID-19 Pandemic
- Ohio BWC: Allows Deferment of Premium Payments and Addresses Compensability of Contracting COVID-19
- Ohio Department of Insurance Provides Coverage Flexibility for Ohio Employees in the Wake of COVID-19
*Lauren Drabic works in Z&R’s Cleveland office and regularly advises clients on all employment matters. If you have questions regarding the Ohio Department of Insurance Bulletin other employment-related matters, please contact Lauren at lmd@zrlaw.com or 216.696.4441.
Thursday, October 17, 2019
EMPLOYMENT LAW QUARTERLY | Volume XXI, Issue iii
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The City of Toledo passed Ordinance No. 173-19, which generally prohibits Toledo employers with at least fifteen employees from seeking an applicant’s prior salary information. Toledo joins a growing number of states and municipalities that have enacted similar bans, including the City of Cincinnati in March of 2019. Accordingly, Toledo employers should determine whether they are subject to the law and, if so, implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective on June 26, 2020.
“Prohibition on Inquiring About or Use of Salary History”
Beginning on June 26, 2020, covered employers in Toledo cannot seek, use, or otherwise rely upon an applicant’s salary history during the hiring process. Notable exceptions include discussions of salary and benefit expectations, internal transfer or promotion, “voluntary and unprompted disclosure” of salary history, and applicants governed by a collective bargaining agreement. The ordinance also requires an employer to provide an applicant the applicable pay scale for the position following an offer of employment, but only upon “reasonable request.”
Remedies and Statute of Limitations
In the event the ordinance is violated, the applicant can seek “compensatory damages, reasonable attorney’s fees, the costs of the action, and such legal and equitable relief as the court deems just and proper.” The applicant must initiate any such action within two years.
Toledo has joined a growing number of jurisdictions outlawing inquiry into an applicant’s salary history, passing an ordinance similar to that passed by the City of Cincinnati just months earlier. Given this trend, employers should expect other cities to pass similar laws. Toledo employers should begin preparations and implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective in June 2020.
*Scott H. DeHart, who works in the Columbus office, practices in all areas of labor and employment law. If you have questions about this ordinance or about inquiry into an applicant’s salary history, please contact Scott at shd@zrlaw.com or (614) 224-4411.
Before an employee can file a lawsuit under Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits discrimination based on an employee’s race, color, religion, sex, or national origin, the employee must file a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) or the employee’s state’s equivalent of the EEOC. In Ohio, the state equivalent to the federal EEOC is the Ohio Civil Rights Commission. Generally, employees must file their Charge of Discrimination within 180 calendar days of the day the discrimination occurred or, if in a state like Ohio that has its own state agency, within 300 calendar days of the date that the discrimination occurred.
On June 3, 2019, the U.S. Supreme Court unanimously held that Title VII’s “charge-filing requirement” is not “jurisdictional,” i.e., grounds for dismissal at any point during litigation. Fort Bend County, Texas v. Davis, 139 S. Ct. 1843 (June 3, 2019). Instead, employers must raise the objection in a timely manner or they forfeit the defense. So, if an employee sues its current or former employer under Title VII, and the employee incorrectly or insufficiently filed a Charge of Discrimination with the EEOC or equivalent state agency, then the employer cannot wait until the later stages of the litigation to object on these grounds.
In Davis, an employee filed an EEOC Charge of Discrimination against her employer alleging sexual harassment and retaliation. While the EEOC processed her charge, the employer fired the employee after she did not show up to work due to a conflict with a church commitment. The employee then attempted to amend her EEOC Charge to include an allegation for religious discrimination by making a handwritten notation on her EEOC intake questionnaire. However, she did not amend her formal EEOC Charge.
After the EEOC notified the employee of her right to sue, she filed a lawsuit in federal court and asserted claims including sexual harassment, retaliation, and religious discrimination under Title VII. After litigating the case for years, the employer moved – for the first time – to dismiss the religious-discrimination claim. The employer argued that the court lacked jurisdiction over the claim because the employee failed to properly assert it in her EEOC Charge. The district court agreed and dismissed the claim. On appeal, the Fifth Circuit reversed and reinstated the claim. The U.S. Supreme Court agreed to hear the case and decide whether Title VII’s charge-filing requirement was a jurisdictional precondition that can be raised at any stage of a lawsuit or a “procedural prescription” that the employer must raise in a timely manner or risk forfeiting. The U.S. Supreme Court picked the latter.
In Davis, the U.S. Supreme Court noted that Title VII’s language regarding the charge-filing requirement focuses on a party’s procedural obligations, not a court’s jurisdiction. Accordingly, the Court held that the charge-filing requirement is not “jurisdictional,” and thus an employer forfeits the objection if it does not raise it in a timely manner. The Court contrasted the “harsh consequences” of jurisdictional objections, which can dissolve a claim at any point in the litigation (even in front of the U.S. Supreme Court), against a party’s argument that the other party failed to comply with a claim-processing rule, which the objecting party forfeits if it “waits too long to raise the point.” The U.S. Supreme Court never specified what amounts to waiting “too long to raise the point.”
The U.S. Supreme Court also confirmed that the EEOC charge-filing requirement is mandatory. Accordingly, upon an employer’s timely objection, a Title VII plaintiff’s failure to abide by the requirement will prove fatal to their lawsuit. Employers who are facing a Title VII lawsuit should consult with counsel to determine whether this procedural defense may exist.
*Tiffany Henderson practices in all areas of labor and employment law. If you have questions regarding the U.S. Supreme Court’s Davis decision or any other employment law issues, please contact Tiffany at tsh@zrlaw.com or (216) 696-4441.
For information to be considered a trade secret, it must be sufficiently secret to impart economic value because of (1) its relative secrecy and (2) the owner of the information must take reasonable efforts to maintain the secrecy of the information. Recent case law serves as a reminder that to obtain trade secret protection from the courts, the second, often overlooked component of the “trade secret” rule is pivotal. In litigating trade secret misappropriation under the federal Defend Trade Secrets Act (“DTSA”) and applicable state law, it is not enough for companies to simply show the existence of a trade secret. Companies must show they took appropriate measures and had proper policies and procedures in place to protect their trade secret information.
A federal court recently reiterated this principle in Abrasic 90 Inc. v. Weldcote Metals, Inc., 364 F. Supp. 3d 888 (N.D. Ill. 2019). In Abrasic, defendant Joseph O’Mera was president and a director of the plaintiff Camel Grinding Wheels, U.S.A. (“CGW”), which produced abrasive products. In his capacity as president, O’Mera developed and oversaw various aspects of CGW’s operations, played the primary role in negotiating costs with CGW’s suppliers, and set CGW’s prices for its entire product line and approved all pricing discounts. In 2018, O’Mera left CGW to start a competing abrasives business for Weldcote Metals, Inc. (“Weldcote”). When he left, O’Mera took files containing information about CGW’s pricing, customers, and suppliers. Additional employees who also took files containing information about CGW’s pricing, customers, and suppliers, followed O’Mera to Weldcote. Further, O’Mera convinced one such employee to bring customer pricing documents from CGW’s shared drive.
CGW filed suit against its former employees and Weldcote and moved to enjoin the defendants from entering the abrasives business, from doing business with CGW’s suppliers or distributors, and from using the information at issue. The information at issue included compilations of CGW’s pricing and sales data. Notably, the court held that this type of information could be a trade secret under the law. However, the court denied CGW’s motion for a preliminary injunction under DTSA and the Illinois Trade Secrets Act, because CGW had taken “almost no measures to safeguard the information that it now maintains was invaluable to its competitors.”
According to the court, CGW could have taken the following data security measures, but did not:
The lesson from Abrasic is clear: to claim information is a statutory trade secret, companies need to employ reasonable security measures to protect that information. While companies need not implement each and every measure discussed above, it is imperative that they take heed of these measures.
*Ami J. Patel practices in all areas of labor and employment law. If you have questions regarding protecting your company’s trade secret information or any other employment law issues, please contact Ami at ajp@zrlaw.com or (216) 696-4441.
In 2018, the U.S. Department of Labor's Wage and Hour Division (“DOL”) reinitiated its practice of issuing opinion letters. The DOL’s opinion letters offer official guidance addressing how a particular law, such as the Family and Medical Leave Act (“FMLA”) and Fair Labor Standards Act (“FLSA”), applies in specific circumstances. These letters also serve as important guidance for other employers faced with similar circumstances and compliance concerns. Although the letters are not binding precedent, they can help bolster arguments made by employers.
Since 2018, the DOL has released a steady stream of opinion letters (available through this link). Just this year, the DOL already has issued over a dozen opinion letters offering guidance on specific issues under the FMLA and the FLSA. A summary of some important opinion letters is provided below.
Opinion Letter FMLA 2019-1-A (available here)
This opinion letter addresses whether an employer may permit employees to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA qualifying, even when the leave clearly is FMLA qualifying. The DOL’s answer is a resounding no.
The individual submitting this request for an opinion stated that employers often justify this practice pursuant to language in the FMLA regulations, 29 C.F.R. §825.700, which in relevant part states that “[a]n employer must observe any employment benefit or program that provides greater family and medical leave rights to employees than the rights provided by the FMLA.” However, the DOL’s response is clear that an employer may not delay the designation of FMLA-qualifying leave as FMLA leave. “Once an employee communicates a need to take leave for a FMLA-qualifying reason, neither the employee nor the employer may decline FMLA protection for that leave. Accordingly, when an employer determines that leave is for an FMLA-qualifying reason, the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement.” Further, pursuant to the FMLA regulations, “once the employer has enough information to make this determination, the employer must, absent extenuating circumstances, provide notice of the designation within five business days, and may not delay designating leave as FMLA-qualifying, even if the employee would prefer the delay.” 29 C.F.R. §825.300(d)(1).
The DOL reconciles the language in 29 C.F.R. §825.700, i.e., the regulation cited in the underlying request for an opinion, with the opinion set forth in its letter, stating “[o]f course an employer must observe any employment benefit or plan that provides greater family or medical leave rights to employees than the rights established by the FMLA, [b]ut providing such additional leave outside of the FMLA cannot expand the employee’s 12-week (or 26 week) entitlement. [If] an employee substitutes paid leave for unpaid FMLA leave, the employee’s paid leave counts toward his or her 12-week (or 26-week) FMLA entitlement and does not expand that entitlement.”
This opinion may create additional confusion for employers in the Ninth Circuit, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. In 2014, the Ninth Circuit Court of Appeals concluded that an employee can decline FMLA leave and use paid leave instead, even though the underlying reason for leave would have been FMLA-qualifying. Escriba v. Foster Poultry Farms, 743 F.3d 123, 1244 (9th Cir. 2014). In issuing this opinion letter, the DOL noted its disagreement with the Escriba decision in a footnote.
Opinion Letter FLSA 2019-2 (available here)
This opinion letter addresses whether time spent participating in an employer’s optional volunteer program constitutes “hours worked” requiring compensation under the FLSA. The answer is no, unless such time is forced.
The program at issue in the opinion letter is an employer-sponsored optional community service program for employees, where employees can choose to engage in certain volunteer activities. Under the program, the employer compensates employees for time they spend on volunteer activities during normal working hours or while they are required to be on the employer’s premises, but activities which take place outside of normal working hours are not compensated. At the end of the year, the employer awards a monetary bonus to certain participating employees based on the total overall hours each employee volunteered.
Relying on a previous opinion letter concerning volunteer activities, the DOL notes that “[a]n employer may use an employee’s time spent volunteering as a factor in calculating whether to pay the employee a bonus, without incurring an obligation to treat that time as hours worked, so long as (1) volunteering is optional, (2) not volunteering will have no adverse effect on the employee, and (3) the employee is not guaranteed a bonus for volunteering.” FLSA 2006-4.
The DOL concluded that participation in the program at issue does not count as hours worked under the FLSA because: (1) the employer does not require participation in the program nor control or direct volunteer work; (2) employees do not appear to suffer adverse employment consequences if they do not participate in the program; and (3) the employer does not guarantee participating employees a bonus for volunteering.
The DOL also confirmed that an employer can use a mobile device application to track a participating employee’s time spent volunteering, provided that this application is not used to direct or control the volunteering activities.
Opinion Letter FLSA 2019-9 (available here)
This opinion letter addresses whether an organization used permissible rounding practices when calculating its employees’ hours worked. The organization at issue used payroll software to calculate its employees’ hours worked and wages. Based on clock in and clock out times, the software would convert an employee’s hours worked each day into a numerical figure that would be rounded based upon whether the third decimal fell below .005. For example, if the software initially calculated an employee’s hours worked in a single day to be 6.865, that figure would be rounded up to 6.87 for purposes of calculating the employee’s pay for that day. However, if the initial figure was 6.864, then the software would use 6.86 for purposes of calculating the employee’s pay for the day.
The DOL found that this rounding practice was consistent with the FLSA’s regulations. The DOL explained it has been its “policy to accept rounding to the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out so that the employees are compensated for all the time they actually work.” The specific rounding practice at issue was neutral on its face and appeared to average out. Therefore, the DOL opined that, consistent with the FLSA’s regulations, the rounding practice “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b)
Conclusion
The key takeaways from the opinion letters summarized above are the following:
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. If you have questions regarding the DOL’s opinion letters, or the FMLA or the FLSA, please contact Michele at mlj@zrlaw.com or (216) 696-4441.
Tiffany Henderson practices out of Z&R’s Cleveland office. Her practice encompasses all areas of private and public sector labor and employment law. Tiffany graduated from Bowling Green State University and received her Master of Public Administration and her Juris Doctor (cum laude) from Cleveland State University and Cleveland-Marshall College of Law, respectively. As a law student, Tiffany served as Student Bar Association President, Director of Pre-Law and Recording Secretary for the Black Law Students Association, and was a member of the mock trial advocacy team. Tiffany also received the Norman S. Minor Scholarship and Cleveland-Marshall Law Alumni Association Life Member Scholarship. Prior to joining Z&R, Tiffany served as an Assistant Attorney General at the Ohio Attorney General’s Office. Before practicing law, Tiffany worked with PPG in Cleveland, Ohio as an Information Technology Systems Analyst.
Ryan Spitzer practices out of Z&R’s Columbus office and represents public and private sector employers in all aspects of labor and employment law. Ryan graduated from the Ohio State University and earned his law degree cum laude from Capital University with a concentration in civil litigation. As a law student, Ryan participated in the Fall National Moot Court Team and was an extern for Chief Justice Maureen O’Connor at the Ohio Supreme Court. Prior to joining Z&R, Ryan worked for the Miami County Prosecuting Attorney’s Office where he handled both civil and criminal matters and was appointed as a Special Assistant Prosecuting Attorney in multiple counties.
Z&R congratulates Stephen Zashin, Helena Oroz, and Jeff Wedel on their recent success before the Ohio Supreme Court in Gembarski v. PartsSource, Inc., 2019-Ohio-3231 (Aug. 14, 2019). The case is a significant win for employers. The Ohio Supreme Court held that when a single named plaintiff files an action on behalf of a class of employees, but is not bound by an arbitration agreement to which other members of the putative class action may be bound, the employer need not raise an arbitration defense at the pleading stage. Instead, the employer may wait and raise such a defense at the class-certification stage of the proceedings.
November 4, 2019
Jonathan J. Downes presents “Keys to Successful Negotiations” and “Negotiation Practice on Specific Issues” at the State Employment Relation Board (SERB) Advanced Negotiations Seminar. The seminar will take place at the State Library in Columbus, Ohio.
December 4, 2019
George S. Crisci will be part of a panel presentation entitled “Labor Law Hot Topics” at the Ohio State Bar Association’s National Labor Relation Board (NLRB) Updates seminar. The panel presentation will take place at the Ohio State Bar Association in Columbus, Ohio.
- City of Toledo Joins Cincinnati, Passes Salary History Ban
- Use it or Lose it: U.S. Supreme Court Holds That Title VII Defendants Must Raise Charge-Filing Defense in a Timely Manner
- Companies Must Make Reasonable Efforts to Maintain the Confidentiality of their Trade Secrets if They Want Courts to Protect Them
- Letter of the Law: U.S. Department of Labor’s Wage and Hour Division Continues Issuing Opinion Letters
- Z&R SHORTS
City of Toledo Joins Cincinnati, Passes Salary History Ban
By Scott H. DeHart*The City of Toledo passed Ordinance No. 173-19, which generally prohibits Toledo employers with at least fifteen employees from seeking an applicant’s prior salary information. Toledo joins a growing number of states and municipalities that have enacted similar bans, including the City of Cincinnati in March of 2019. Accordingly, Toledo employers should determine whether they are subject to the law and, if so, implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective on June 26, 2020.
“Prohibition on Inquiring About or Use of Salary History”
Beginning on June 26, 2020, covered employers in Toledo cannot seek, use, or otherwise rely upon an applicant’s salary history during the hiring process. Notable exceptions include discussions of salary and benefit expectations, internal transfer or promotion, “voluntary and unprompted disclosure” of salary history, and applicants governed by a collective bargaining agreement. The ordinance also requires an employer to provide an applicant the applicable pay scale for the position following an offer of employment, but only upon “reasonable request.”
Remedies and Statute of Limitations
In the event the ordinance is violated, the applicant can seek “compensatory damages, reasonable attorney’s fees, the costs of the action, and such legal and equitable relief as the court deems just and proper.” The applicant must initiate any such action within two years.
Toledo has joined a growing number of jurisdictions outlawing inquiry into an applicant’s salary history, passing an ordinance similar to that passed by the City of Cincinnati just months earlier. Given this trend, employers should expect other cities to pass similar laws. Toledo employers should begin preparations and implement necessary changes to existing practices to ensure compliance with the ordinance when it becomes effective in June 2020.
*Scott H. DeHart, who works in the Columbus office, practices in all areas of labor and employment law. If you have questions about this ordinance or about inquiry into an applicant’s salary history, please contact Scott at shd@zrlaw.com or (614) 224-4411.
Use it or Lose it: U.S. Supreme Court Holds That Title VII Defendants Must Raise Charge-Filing Defense in a Timely Manner
By Tiffany Henderson*Before an employee can file a lawsuit under Title VII of the Civil Rights Act of 1964 (“Title VII”), which prohibits discrimination based on an employee’s race, color, religion, sex, or national origin, the employee must file a Charge of Discrimination with the Equal Employment Opportunity Commission (“EEOC”) or the employee’s state’s equivalent of the EEOC. In Ohio, the state equivalent to the federal EEOC is the Ohio Civil Rights Commission. Generally, employees must file their Charge of Discrimination within 180 calendar days of the day the discrimination occurred or, if in a state like Ohio that has its own state agency, within 300 calendar days of the date that the discrimination occurred.
On June 3, 2019, the U.S. Supreme Court unanimously held that Title VII’s “charge-filing requirement” is not “jurisdictional,” i.e., grounds for dismissal at any point during litigation. Fort Bend County, Texas v. Davis, 139 S. Ct. 1843 (June 3, 2019). Instead, employers must raise the objection in a timely manner or they forfeit the defense. So, if an employee sues its current or former employer under Title VII, and the employee incorrectly or insufficiently filed a Charge of Discrimination with the EEOC or equivalent state agency, then the employer cannot wait until the later stages of the litigation to object on these grounds.
In Davis, an employee filed an EEOC Charge of Discrimination against her employer alleging sexual harassment and retaliation. While the EEOC processed her charge, the employer fired the employee after she did not show up to work due to a conflict with a church commitment. The employee then attempted to amend her EEOC Charge to include an allegation for religious discrimination by making a handwritten notation on her EEOC intake questionnaire. However, she did not amend her formal EEOC Charge.
After the EEOC notified the employee of her right to sue, she filed a lawsuit in federal court and asserted claims including sexual harassment, retaliation, and religious discrimination under Title VII. After litigating the case for years, the employer moved – for the first time – to dismiss the religious-discrimination claim. The employer argued that the court lacked jurisdiction over the claim because the employee failed to properly assert it in her EEOC Charge. The district court agreed and dismissed the claim. On appeal, the Fifth Circuit reversed and reinstated the claim. The U.S. Supreme Court agreed to hear the case and decide whether Title VII’s charge-filing requirement was a jurisdictional precondition that can be raised at any stage of a lawsuit or a “procedural prescription” that the employer must raise in a timely manner or risk forfeiting. The U.S. Supreme Court picked the latter.
In Davis, the U.S. Supreme Court noted that Title VII’s language regarding the charge-filing requirement focuses on a party’s procedural obligations, not a court’s jurisdiction. Accordingly, the Court held that the charge-filing requirement is not “jurisdictional,” and thus an employer forfeits the objection if it does not raise it in a timely manner. The Court contrasted the “harsh consequences” of jurisdictional objections, which can dissolve a claim at any point in the litigation (even in front of the U.S. Supreme Court), against a party’s argument that the other party failed to comply with a claim-processing rule, which the objecting party forfeits if it “waits too long to raise the point.” The U.S. Supreme Court never specified what amounts to waiting “too long to raise the point.”
The U.S. Supreme Court also confirmed that the EEOC charge-filing requirement is mandatory. Accordingly, upon an employer’s timely objection, a Title VII plaintiff’s failure to abide by the requirement will prove fatal to their lawsuit. Employers who are facing a Title VII lawsuit should consult with counsel to determine whether this procedural defense may exist.
*Tiffany Henderson practices in all areas of labor and employment law. If you have questions regarding the U.S. Supreme Court’s Davis decision or any other employment law issues, please contact Tiffany at tsh@zrlaw.com or (216) 696-4441.
Companies Must Make Reasonable Efforts to Maintain the Confidentiality of their Trade Secrets if They Want Courts to Protect Them
By Ami J. Patel*For information to be considered a trade secret, it must be sufficiently secret to impart economic value because of (1) its relative secrecy and (2) the owner of the information must take reasonable efforts to maintain the secrecy of the information. Recent case law serves as a reminder that to obtain trade secret protection from the courts, the second, often overlooked component of the “trade secret” rule is pivotal. In litigating trade secret misappropriation under the federal Defend Trade Secrets Act (“DTSA”) and applicable state law, it is not enough for companies to simply show the existence of a trade secret. Companies must show they took appropriate measures and had proper policies and procedures in place to protect their trade secret information.
A federal court recently reiterated this principle in Abrasic 90 Inc. v. Weldcote Metals, Inc., 364 F. Supp. 3d 888 (N.D. Ill. 2019). In Abrasic, defendant Joseph O’Mera was president and a director of the plaintiff Camel Grinding Wheels, U.S.A. (“CGW”), which produced abrasive products. In his capacity as president, O’Mera developed and oversaw various aspects of CGW’s operations, played the primary role in negotiating costs with CGW’s suppliers, and set CGW’s prices for its entire product line and approved all pricing discounts. In 2018, O’Mera left CGW to start a competing abrasives business for Weldcote Metals, Inc. (“Weldcote”). When he left, O’Mera took files containing information about CGW’s pricing, customers, and suppliers. Additional employees who also took files containing information about CGW’s pricing, customers, and suppliers, followed O’Mera to Weldcote. Further, O’Mera convinced one such employee to bring customer pricing documents from CGW’s shared drive.
CGW filed suit against its former employees and Weldcote and moved to enjoin the defendants from entering the abrasives business, from doing business with CGW’s suppliers or distributors, and from using the information at issue. The information at issue included compilations of CGW’s pricing and sales data. Notably, the court held that this type of information could be a trade secret under the law. However, the court denied CGW’s motion for a preliminary injunction under DTSA and the Illinois Trade Secrets Act, because CGW had taken “almost no measures to safeguard the information that it now maintains was invaluable to its competitors.”
According to the court, CGW could have taken the following data security measures, but did not:
- Requiring its employees to enter into non-disclosure and confidentiality agreements. CGW failed to require those with access to its supposed trade secrets to enter into non-disclosure and confidentiality agreements. The court described this as “among the most fundamental omissions by the company.”
- Establishing and implementing policies concerning the confidentiality of the company’s business information. CGW’s employee handbook did not have a policy regarding confidentiality beyond a “vague, generalized admonition about not discussing CGW business outside of work,” which “did not define, delineate, or specify which information was considered confidential.” The court determined this was “too broad and vague to confer meaningful protection over the information at issue.”
- Training company employees about their obligation to keep certain categories of information confidential. In the absence of a confidentiality policy, CGW further “did nothing to train or instruct employees about their obligation to keep certain categories of information confidential.”
- Ensuring all confidential information is returned to the company upon the cessation of employment of any employee with access to such information. Although CGW instructed departing employees to return CGW “property,” these employees “were not asked whether they possessed any of the information at issue or instructed to return or delete such information.” The court noted that merely requiring that departing employees return company property is not enough, and that company precautions “must go beyond normal business practices for the information to qualify for trade secret protection.”
- Ensuring that employees with responsibility for maintaining the security of sensitive company data and information are trained in data security and IT management. CGW’s IT management person had “no training in data security (or virtually any other area of IT management) and was ill-equipped to identify, much less champion, sound data security practices.”
- Ensuring that the company maintains and implements comprehensive data security policies and practices. CGW’s IT management practices were “grossly inadequate to prevent unauthorized access and use of the company’s purportedly valuable proprietary information.” Further, CGW’s IT person recommended to the company internally that it “take some basic steps to improve the security of the information at issue,” such as segregating access to documents on a need-to-know basis and adopting an “acceptable device use policy.” CGW, however, failed to implement “even these modest suggestions, further undermining its trade secret claim.”
- Restricting access to sensitive company information to employees on a need-to-know basis, such as assigning employees passwords to access the information. The entire contents of CGW’s shared drive were accessible to employees who did not need access to this information. Further, the IT management person always granted any request for access that was made of her and she “did not make any meaningful inquiry into whether the person needed access to the information.”
- Differentiating access and protective measures with respect to sensitive company information from those imposed with respect to non-sensitive company information. The court disfavored the manner in which the information was stored on CGW’s shared drive. CGW provided all employees with the same password to obtain access to the shared drive. Files were not encrypted, and there were no restrictions on employees’ ability to access, save, copy, print, or email the information. Further, there was no evidence that employees needed the authorization of the IT management person to obtain access to the shared drive. Rather, any employee could have enabled their own workstation to access the shared drive with minimal knowledge or assistance. Moreover, the documents on the shared drive were not segregated from other files that were not trade secrets and the documents were not labeled in any manner as “confidential” or “proprietary.” The court noted that it “takes virtually no effort and little sophistication to include a heading on an Excel spreadsheet identifying a document as ‘proprietary’ or ‘confidential,’ yet CGW failed even to do that much with respect to the information at issue.”
The lesson from Abrasic is clear: to claim information is a statutory trade secret, companies need to employ reasonable security measures to protect that information. While companies need not implement each and every measure discussed above, it is imperative that they take heed of these measures.
*Ami J. Patel practices in all areas of labor and employment law. If you have questions regarding protecting your company’s trade secret information or any other employment law issues, please contact Ami at ajp@zrlaw.com or (216) 696-4441.
Letter of the Law: U.S. Department of Labor’s Wage and Hour Division Continues Issuing Opinion Letters
By Michele L. Jakubs*In 2018, the U.S. Department of Labor's Wage and Hour Division (“DOL”) reinitiated its practice of issuing opinion letters. The DOL’s opinion letters offer official guidance addressing how a particular law, such as the Family and Medical Leave Act (“FMLA”) and Fair Labor Standards Act (“FLSA”), applies in specific circumstances. These letters also serve as important guidance for other employers faced with similar circumstances and compliance concerns. Although the letters are not binding precedent, they can help bolster arguments made by employers.
Since 2018, the DOL has released a steady stream of opinion letters (available through this link). Just this year, the DOL already has issued over a dozen opinion letters offering guidance on specific issues under the FMLA and the FLSA. A summary of some important opinion letters is provided below.
Opinion Letter FMLA 2019-1-A (available here)
This opinion letter addresses whether an employer may permit employees to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA qualifying, even when the leave clearly is FMLA qualifying. The DOL’s answer is a resounding no.
The individual submitting this request for an opinion stated that employers often justify this practice pursuant to language in the FMLA regulations, 29 C.F.R. §825.700, which in relevant part states that “[a]n employer must observe any employment benefit or program that provides greater family and medical leave rights to employees than the rights provided by the FMLA.” However, the DOL’s response is clear that an employer may not delay the designation of FMLA-qualifying leave as FMLA leave. “Once an employee communicates a need to take leave for a FMLA-qualifying reason, neither the employee nor the employer may decline FMLA protection for that leave. Accordingly, when an employer determines that leave is for an FMLA-qualifying reason, the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement.” Further, pursuant to the FMLA regulations, “once the employer has enough information to make this determination, the employer must, absent extenuating circumstances, provide notice of the designation within five business days, and may not delay designating leave as FMLA-qualifying, even if the employee would prefer the delay.” 29 C.F.R. §825.300(d)(1).
The DOL reconciles the language in 29 C.F.R. §825.700, i.e., the regulation cited in the underlying request for an opinion, with the opinion set forth in its letter, stating “[o]f course an employer must observe any employment benefit or plan that provides greater family or medical leave rights to employees than the rights established by the FMLA, [b]ut providing such additional leave outside of the FMLA cannot expand the employee’s 12-week (or 26 week) entitlement. [If] an employee substitutes paid leave for unpaid FMLA leave, the employee’s paid leave counts toward his or her 12-week (or 26-week) FMLA entitlement and does not expand that entitlement.”
This opinion may create additional confusion for employers in the Ninth Circuit, which covers Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington. In 2014, the Ninth Circuit Court of Appeals concluded that an employee can decline FMLA leave and use paid leave instead, even though the underlying reason for leave would have been FMLA-qualifying. Escriba v. Foster Poultry Farms, 743 F.3d 123, 1244 (9th Cir. 2014). In issuing this opinion letter, the DOL noted its disagreement with the Escriba decision in a footnote.
Opinion Letter FLSA 2019-2 (available here)
This opinion letter addresses whether time spent participating in an employer’s optional volunteer program constitutes “hours worked” requiring compensation under the FLSA. The answer is no, unless such time is forced.
The program at issue in the opinion letter is an employer-sponsored optional community service program for employees, where employees can choose to engage in certain volunteer activities. Under the program, the employer compensates employees for time they spend on volunteer activities during normal working hours or while they are required to be on the employer’s premises, but activities which take place outside of normal working hours are not compensated. At the end of the year, the employer awards a monetary bonus to certain participating employees based on the total overall hours each employee volunteered.
Relying on a previous opinion letter concerning volunteer activities, the DOL notes that “[a]n employer may use an employee’s time spent volunteering as a factor in calculating whether to pay the employee a bonus, without incurring an obligation to treat that time as hours worked, so long as (1) volunteering is optional, (2) not volunteering will have no adverse effect on the employee, and (3) the employee is not guaranteed a bonus for volunteering.” FLSA 2006-4.
The DOL concluded that participation in the program at issue does not count as hours worked under the FLSA because: (1) the employer does not require participation in the program nor control or direct volunteer work; (2) employees do not appear to suffer adverse employment consequences if they do not participate in the program; and (3) the employer does not guarantee participating employees a bonus for volunteering.
The DOL also confirmed that an employer can use a mobile device application to track a participating employee’s time spent volunteering, provided that this application is not used to direct or control the volunteering activities.
Opinion Letter FLSA 2019-9 (available here)
This opinion letter addresses whether an organization used permissible rounding practices when calculating its employees’ hours worked. The organization at issue used payroll software to calculate its employees’ hours worked and wages. Based on clock in and clock out times, the software would convert an employee’s hours worked each day into a numerical figure that would be rounded based upon whether the third decimal fell below .005. For example, if the software initially calculated an employee’s hours worked in a single day to be 6.865, that figure would be rounded up to 6.87 for purposes of calculating the employee’s pay for that day. However, if the initial figure was 6.864, then the software would use 6.86 for purposes of calculating the employee’s pay for the day.
The DOL found that this rounding practice was consistent with the FLSA’s regulations. The DOL explained it has been its “policy to accept rounding to the nearest five minutes, one-tenth of an hour, one-quarter of an hour, or one-half hour as long as the rounding averages out so that the employees are compensated for all the time they actually work.” The specific rounding practice at issue was neutral on its face and appeared to average out. Therefore, the DOL opined that, consistent with the FLSA’s regulations, the rounding practice “will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.” 29 C.F.R. § 785.48(b)
Conclusion
The key takeaways from the opinion letters summarized above are the following:
- Employers may not permit employees to exhaust some or all available paid sick (or other) leave prior to designating leave as FMLA-qualifying. When an employer determines that leave is for a FMLA-qualifying reason, the qualifying leave is FMLA-protected and counts toward the employee’s FMLA leave entitlement.
- Employers will not incur an obligation to treat an employee’s time spent volunteering as “hours worked” under the FLSA, so long as such time is not forced, i.e., (1) volunteering is optional, (2) not volunteering will have no adverse effect on the employee, and (3) the employee is not guaranteed a bonus for volunteering.
- In determining employees’ hours worked, employers may use rounding practices, so long as those practices are neutral and average out so that the employer compensates its employees for all the time its employees actually worked.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. If you have questions regarding the DOL’s opinion letters, or the FMLA or the FLSA, please contact Michele at mlj@zrlaw.com or (216) 696-4441.
Z&R SHORTS
Please join Z&R in welcoming Tiffany Henderson and Ryan Spitzer to its Employment and Labor Groups
Tiffany Henderson practices out of Z&R’s Cleveland office. Her practice encompasses all areas of private and public sector labor and employment law. Tiffany graduated from Bowling Green State University and received her Master of Public Administration and her Juris Doctor (cum laude) from Cleveland State University and Cleveland-Marshall College of Law, respectively. As a law student, Tiffany served as Student Bar Association President, Director of Pre-Law and Recording Secretary for the Black Law Students Association, and was a member of the mock trial advocacy team. Tiffany also received the Norman S. Minor Scholarship and Cleveland-Marshall Law Alumni Association Life Member Scholarship. Prior to joining Z&R, Tiffany served as an Assistant Attorney General at the Ohio Attorney General’s Office. Before practicing law, Tiffany worked with PPG in Cleveland, Ohio as an Information Technology Systems Analyst.
Ryan Spitzer practices out of Z&R’s Columbus office and represents public and private sector employers in all aspects of labor and employment law. Ryan graduated from the Ohio State University and earned his law degree cum laude from Capital University with a concentration in civil litigation. As a law student, Ryan participated in the Fall National Moot Court Team and was an extern for Chief Justice Maureen O’Connor at the Ohio Supreme Court. Prior to joining Z&R, Ryan worked for the Miami County Prosecuting Attorney’s Office where he handled both civil and criminal matters and was appointed as a Special Assistant Prosecuting Attorney in multiple counties.
Congratulations to Stephen Zashin, Helena Oroz, and Jeffrey Wedel on their Recent Win before the Ohio Supreme Court
Z&R congratulates Stephen Zashin, Helena Oroz, and Jeff Wedel on their recent success before the Ohio Supreme Court in Gembarski v. PartsSource, Inc., 2019-Ohio-3231 (Aug. 14, 2019). The case is a significant win for employers. The Ohio Supreme Court held that when a single named plaintiff files an action on behalf of a class of employees, but is not bound by an arbitration agreement to which other members of the putative class action may be bound, the employer need not raise an arbitration defense at the pleading stage. Instead, the employer may wait and raise such a defense at the class-certification stage of the proceedings.
Upcoming Speaking Engagements
November 4, 2019
Jonathan J. Downes presents “Keys to Successful Negotiations” and “Negotiation Practice on Specific Issues” at the State Employment Relation Board (SERB) Advanced Negotiations Seminar. The seminar will take place at the State Library in Columbus, Ohio.
December 4, 2019
George S. Crisci will be part of a panel presentation entitled “Labor Law Hot Topics” at the Ohio State Bar Association’s National Labor Relation Board (NLRB) Updates seminar. The panel presentation will take place at the Ohio State Bar Association in Columbus, Ohio.
Tuesday, September 24, 2019
Department of Labor Increases Salary Thresholds for FLSA Overtime Exemptions
On September 24, 2019, the United States Department of Labor (“DOL”) announced its final rule increasing the salary thresholds for exemptions under the Fair Labor Standards Act (“FLSA”). The final rule sets the new salary threshold for “white collar” exemptions at $35,568 annually, or $684 weekly. Under the new rule, to satisfy up to 10 percent of this salary threshold, employers may use nondiscretionary bonuses and incentive payments (including commissions) that are paid at least annually. For the highly-compensated employee exemption, the new salary threshold will increase from $100,000 to $107,432 annually. The final rule (including the new salary thresholds) goes into effect on January 1, 2020. The changes will have a major impact on employers, as an estimated 1.3 million formerly-exempt employees will become eligible for overtime.
The FLSA generally requires employers to pay employees for any time worked in excess of forty hours per work week at a rate of one-and-a-half times the employee’s regular rate. The FLSA exempts “white collar” and highly-compensated employees from the overtime requirement, provided the employees meet specific criteria.
Employees qualify for an exemption by meeting three criteria: (1) the employee receives a fixed salary; (2) the salary meets the minimum threshold requirement (currently $455 per week, or $23,660 per year); and, (3) the employee’s responsibilities primarily involve executive, administrative, or professional duties. Highly-compensated employees who regularly perform one or more exempt duties also are exempt.
The final rule does not make any changes to the existing job duty requirements for the “white collar” and highly-compensated employee exemptions.
In light of the increases in the salary thresholds, employers should consult with counsel to ensure compliance with both the salary and duties tests. The change in the law presents a great opportunity for employers to evaluate whether they are properly classifying their employees as exempt under the FLSA and make any necessary corrections. The implications of misclassifying employees are significant and typically costly and may result in litigation or an investigation by the DOL. With just over three months to prepare and implement a plan to ensure compliance with the new salary thresholds, employers should establish a plan as soon as possible.
*Lauren M. Drabic practices in all areas of labor and employment law and is particularly adept at handling wage and hour issues. If you have questions about how the Department of Labor’s final rule may impact your company, please contact Lauren at lmd@zrlaw.com or 216.696.4441.
Thursday, February 21, 2019
EMPLOYMENT LAW QUARTERLY | Volume XXI, Issue i
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Recently, the National Labor Relations Board (“NLRB”) published a notice of proposed rulemaking on the standard for determining joint-employer status. The proposed rule makes it less likely that a company would be deemed a joint-employer liable for labor law violations involving workers the company engages at arm’s length, such as subcontractors or franchisees. Under the NLRB’s proposed standard, an employer may be deemed a joint-employer of another employer’s employees only if it possesses and exercises “substantial, direct and immediate control” over the essential terms and conditions of the employees’ employment and has done so in a manner that is not “limited and routine.” The proposed rule is intended to avoid forcing companies, who have not exerted control over the terms and conditions of employment of other companies’ employees, to be involved in collective bargaining negotiations or defending against unfair labor practice charges with respect to those employees.
The proposed rule could be even better for employers than the pre-2015 standard because, in listing the criteria for whether a company exercises enough control to be considered a joint-employer, the proposed rule requires substantial “direct and immediate control.” The NLRB maintains that the proposed rule fosters predictability, consistency, and stability in the determination of joint-employer status.
After releasing the proposed rule, the NLRB accepted comments from the public, which it will now consider in formulating its final rule. Regardless of the final rule’s language, employers must remain cognizant of the control they exert over subcontractors, independent contractors, etc., and analyze whether it creates an employment relationship with such individuals, giving rise to related liability.
*Jessi L. Ziska practices in all areas of labor and employment law. If you have questions regarding the NLRB’s proposed joint-employer rule, please contact Jessi at jlz@zrlaw.com or 216.696.4441.
By Lauren M. Drabic*
The Fair Labor Standards Act (“FLSA”) provides wage and overtime protections for full- and part-time workers in both the private and public sectors. In particular, it establishes the federal minimum wage and generally requires covered employers to pay their employees an overtime rate at one and one-half times their regular rate of pay for hours worked over 40 in a workweek. However, the statute exempts certain employees from these minimum wage and overtime protections depending on the nature of the employee’s position, duties, and pay. The statute lists more than a dozen categories of positions that are exempt from the FLSA’s minimum wage and overtime protections. Federal regulations provide further guidance on positions that qualify as exempt.
Some FLSA provisions and related federal regulations are specific and leave little room for interpretation as to whether a certain position is exempt. For example, the FLSA specifically delineates that elementary and secondary school teachers are exempt from one or more of its protections, as are criminal investigators, police officers, firefighters, computer programmers, software engineers, cab drivers, babysitters hired on a casual basis, movie theater employees, and certain employees employed in agriculture. Federal regulations further delineate, by way of example, that doctors, lawyers, architects, and engineers typically are considered exempt employees. The applicability of other exemptions under the FLSA, however, are far from clear, even in light of additional guidance.
For nearly six decades, the Supreme Court held time and again that, when ambiguous, the provisions of the FLSA – including these exemption provisions – should be narrowly construed. In essence, this meant that unless the position at issue explicitly and irrefutably fell within the plain meaning of the FLSA’s exemption provisions – or as the Supreme Court once put it, “plainly and unmistakably [fell] within the terms or the spirit” of those provisions – such a position could not be considered exempt from the statute’s wage and overtime provisions. In practice, this meant that whenever it was unclear whether a particular position was exempt, courts were more likely to conclude it was not. This benefitted plaintiff employees bringing wage and hour claims alleging that their employers misclassified them as exempt.
In a recent decision, Encino Motorcars, LLC v. Navarro, the Supreme Court turned this longstanding precedent on its head. In Encino Motorcars, the Court interpreted the exemption under the FLSA that exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” from its overtime provisions. The Court addressed whether car dealership service advisors – i.e., employees who consulted with customers about their automobile servicing needs and sold customers servicing solutions – fell under this exemption. The U.S. Court of Appeals for the Ninth Circuit concluded they did not. In reaching this conclusion, the Ninth Circuit applied the long-standing precedent that courts should narrowly construe the FLSA’s provisions.
The Supreme Court reversed the Ninth Circuit’s decision. After a lengthy discussion about the construction of the FLSA’s text, the Court determined that service advisors fell within the “salesman, partsman, or mechanic” exemption, despite the fact that they neither sold automobiles nor were generally responsible for servicing them. The Court reached this conclusion by determining that these employees were technically “salesmen.” Also, because these employees provided advice and sold services to customers, the Court found this technically could be interpreted to mean that they “serviced automobiles.”
One easily could argue that the Court did not base its holding on a narrow construction of the FLSA. Departing from the Court’s decades-long precedent, the Supreme Court explicitly rejected the principle of using narrow construction “as a useful guidepost for interpreting the FLSA.” Instead, the Court had “no license” to give the FLSA’s exemptions “anything but a fair reading.” With this simple statement, the FLSA’s provisions should now be interpreted “fairly” and no longer “narrowly.”
While it is too soon to say what the full impact of the Court’s Encino Motorcars decision will be, it likely will have far-reaching consequences. For the first time since the FLSA was enacted in 1938, the Supreme Court has given lower courts – and by extension, employers – license to take broader liberties in determining whether a position is exempt from the FLSA’s wage and overtime provisions.
When classifying employees, employers should still proceed with caution and err on the side of classifying positions as non-exempt, particularly when there is room for interpretation. Misclassifying an employee as exempt can result in costly litigation, including back pay for unpaid overtime wages, liquidated damages, and payment of attorneys’ fees and costs. However, the Supreme Court’s Encino Motorcars decision is a positive development for employers.
*Lauren M. Drabic works in Z&R’s Cleveland office and practices in all areas of labor and employment law. If you have questions regarding the FLSA’s wage and hour exemptions or other employment-related matters, please contact Lauren at lmd@zrlaw.com or 216.696.4441.
By Patrick M. Watts*
The Cuyahoga County Council recently enacted Ordinance No. O2018-0009, which specifically outlaws discrimination based upon sexual orientation and gender identity or expression. The ordinance also outlaws discrimination based upon “race, color, religion, military status, national origin, disability, age, ancestry, familial status, and sex.” Finally, the ordinance creates a Commission on Human Rights.
The ordinance affords the commission the power to “review, hear, decide, and enforce final decisions rendered under” the ordinance. The commission also has the power to issue subpoenas, require production of evidence, require attendance of witnesses, order preservation of evidence, assess civil administrative penalties, issue cease and desist orders, take certain actions in court to secure evidence, and generally exercise other powers “reasonable and necessary to fulfill [its] purpose.”
Complaints regarding “unlawful employment practice[s]” must be filed within 150 days after the alleged unlawful discriminatory practices or acts occurred. A response to any complaint is due within 30 days after service of any complaint. The ordinance contemplates that a hearing occur concerning the allegations contained in the complaint. Thereafter, the commission is charged with issuing a Final Decision and Order regarding whether the allegations are substantiated. To the extent the commission finds a violation, the commission can issue a cease and desist order and may issue civil penalties. Civil penalties may not exceed $5,000. The commission also may award reasonable attorneys’ fees and costs to the complainant. Any party may appeal a commission decision to the Cuyahoga County Court of Common Pleas for judicial review.
In addition to provisions relating to fair housing and public accommodations, the ordinance specifically prohibits “any employer, because of race, color, religion, military status, national origin, disability, age, ancestry, sex, sexual orientation, or gender identity or expression,” from “discharg[ing] without cause,” “refus[ing] to hire a person or otherwise…discriminat[ing] against any person with respect to hire, promotion, tenure, discharge, or any terms, conditions or privileges of employment, or any matter related to employment.”
The ordinance also outlaws certain other actions, such as publishing or circulating discriminatory notices, advertisements, or failing to “classify properly” any individual within a protected class. The ordinance prohibits employers from eliciting information concerning membership in any protected class, including sexual orientation and gender identity or expression on any application for employment, unless based upon a bona fide occupational qualification. The ordinance further prohibits retaliation against any person for opposing practices forbidden by the ordinance. The ordinance has certain exceptions, including for religious organizations.
Cuyahoga County employers should implement necessary changes to existing policies to ensure compliance with this new ordinance.
*Patrick M. Watts, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. If you have questions about this ordinance or the Cuyahoga County Commission on Human Rights, please contact Patrick at pmw@zrlaw.com or 216.696.4441.
By Moriah L. Stutler*
At the beginning of the year, several states, including Ohio, increased their minimum wage. In Ohio, the minimum wage increased by twenty-five cents per hour to $8.55 for non-tipped employees and $4.30 for tipped employees. Ohio’s law applies to employers with gross revenue of $314,000.00 or more. Ohio employers grossing less than $314,000.00 are only required to pay the federal minimum wage, which is $7.25 per hour to non-tipped employees and $2.13 per hour to tipped employees. Additionally, Ohio employers only are required to pay minors age fifteen or younger the federal minimum wage.
Some states did not wait for the New Year to increase wages. On July 1, 2018, Maryland’s minimum wage increased to $10.10 per hour, while District of Columbia’s minimum wage increased to $13.25 per hour. On December 31, 2018, New York fast food employees saw a minimum wage increase to $12.75 per hour, and other New York employees saw an increase to $11.10 per hour. Other states will see increases later in 2019. For example, Oregon’s minimum wage will increase to $11.25 per hour on July 1, 2019.
Recently, states have been moving towards the “Living Wage” and “$15 Minimum Wage Initiative.” A number of states, including Florida, Hawaii, Maryland, Massachusetts, New Jersey, and New York have proposed bills that would increase their minimum wage to approximately $15.00 per hour within the next five to seven years.
Employers also should be aware that some municipalities have local laws setting higher minimum wages than the state minimum wage.
*Moriah L. Stutler practices in all areas of labor and employment law. For more information about minimum wage and other wage and hour questions, please contact Moriah at mls@zrlaw.com or 216.696.4441
Alison Buzzard represents public and private sector employers in all aspects of labor and employment law. Prior to joining Zashin & Rich in 2018 at the firm's Columbus office, Alison worked as a law clerk assisting with public and private sector labor matters while she attended The Ohio State University Moritz College of Law. At Moritz, Alison served as an Associate Editor for the Ohio State Law Journal and took part in Ohio State’s moot court program, both as a member of the Governing Board and a competitor and semifinalist in the National Moot Court Competition in Child Welfare and Adoption Law.
Moriah Stutler's practice encompasses all areas of labor and employment law. Prior to joining Zashin & Rich, Moriah spent several years at a big four accounting firm in the mergers and acquisitions tax practice, where she assisted large multinational companies execute multi-million dollar acquisitions, dispositions, and other global structuring transactions. Moriah earned her law degree and MBA from The University of Akron, where she was a graduate assistant in the department of finance.
March 6, 2019
Drew C. Piersall presents “Emerging Trends in Discrimination and Retaliation Law” at the Labor and Employment Law Section meeting of the Columbus Bar Association in Columbus, Ohio.
March 7, 2019
Jonathan J. Downes presents “FMLA, ADA & Interactive Process” at the Jobs and Family Services Human Resource Association Conference 2019 at the Quest Conference Center in Columbus, Ohio.
April 5, 2019
David R. Vance will be presenting on civil claims under Ohio Revised Code 2307.60, including civil theft, at the CMBA Litigation Section’s lunch and CLE in Cleveland, Ohio.
April 24, 2019
George S. Crisci presents “Train Your Supervisors to Mitigate Lawsuits” and “Create Documentation That is a Legal Shield” at the National Business Institute’s “Why Employers Get Sued: How You Can Stop It” seminar in Maumee, Ohio.
- The NLRB Proposes New Joint-Employer Standard Limiting Employers’ Liability
- FLSA & Car Dealer Alert: What’s Fair is Fair
- Cuyahoga County Council Passes Law Protecting Sexual Orientation & Gender Identity
- New Year, New Wages: Minimum Wage Increases in Several States
- Z&R SHORTS
The NLRB Proposes New Joint-Employer Standard Limiting Employers’ Liability
By Jessi L. Ziska*Recently, the National Labor Relations Board (“NLRB”) published a notice of proposed rulemaking on the standard for determining joint-employer status. The proposed rule makes it less likely that a company would be deemed a joint-employer liable for labor law violations involving workers the company engages at arm’s length, such as subcontractors or franchisees. Under the NLRB’s proposed standard, an employer may be deemed a joint-employer of another employer’s employees only if it possesses and exercises “substantial, direct and immediate control” over the essential terms and conditions of the employees’ employment and has done so in a manner that is not “limited and routine.” The proposed rule is intended to avoid forcing companies, who have not exerted control over the terms and conditions of employment of other companies’ employees, to be involved in collective bargaining negotiations or defending against unfair labor practice charges with respect to those employees.
The Current Joint-Employer Standard
In 2015, the NLRB’s decision in Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, 362 NLRB No. 186 (2015) (“Browning-Ferris”) established a new joint-employer standard to replace the decades-old standard set forth in TLI, Inc., 271 NLRB 798 (1984) and Laerco Transportation, 269 NLRB 324 (1984), both now reversed by Browning-Ferris. Under the the Browning-Ferris standard, which currently controls, multiple entities are deemed a joint-employer of a single workforce if (1) “they are both employers within the meaning of the common law” and (2) they “share or co-determine” matters governing the essential terms and conditions of employment. Essentially, if an employer retains the right to control another employer’s employees — regardless of whether it actually exercises that control — this is sufficient to establish a joint-employer relationship with respect to those employees. The Browning-Ferris standard potentially exposes more companies to legal liability as joint-employers than the pre-2015 standard. Prior to Browning-Ferris, the NLRB defined a joint-employer as one who exercised “direct and immediate” control over the workers’ terms and conditions of employment. A detailed discussion of the Browning-Ferris decision and pre-2015 standard can be found here.A Move to Return to the Pre-2015 Joint-Employer Standard
The NLRB’s December 2017 decision in Hy-Brand Industrial Contractors, Ltd, 365 NLRB No. 156 (2017) (“Hy-Brand”) overruled the controversial Browning-Ferris joint-employer standard. However, the Hy-Brand case was vacated by the NLRB in February 2018 for an alleged conflict of interest due to NLRB Member Emanuel’s participation in the case, leaving employers once again subject to the Browning-Ferris standard. This hiccup did not deter the NLRB from re-establishing the pre-2015 joint-employer standard. Unable to overturn the Browning-Ferris standard through case ruling, the NLRB is engaging in rulemaking to overturn the current standard. Further, a standard issued through rulemaking is less likely to be reversed than a standard established by case ruling, since those rulings easily can be overturned if the NLRB majority flips.The proposed rule could be even better for employers than the pre-2015 standard because, in listing the criteria for whether a company exercises enough control to be considered a joint-employer, the proposed rule requires substantial “direct and immediate control.” The NLRB maintains that the proposed rule fosters predictability, consistency, and stability in the determination of joint-employer status.
After releasing the proposed rule, the NLRB accepted comments from the public, which it will now consider in formulating its final rule. Regardless of the final rule’s language, employers must remain cognizant of the control they exert over subcontractors, independent contractors, etc., and analyze whether it creates an employment relationship with such individuals, giving rise to related liability.
*Jessi L. Ziska practices in all areas of labor and employment law. If you have questions regarding the NLRB’s proposed joint-employer rule, please contact Jessi at jlz@zrlaw.com or 216.696.4441.
FLSA & Car Dealer Alert: What’s Fair is Fair
By Lauren M. Drabic*
The Fair Labor Standards Act (“FLSA”) provides wage and overtime protections for full- and part-time workers in both the private and public sectors. In particular, it establishes the federal minimum wage and generally requires covered employers to pay their employees an overtime rate at one and one-half times their regular rate of pay for hours worked over 40 in a workweek. However, the statute exempts certain employees from these minimum wage and overtime protections depending on the nature of the employee’s position, duties, and pay. The statute lists more than a dozen categories of positions that are exempt from the FLSA’s minimum wage and overtime protections. Federal regulations provide further guidance on positions that qualify as exempt.
Some FLSA provisions and related federal regulations are specific and leave little room for interpretation as to whether a certain position is exempt. For example, the FLSA specifically delineates that elementary and secondary school teachers are exempt from one or more of its protections, as are criminal investigators, police officers, firefighters, computer programmers, software engineers, cab drivers, babysitters hired on a casual basis, movie theater employees, and certain employees employed in agriculture. Federal regulations further delineate, by way of example, that doctors, lawyers, architects, and engineers typically are considered exempt employees. The applicability of other exemptions under the FLSA, however, are far from clear, even in light of additional guidance.
For nearly six decades, the Supreme Court held time and again that, when ambiguous, the provisions of the FLSA – including these exemption provisions – should be narrowly construed. In essence, this meant that unless the position at issue explicitly and irrefutably fell within the plain meaning of the FLSA’s exemption provisions – or as the Supreme Court once put it, “plainly and unmistakably [fell] within the terms or the spirit” of those provisions – such a position could not be considered exempt from the statute’s wage and overtime provisions. In practice, this meant that whenever it was unclear whether a particular position was exempt, courts were more likely to conclude it was not. This benefitted plaintiff employees bringing wage and hour claims alleging that their employers misclassified them as exempt.
In a recent decision, Encino Motorcars, LLC v. Navarro, the Supreme Court turned this longstanding precedent on its head. In Encino Motorcars, the Court interpreted the exemption under the FLSA that exempts “any salesman, partsman, or mechanic primarily engaged in selling or servicing automobiles” from its overtime provisions. The Court addressed whether car dealership service advisors – i.e., employees who consulted with customers about their automobile servicing needs and sold customers servicing solutions – fell under this exemption. The U.S. Court of Appeals for the Ninth Circuit concluded they did not. In reaching this conclusion, the Ninth Circuit applied the long-standing precedent that courts should narrowly construe the FLSA’s provisions.
The Supreme Court reversed the Ninth Circuit’s decision. After a lengthy discussion about the construction of the FLSA’s text, the Court determined that service advisors fell within the “salesman, partsman, or mechanic” exemption, despite the fact that they neither sold automobiles nor were generally responsible for servicing them. The Court reached this conclusion by determining that these employees were technically “salesmen.” Also, because these employees provided advice and sold services to customers, the Court found this technically could be interpreted to mean that they “serviced automobiles.”
One easily could argue that the Court did not base its holding on a narrow construction of the FLSA. Departing from the Court’s decades-long precedent, the Supreme Court explicitly rejected the principle of using narrow construction “as a useful guidepost for interpreting the FLSA.” Instead, the Court had “no license” to give the FLSA’s exemptions “anything but a fair reading.” With this simple statement, the FLSA’s provisions should now be interpreted “fairly” and no longer “narrowly.”
While it is too soon to say what the full impact of the Court’s Encino Motorcars decision will be, it likely will have far-reaching consequences. For the first time since the FLSA was enacted in 1938, the Supreme Court has given lower courts – and by extension, employers – license to take broader liberties in determining whether a position is exempt from the FLSA’s wage and overtime provisions.
When classifying employees, employers should still proceed with caution and err on the side of classifying positions as non-exempt, particularly when there is room for interpretation. Misclassifying an employee as exempt can result in costly litigation, including back pay for unpaid overtime wages, liquidated damages, and payment of attorneys’ fees and costs. However, the Supreme Court’s Encino Motorcars decision is a positive development for employers.
*Lauren M. Drabic works in Z&R’s Cleveland office and practices in all areas of labor and employment law. If you have questions regarding the FLSA’s wage and hour exemptions or other employment-related matters, please contact Lauren at lmd@zrlaw.com or 216.696.4441.
Cuyahoga County Council Passes Law Protecting Sexual Orientation & Gender Identity
By Patrick M. Watts*
The Cuyahoga County Council recently enacted Ordinance No. O2018-0009, which specifically outlaws discrimination based upon sexual orientation and gender identity or expression. The ordinance also outlaws discrimination based upon “race, color, religion, military status, national origin, disability, age, ancestry, familial status, and sex.” Finally, the ordinance creates a Commission on Human Rights.
Commission on Human Rights
The ordinance creates a new Commission on Human Rights that is charged with promoting “principles of diversity, inclusion, and harmony in the County of Cuyahoga.” The commission will have three members who are appointed by the County Executive and confirmed by the County Council. The ordinance requires that these members be licensed attorneys. The commission is charged with receiving, investigating, and attempting to mediate all complaints filed under the ordinance. Of note, the commission is charged with generally encouraging complainants to file a complaint with the applicable state and federal bodies, including the Ohio Civil Rights Commission and U.S. Equal Employment Opportunity Commission. The commission is authorized to decline the exercise of jurisdiction in most circumstances. However, the ordinance requires that complaints exclusively alleging discrimination based upon “sexual orientation and/or gender identity or expression… be adjudicated by the commission… without deferral” to the related state and/or federal agency.The ordinance affords the commission the power to “review, hear, decide, and enforce final decisions rendered under” the ordinance. The commission also has the power to issue subpoenas, require production of evidence, require attendance of witnesses, order preservation of evidence, assess civil administrative penalties, issue cease and desist orders, take certain actions in court to secure evidence, and generally exercise other powers “reasonable and necessary to fulfill [its] purpose.”
Complaints regarding “unlawful employment practice[s]” must be filed within 150 days after the alleged unlawful discriminatory practices or acts occurred. A response to any complaint is due within 30 days after service of any complaint. The ordinance contemplates that a hearing occur concerning the allegations contained in the complaint. Thereafter, the commission is charged with issuing a Final Decision and Order regarding whether the allegations are substantiated. To the extent the commission finds a violation, the commission can issue a cease and desist order and may issue civil penalties. Civil penalties may not exceed $5,000. The commission also may award reasonable attorneys’ fees and costs to the complainant. Any party may appeal a commission decision to the Cuyahoga County Court of Common Pleas for judicial review.
Anti-Discrimination Law and Unlawful Employment Practices under the Ordinance
In addition to existing protections for various protected classes, the ordinance specifically adds protections for sexual orientation and gender identity or expression. The ordinance defines “[g]ender identity or expression” as “an individual’s actual or perceived gender-related identity, appearance, expression, mannerisms, or other gender-related characteristics, regardless of the individual’s designated sex at birth.”In addition to provisions relating to fair housing and public accommodations, the ordinance specifically prohibits “any employer, because of race, color, religion, military status, national origin, disability, age, ancestry, sex, sexual orientation, or gender identity or expression,” from “discharg[ing] without cause,” “refus[ing] to hire a person or otherwise…discriminat[ing] against any person with respect to hire, promotion, tenure, discharge, or any terms, conditions or privileges of employment, or any matter related to employment.”
The ordinance also outlaws certain other actions, such as publishing or circulating discriminatory notices, advertisements, or failing to “classify properly” any individual within a protected class. The ordinance prohibits employers from eliciting information concerning membership in any protected class, including sexual orientation and gender identity or expression on any application for employment, unless based upon a bona fide occupational qualification. The ordinance further prohibits retaliation against any person for opposing practices forbidden by the ordinance. The ordinance has certain exceptions, including for religious organizations.
Cuyahoga County employers should implement necessary changes to existing policies to ensure compliance with this new ordinance.
*Patrick M. Watts, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law. If you have questions about this ordinance or the Cuyahoga County Commission on Human Rights, please contact Patrick at pmw@zrlaw.com or 216.696.4441.
New Year, New Wages: Minimum Wage Increases in Several States
By Moriah L. Stutler*
At the beginning of the year, several states, including Ohio, increased their minimum wage. In Ohio, the minimum wage increased by twenty-five cents per hour to $8.55 for non-tipped employees and $4.30 for tipped employees. Ohio’s law applies to employers with gross revenue of $314,000.00 or more. Ohio employers grossing less than $314,000.00 are only required to pay the federal minimum wage, which is $7.25 per hour to non-tipped employees and $2.13 per hour to tipped employees. Additionally, Ohio employers only are required to pay minors age fifteen or younger the federal minimum wage.
Some states did not wait for the New Year to increase wages. On July 1, 2018, Maryland’s minimum wage increased to $10.10 per hour, while District of Columbia’s minimum wage increased to $13.25 per hour. On December 31, 2018, New York fast food employees saw a minimum wage increase to $12.75 per hour, and other New York employees saw an increase to $11.10 per hour. Other states will see increases later in 2019. For example, Oregon’s minimum wage will increase to $11.25 per hour on July 1, 2019.
Recently, states have been moving towards the “Living Wage” and “$15 Minimum Wage Initiative.” A number of states, including Florida, Hawaii, Maryland, Massachusetts, New Jersey, and New York have proposed bills that would increase their minimum wage to approximately $15.00 per hour within the next five to seven years.
Employers also should be aware that some municipalities have local laws setting higher minimum wages than the state minimum wage.
The following table includes all increases to state minimum wages in 2019 (unless otherwise noted, all increases were effective January 1, 2019):
STATE | NON-TIPPED | TIPPED |
Alaska | $9.89 | $9.89 |
Arizona | $11.00 | $8.00 |
California | $12 for larger employers; $11 for smaller employer | $12 for larger employers; $11 for smaller employer |
Colorado | $11.10 | $8.08 |
District of Columbia (effective 7/1/2018) | $13.25 | $3.89 |
Florida | $8.46 | $5.44 |
Maine | $11.00 | $5.50 |
Maryland (effective 7/1/2018) | $10.10 | $3.63 |
Massachusetts | $12.00 | $4.35 |
Minnesota | $9.86 for larger employers; $8.04 for smaller employers | $9.86 for larger employers; $8.04 for smaller employers |
Montana | $8.50 | $8.50 |
New Jersey | $8.85 | $8.85 |
New York (effective 12/31/18) | $12.75 for fast food employees; $11.10 for other employees | $7.50 for food service employees; $9.25 for other service employees |
Ohio | $8.55 | $4.30 |
Oregon (effective 7/1/19) | $11.25 | $11.25 |
Rhode Island | $10.50 | $3.89 |
South Dakota | $9.10 | $4.55 |
Vermont | $10.78 | $5.39 |
Washington | $12.00 | $12.00 |
*Moriah L. Stutler practices in all areas of labor and employment law. For more information about minimum wage and other wage and hour questions, please contact Moriah at mls@zrlaw.com or 216.696.4441
Z&R SHORTS
Please join Z&R in welcoming Alison Buzzard and Moriah Stutler to its Employment and Labor Groups
Alison Buzzard represents public and private sector employers in all aspects of labor and employment law. Prior to joining Zashin & Rich in 2018 at the firm's Columbus office, Alison worked as a law clerk assisting with public and private sector labor matters while she attended The Ohio State University Moritz College of Law. At Moritz, Alison served as an Associate Editor for the Ohio State Law Journal and took part in Ohio State’s moot court program, both as a member of the Governing Board and a competitor and semifinalist in the National Moot Court Competition in Child Welfare and Adoption Law.
Moriah Stutler's practice encompasses all areas of labor and employment law. Prior to joining Zashin & Rich, Moriah spent several years at a big four accounting firm in the mergers and acquisitions tax practice, where she assisted large multinational companies execute multi-million dollar acquisitions, dispositions, and other global structuring transactions. Moriah earned her law degree and MBA from The University of Akron, where she was a graduate assistant in the department of finance.
Upcoming Speaking Engagements
March 6, 2019
Drew C. Piersall presents “Emerging Trends in Discrimination and Retaliation Law” at the Labor and Employment Law Section meeting of the Columbus Bar Association in Columbus, Ohio.
March 7, 2019
Jonathan J. Downes presents “FMLA, ADA & Interactive Process” at the Jobs and Family Services Human Resource Association Conference 2019 at the Quest Conference Center in Columbus, Ohio.
April 5, 2019
David R. Vance will be presenting on civil claims under Ohio Revised Code 2307.60, including civil theft, at the CMBA Litigation Section’s lunch and CLE in Cleveland, Ohio.
April 24, 2019
George S. Crisci presents “Train Your Supervisors to Mitigate Lawsuits” and “Create Documentation That is a Legal Shield” at the National Business Institute’s “Why Employers Get Sued: How You Can Stop It” seminar in Maumee, Ohio.
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