The Legal Line


Fifth Circuit Strikes Down EEOC Guidance that Limited Employer Use of Applicant Criminal Histories

posted Nov 13, 2019, 11:22 AM by Allison Ayer

In a recent case called State of Texas v. Equal Employment Opportunity Commission, et al., the Fifth Circuit Court of Appeals held unenforceable Guidance from the Equal Employment Opportunity Commission (“EEOC”) that limited an employer’s use of criminal records in hiring.  On its face, the holding might seem to allow employers more freedom to refuse to hire an applicant because of his or her criminal past.  But, the case has significant limitations discussed below.  Employers therefore are still well-advised to tread carefully before asking applicants about their criminal history and to avoid automatic bans on hiring individuals based on an applicant’s criminal convictions.

Here’s what happened: 

The EEOC has long been concerned based on hiring data it was seeing, that bans on hiring individuals with criminal records disproportionately prevent minorities, in particular African Americans and Hispanics, from obtaining employment.  In April 2012, the EEOC issued written Guidance that essentially purported to outlaw certain practices concerning use of criminal background information.  More specifically, the EEOC took the position that if an employer’s criminal records screening practice disproportionately impacted individuals of a particular race or other protected class, the employer would be presumed liable for discrimination under Title VII unless the employer could demonstrate the policy or practice was job-related for the position sought and consistent with business necessity.  The Guidance also banned automatic across-the-board exclusions from employment of a particular class or type of crime.  In essence, the Guidance required employers to conduct individualized assessments of every person’s criminal record, using a multi-factor screening system to ascertain whether a certain individual should or should not be hired. 

Meanwhile, the State of Texas propounded a strict policy excluding individuals convicted of certain specified categories of felonies from most public jobs.  In 2012, soon after the EEOC issued its Guidance, a person who had been rejected for a Texas Department of Public Safety job filed a complaint with the EEOC challenging Texas’ no-felon hiring policy on the grounds that it had a disparate impact on certain groups in violation of Title VII.  Texas responded by suing the EEOC, claiming that the EEOC Guidance was unenforceable.  The Fifth Circuit took the case up and agreed with Texas. 

According to the Fifth Circuit, the EEOC was not authorized to issue its Guidance in the first place because it created substantive legal obligations rather than mere procedural requirements to comply with federal law.  The Court further ruled that the EEOC was barred from enforcing its unauthorized Guidance against Texas or any other employer. 

But don’t think that is the end of the story. The Fifth Circuit conceded that while the EEOC could not issue “Guidance” to create binding presumptions of unlawful disparate impact upon employers who use automatic criminal hiring bans, the EEOC could nevertheless sue to enforce Title VII against an employer for anti-criminal hiring practices and prevail if such a ban was proven to have had a disparate impact on any protected class under the statute. 

So, where does this leave employers who wish to lawfully implement criminal conviction screenings in their hiring process.  Can employers automatically refuse to hire anyone convicted of felonious sexual assault for example so long as it does not unfairly impact Hispanic applicants?  Can they ask about an employee’s criminal record without any limitation?  The short answer is any “automatic” policy is generally not a good idea as such could lead to substantial liability.  Always apply intelligence to any rule you follow.       

For one thing, the Texas case is only the law in the Fifth Circuit, at least for now.  It was decided in a jurisdiction that covers Texas, Louisiana, and Mississippi.   Accordingly, the decision is not binding on New England states.  Until there is a similar decision by the First or Second Circuit which together cover New Hampshire, Massachusetts, Maine, Vermont, Connecticut and Rhode Island, employers operating in these states should continue to comply with the EEOC Guidance to secure its best chance of avoiding a Title VII disparate impact claim of this type. 

The Fifth Circuit case also only addressed the narrow issue of whether an employer’s use of criminal histories in hiring violates Title VII.  There are other state and Federal statutes that an employer could violate when relying on criminal histories to make hiring decisions. 

For example, many states like Massachusetts have “ban the box” laws which prohibit employers from asking applicants[1] about their criminal histories including arrests or convictions.   Other states like New York, expressly prohibit denying employment based solely an individual’s’ previous conviction(s).  New York employers must go through an individualized assessment to weigh multiple specific factors before denying employment because of an individual’s criminal background. 

In 2019, New Hampshire moved closer to passing a “ban the box” although it has not yet become law.  Nevertheless, current New Hampshire law specifies what an employer is allowed ask an applicant.  In an application, a New Hampshire employer may only ask “have you ever been arrested for or convicted of a crime that has not be annulled by the court?”

There are also Federal laws like the Federal Fair Credit Report Act (“FCRA”) that address what an employer can do in terms of asking about applicant’s criminal history.  This FCRA provides for specific procedures that an employer must follow before obtaining a criminal background check from a third-party (like a credit agency) or relying on the report to make an adverse employment decision. 

The point here is that employers must understand all of these laws, not just Title VII, when deciding if and how to lawfully use criminal background information in the hiring process.  When considering whether and to what extent you will rely on criminal histories in making hiring decisions in a way that does not run afoul of the law, consider these practice tips: 

·        Avoid automatic hiring bans based solely on an applicant’s criminal conviction(s).

·        Omit from your applications a question about someone’s criminal history. 

·        Wait until after making a conditional offer of employment to ask about an individual’s criminal background, if at all. 

·        Assess each applicant on an individualized basis to determine whether there is a direct relationship between his/her previous criminal offenses and the specific position sought, and whether there exists an unreasonable risk to the safety of property, other employees or the public, in hiring this person given his/her past criminal convictions.  The specific duties of the job, the timing of the criminal conviction, the age of the person when convicted, the number and seriousness of the offenses are just some of the factors that an employer may wish to consider in making this assessment.

·        Uniformly conduct criminal record inquiries, if you decide to use them.  This means you must make sure you ask all prospective employees of the same position about their criminal conviction(s); NEVER selectively ask about conviction histories of only certain individuals because they “look like” they may have a criminal record.

·        Allow the applicant to explain the circumstances of his/her conviction(s) and to correct what may be an inaccurate criminal record, before deciding whether or not to hire the individual. 

·        Seek help from legal counsel to understand the risk of liability and balance these risks against the business interest in hiring a person with a criminal past.   



[1] In Massachusetts, employers must wait until later in the hiring process (i.e. at an interview or after a conditional offer of employment) to ask about or obtain information about an applicant’s criminal past, and must comply with specific notice requirements for obtaining a criminal record or acting on it in making a hiring decision.  

The Last Domino Falls in the Domino’s Website Accessibility Case

posted Nov 8, 2019, 2:50 PM by Christopher Vrountas

When the Supreme Court last month denied Domino’s petition to review the Ninth Circuit’s decision that allowed a website accessibility case to proceed against the pizza chain, it continued a split among the circuits. While all courts agree that Title III imposes accessibility obligations to websites connected to “brick and mortar” businesses, circuits have divided over whether Title III extends to companies that do business only “online”.  That divide remains.

The Ninth Circuit held that Title III refers to “places of public accommodation” and therefore only websites that have a “nexus” to a physical, public accommodation must comply with the accessibility requirement of the statute.  Under this approach, a public accommodation must make its website accessible to the disabled (typically, the visually impaired) to the extent such accessibility would be necessary to provide equal access to the goods or services of the physical place of public accommodation for those with disabilities. For now, that decision stands and the split amongst the circuits as to which approach to follow remains.   

While interesting, it would seem that resolving this split would not have helped Domino’s cause in any event, as its website was indeed found to have had a “nexus” to the services provided by a place of public accommodation.  Rather, it appears Domino’s highlighted the split as a reason to argue that perhaps the entire idea of applying Title III to websites at all should be reconsidered.  Indeed, the Washington Legal Foundation argued in its amicus brief that essentially all the circuits are wrong and that the Americans With Disabilities Act of 1990 simply did not cover or even anticipate websites as it was enacted before the Internet. This is not an entirely unfair argument, as Title III is clearly focused on physical barriers that must be removed for the disabled, and gaps in statutory law that might arise from  changing technology should not be filled by the judiciary but by the legislature which can readily act to implement policy in response to changing times. 

Domino’s argument failed.  Not only do all the circuits see the ADA governing websites at least to some extent, the Department of Justice also “has repeatedly affirmed the application of [T]itle III to Web sites of public accommodations.”  Really, how is the website any different from a front door if it similarly serves as the gateway to the products and services of a place of public accommodation? Neither the Ninth Circuit nor the Supreme Court was willing to go there. At least not yet.

Next, Domino’s argued that the language of Title III on its own is too vague to be followed or enforced and, as such, needs implementing regulations to establish a specific standard propounded by the Department of Justice in order to give notice of what technically must be done to comply with the law.  Domino’s argued that because the Department of Justice had failed to adopt specific technical guidelines as to how to do comply, there exists a continuing failure of notice that would amount to a denial of due process for those subject to the law.    

This also was not an unfair argument.  In an area of technical complexity and multiple potential methods to resolve an issue, it would seem fair to expect a specific standard to allow businesses to know what it must do to comply with the law and avoid substantial liability.  Indeed, a rule without enough specificity sufficient for someone to conform one’s behavior to it would seem to be the very antithesis of law.

Notably, in the absence of a regulatory standard, many including the Department of Transportation have referred to private industry standards to guide their compliance efforts. The most notable of these is what is known as WCAG 2.0.  The DOT requires airline websites to adopt these standards and the DOJ has imposed these standards on other private entities as part of some of the consent decrees it has entered.  WCAG 2.0 does not have the force of law, however, although it does serve as at least evidence of an industry standard for compliance.

In the end, the Ninth Circuit disagreed with Domino’s undue vagueness argument.  In short, the Ninth Circuit held that Title III’s provisions are clear enough to be followed and enforced notwithstanding the DOJ’s failure to adopt specific technical guidelines as to how to do so.  From the court’s perspective, Title III’s command to require accessibility so that the disabled may enjoy equal access to the products and services of places of public accommodation provides sufficient notice of the goal that must be achieved. As the court explained, since the goal is clear, “it is of no matter that the ADA and the DOJ fail to describe exactly how any given website must be made accessible to people with visual impairments . . . This flexibility is a feature, not a bug, and certainly not a violation of due process.”  

The Supreme Court did not take the bait. By rejecting Domino’s petition, the Ninth Circuit’s decision remains law, at least in the Ninth Circuit.

Indeed, courts have been dealing with this sort of ambiguity for centuries in negligence cases brought in tort.  What would the reasonable and prudent person do in any given situation? Ask a jury. The same can be said for whether a website as designed adequately allows the disabled equal access to the products and services of the place of public accommodation. Does the website do the job? Ask a jury.   

Finally, Domino’s argued under the “primary jurisdiction doctrine” that even if there is no undue vagueness the court should nevertheless stay its hand until the DOJ eventually issues its regulations, as the DOJ has said it would eventually do over several years.  Briefly, the Ninth Circuit was not convinced the DOJ was any better qualified to resolve accessibility issues than the courts and it was unwilling to force the plaintiff to wait for a remedy while the DOJ continued to delay action on propounding regulations.

So, there we have it. The Ninth Circuit’s opinion stands, the circuits remain split as to what websites must comply and the specific standard for compliance is unknown. Do not expect the DOJ to act soon, as its delay has served to delay extensive standards suggested by the predecessor administration.  Rather, expect further, opportunistic litigation.  Meanwhile, watch your website, as it could lead to liability. 

Vrountas Selected as SuperLawyer®

posted Oct 23, 2019, 1:26 PM by Allison Ayer

Congratulations to our partner, Christopher T. Vrountas, for being selected for the fourth year in a row as a SuperLawyer® in the area of Labor & Employment, in the 2019 edition of the New England SuperLawyers® Magazine.  A full description of Chris’s law practice and a list of the multiple jurisdictions of admissions, can be accessed at his SuperLawyers® profile.   

U.S. DOL Proposes Final Rule for Tip Credit and Tip Pooling

posted Oct 16, 2019, 10:00 AM by Allison Ayer

The United States Department of Labor has taken the next step to change the law concerning the tip credit, an important matter for restaurant and other hospitality businesses.   Here is the latest: 

On October 7, 2019, the DOL also took the next step to implement new rules concerning when employers with tipped employees can pay these service employees the FLSA tip credit wage.  The proposed Final Rule essentially incorporates what the DOL has proposed recently in prior guidance and opinion letters about the limitations of the tip credit. 

Tip Credit Wage - Briefly, the proposed Final Rule eliminates the longstanding 20% Rule for assessing when the tip credit wage can be taken, and replaces it with a rule that an employer may take a tip credit on ANY AMOUNT OF TIME an employee in a tipped occupation performs non-tipped duties, SO LONG AS they are related to and performed contemporaneously with the tipped duties, and they are performed for a reasonable time immediately before or after performing the tipped duties. 

The proposed Final Rule further clarifies when a non-tipped duty is related to a tip-producing duty (and therefore eligible for pay at the tip-credit wage).  Under the proposed Final Rule, a non-tipped duty is related to a tip-producing duty (and can therefore be paid at the tip-credit wage) if it is either listed in the dual jobs regulations OR if it is listed as a task of a tip-producing occupation in the Occupational Information Network (“O*NET”).  Those tasks include, among others: 

·        Removing dishes and glasses from tables or counters and take them to kitchen for cleaning. 

·        Cleaning tables or counters after patrons have finished dining. 

·        Preparing tables for meals, including setting up items such as linens, silverware, and glassware. 

·        Assisting the host or hostess by answering phones to take reservations or to-go orders, and by greeting, seating, and thanking guests. 

·        Performing cleaning duties, such as sweeping and mopping floors, vacuuming carpet, tidying up server station, taking out trash, or checking and cleaning bathroom. 

·        Preparing hot, cold, and mixed drinks for patrons, and chill bottles of wine. 

·        Rolling silverware, setting up food stations, or setting up dining areas to prepare for the next shift or for large parties. 

·        Stocking service areas with supplies such as coffee, food, tableware, and linens. 

·        Filling salt, pepper, sugar, cream, condiment, and napkin containers. 

·        Performing food preparation duties such as preparing salads, appetizers, and cold dishes, portioning desserts, and brewing coffee; and

·        Providing guests with information about local areas, including giving directions. 

 

This means that an employer may take a tip credit for any amount of time a server who is a tipped employee spends performing these newly defined “tip-related” duties.  If the duties are outside this list, they must be paid at the full minimum wage, unless the time spent in the task is de minimis

Under the proposed Final Rule, employers remain prohibited from keeping tips received by their employees, regardless of whether the employer takes a tip credit under the Fair Labor Standards Act.

Tip Pools.  The Final Rule also addresses tip pools. It prohibits managers and supervisors from keeping any portion of employee tips, including from a tip pool.  The duties test under the executive employee exemption for overtime is used to determine whether an employee is a manager or supervisor who may not keep employee tips.  An employee who owns 20% equity in the business and who is actively engaged in management is also considered a manager/supervisor who cannot share in tips.   

The proposed Final Rule further clarifies that an employer may exert control over an employee’s tips only in the following ways:  1) to distribute tips to the employees who received them (e.g. cashing out credit card tips at the end of a ship), 2) to institute a mandatory tip pool that complies with FLSA regulations, and 3) facilitate a tip pool by distributing tips to employees in the pool. 

Lastly, the Final Rule also permits employers that do NOT take an FLSA tip credit to include a broader group of workers, including back-of-the-house employees like cooks or dishwashers.  But this is only allowed if none of the employees are paid the lower tip-credit wage, i.e. they are all paid at least full minimum wage.  Even under the proposed Final Rule, back-of-the-house employees CANNOT participate in a mandatory tip pool with service workers who are paid the lower, tip credit hourly wage.  Tip credit employees CANNOT be part of a tip pool with employees who are paid full minimum wage.   

The issuance of the proposed Final Rule generally is good news for restaurant and hospitality businesses.  It is highly likely to become the law of the land after the expiration of the 60-day comment period, and will once and for all settle the legal standard for paying employees at the tip credit wage that has been up in the air for quite some time. 

With that said, as always, restaurants should be aware that they must also comply with the state’s minimum wage statutes and regulations, including the rules concerning the tip credit.  In New Hampshire, for example, mandatory tip pools are not permitted.  Tipped service employees are only allowed to pool tips if it is voluntary.  

Businesses should always raise their questions or concerns with their legal counsel about paying employee wages in compliance with applicable state and federal law.  

U.S. DOL Increases Salary Requirements for Exemption from Overtime

posted Oct 16, 2019, 9:56 AM by Allison Ayer

As noted in a prior post, employers should be aware that in late September, the DOL published a Final Rule that expands overtime coverage to over a million workers in America, or alternatively will result in those workers getting a pay raise. As expected, the Final Rule increases the salary that employers must pay certain workers in order for them to be exempt from receiving overtime. 

First, the Final Rule raises the salary level for employees exempt under the duties-based exemption to overtime (e.g. the administrative, executive, professional, and outside sales exemptions).  Employees exempt from overtime on this basis must still be paid on a salary basis and must still meet the job duties test.  But, going forward, they must earn at least $35,568 per year, an increase from $23,600, in order to qualify for the professional, administrative, executive, and outside sales exemptions to the overtime rule.  This means that if an employee is salaried under one of these exemptions, but earns less than $35,568 per year, the employee will need to paid overtime at the rate of at least 1.5 times the regular rate of pay for all hours worked over 40, or have his or her salary increased to the new minimum salary of $35,568 to still qualify for the overtime exemption. 

In addition, the DOL’s Final Rule increased the annual compensation level for “highly compensated employees,” individuals who may not meet the “duties” test to qualify for an exemption, but make so much money that the DOL allows them to be salaried anyway, from $100,000 per year to $107,432 per year.

Finally, employers will be allowed to use nondiscretionary bonuses, incentive payments, and commissions to satisfy up to ten percent of the salary test to determine whether employees must be paid hourly or based on salary.

What does this new rule mean for employers?  

Employers will need to assess if they have any salaried workers exempted based on their duties who make less than $35,568/year.  For employees exempt not pursuant to their duties, but simply because they are highly compensated, employers will have to assess if those employees make less than $107,432 per year.  In either case, employers are going to have to bump up those employees’ salaries to meet the new yearly salary applicable to their exemption, or change the employee to hourly pay as of January 1, 2020.


Walmart Ordered To Pay $5.2 Million For Failing To Provide A Job Coach To Its Deaf, Visually Impaired Cart Pusher With a Developmental Disability.

posted Oct 16, 2019, 9:01 AM by Christopher Vrountas

Just last week, a jury in Wisconsin ordered Walmart to pay $5.2 Million to a former employee for disability discrimination based on the company’s decision to stop providing a job coach for one of its store employees.  It was a stunning decision that should give employers pause. 

The EEOC brought the action against Walmart on behalf of an employee with an alleged developmental disability and who is also deaf and visually impaired.  The employee had been a cart pusher for 16 years at the Walmart store in Beloit, Wisconsin. When a new manager started at the store, he suspended the employee and demanded new medical paperwork to continue with the accommodations that had been provided to the employee.  These accommodations included the assistance from a “job coach” which had been provided by public funding.  According to the EEOC, when the employee complied the store  essentially terminated his employment.  After a 3½-day trial, the jury found in favor of the EEOC and awarded the employee $200,000 in compensatory damages and an additional $5 million in punitive damages.

DON’T BE DISMISSIVE.

The employer paid a stiff price here.  What went wrong? Notably, the new manager insisted on making a change when there allegedly had been “no change in circumstances”.  Sudden changes without explanation, especially when they come upon the introduction of new management, can raise substantial suspicion and, as here, could result in massive liability. Presumably, the change did not result from any complaint or operational issue, or from a need to cut costs or streamline operations, or some other legitimate business concern.  Mere irritation over what may appear to be a cumbersome accommodation, without more, just does not constitute an “undue burden” sufficient to deny a reasonable accommodation. 

LOOK BEFORE YOU LEAP.

That said, just because the provision of a “job coach” in this case was found to be a reasonable accommodation does not mean it would be so in all circumstances.  The employer should be very careful before agreeing to this sort of accommodation ,as third party job coaches could present a substantial increased burden and risk that the employer should balance when considering whether an accommodation might be reasonable or whether it would constitute an undue burden.  

ENGAGE IN THE INTERACTIVE PROCESS.

Before making any agreement with respect to this type of accommodation, the employer must have a very concrete understanding of why the employee “needs” the job coach and whether such accommodation is “reasonable” given the employee’s job description.  This information must come from the “interactive process”.  The employer (i.e., human resources or senior management if no HR) may ask the employee for direct access to the employee’s treating physician or the employer may work directly with the employee, but the employer is entitled either way to a verifiable understanding of the employee’s limitations.  That does not mean “diagnosis” or “prognosis” or other medical details.  Just an understanding of what the employee can or cannot do and that such abilities and disabilities are verified by the medical professional as stemming from a “disability” as such is defined under the statute. 

As part of this process, the employer typically provides a job description to the doctor who reviews it and says what the employee can or cannot do and what accommodation would be necessary to enable to the employee to do each of the essential functions of the job.  With that response, the employer and employee can have a conversation about what would be “reasonable” and what might be an “undue burden”.  For example, a temporary accommodation to get someone on their own two feet may allow for a somewhat more onerous, short term, accommodation which would otherwise be unduly burdensome if it were to last a long time or indefinitely.  But you cannot make these assessments without a comprehensive interactive discussion process with the employee and/or his or her medical provider.  

BALANCE THE RISKS TO DETERMINE WHETHER THERE REALLY IS AN UNDUE BURDEN.

Remember, the employer risks turning that job coach into an employee if the employer “suffers any work” by the job coach.  In short, the job coach cannot do any work for the employer (including not doing any part of the employee’s job) without creating the risk that an employment relationship may arise between the job coach and the employer.  It is almost never a reasonable accommodation to have to hire a second person to do a one-person job.  The employer needs to know that it will not be responsible for paying the job coach or fulfilling any other wage and hour obligations for the job coach including, for example, minimum wage and overtime pay, tracking hours or providing insurance coverages.  This can be clarified in a writing agreed to between the employer and the job coach and/or the third-party entity that provides the job coach.    

Second, the presence of a job coach in the workplace presents third-party liability risk for the employer as well.  This could arise from alleged personal injury at the worksite, violations of Title VII, and other liability issues arising from the presence of a job coach.  These risks should be addressed in a written understanding between the employer and the job coach and/or the entity that provides the coach, including how these risks will be insured.  

For example, what happens if the coach is injured on the job?  Does he or she have workers compensation coverage? Who pays for it? Will the job coach sue you for on the job injuries or for other liability? Does the job coach have any insurance coverage for these other risks?  Will the job coach or the entity that provides the job coach indemnify the employer for these risks? 

Similarly, what if the job coach is sexually harassed or commits sexual harassment?  The employer would likely be responsible for the job coach’s misconduct because inviting that coach into the workplace affects the work environment for which the employer is responsible.  Has the job coach been vetted?  Will the job coach be insured for these risks and will the job coach and/or the entity that supplies the job coach indemnify the employer for these risks?  And, if the job coach is the target of sexual harassment, will the employer have liability under Title VII or other theory?  The areas of responsibility need to be clearly drawn in advance. 

IF DOING GOOD WORKS RATHER THAN BUSINESS, BE CLEAR

It is possible that the Walmart story began when a predecessor manager from 16 years ago provided a position and allowed the presence of a job coach as part of an effort to give a helping hand to the community and to “help out” and “do good” rather than to employ necessary labor.  Conceivably, in this context, when the next manager wants to end the charity works, the plaintiff can turn the story around and argue that the arrangement was an employment accommodation for a disability and that he was entitled for it to continue.  While the ADA does not require acts of charity, failure to clarify the nature and intent of certain relationships could allow a latter day plaintiff to spin charity into a legal obligation as the lack of documentation clarifying the parties’ intent could allow for many alternative versions of history.   

The answer is not to always reject job coaches but to consider them objectively and from a business perspective rather than from a charitable perspective.  The parties should always communicate clearly and comprehensive so that the need is clear, the essential job duties are clear, and the accommodation is specifically tailored to fill the need in order for the employee to meet the duties.  At the end of the day, the employee must be able to perform all the essential functions of the job either with or without a reasonable accommodation.  Having someone else do the employee’s job is typically not a reasonable accommodation and it would likely would constitute an undue burden.  The parties understanding of any accommodation, including if such were to include the provision of a job coach, should be clear from the beginning to avoid turning the job coach into a second employee and to protect the employer from further undue burden. 

PROCEED WITH CAUTION IN GOOD FAITH.

If the employee cannot do all the essential functions of the job with or without a reasonable accommodation, the employer ultimately is entitled to terminate employment.  But you not get to that point with a good faith interactive process.  Proceed with deliberate caution. 

Ninth Circuit Holds McDonald’s Not Liable for Wage and Hour Violations of its Franchisee because It Did not control Franchisee’s Employees.

posted Oct 4, 2019, 5:35 AM by Christopher Vrountas

On October 1, 2019. the 9th Circuit affirmed summary judgment in favor of McDonald’s, the franchisor, stating that the company did not control the franchisee enough to be liable for the wage and hour claims brought by the franchisee’s employees.  While it is under California law, it is significant as the concepts are similar.  See Guadalupe Salazar, et. al. v. McDonald’s Corp., et. al.

Simply put, even though the franchisee used (on a voluntary basis) the franchisor’s suggested HR computer system, and even though the computer system caused a number of wage and hour violations, and even thought McDonald’s exercised quality control and brand control over the franchisee, including uniform requirements, the 9th Circuit agreed with the District Court that these facts were not enough to hold McDonald’s, as the franchisor, liable for the wage and hour violations of its franchisee.  The Court relied heavily on the fact that the franchisee selected, interviewed, and hired its own employees, that it trained its own employees, that it set wages for its own employees and paid them from its own bank account, that it supervised, set schedules and monitored the time entries of its employees, and that it disciplined and fired its own employees.  Given all that, the Court found McDonald’s did not sufficiently control the franchisee to become an “employer” or a “joint employer” under the California Labor Code. 

Notably, the Court came to this conclusion notwithstanding McDonald’s significant involvement in quality control, branding and even in training to the extent permitted by the franchisee, and the Court rejected the theory that the franchisor should be liable merely because it “could have” stopped the wage and hour violation.  In the end, the opinion and the result came down to the right, or lack thereof, of the franchisor to control the franchisee’s employees in their daily work.

So, even though it comes from California law, it should serve as a good general road map on how franchisors can avoid becoming liable for the wage and hour violations of their franchisees.  Of course, federal law and the laws of the various states where one does business will ultimately control, but again, this approach would be worth considering when developing guidelines for dealing with franchisees in any organization.

 

DOL Issues Final Rule to Increase the Salary Basis Test for determining Exempt Status

posted Oct 3, 2019, 6:41 PM by Christopher Vrountas

On September 24, 2019, the United States Department of Labor announced its Final Rule to change the salary basis test, which is an integral test used by the DOL to determine whether certain employees shall be considered “exempt” from the protections of the Fair Labor Standards Act concerning minimum wage and overtime pay. 

Briefly, in order for an employee to be considered “exempt” from the protections of the FLSA, that employee must now receive an annual salary of no less than $35,568, or $684 weekly (up from $455 weekly). Only employees working certain kinds of jobs can be considered for exempt status, regardless of salary, including such workers who are primarily executives, professionals, administrators, outside sales people, and others whose jobs primarily involve defined “exempt duties”.  

That said, there is a hybrid exemption that allows employers to treat a “highly compensated employee” as exempt from the protections of the FLSA so long as such employee has at least some “exempt” duties and is paid at a certain benchmark.  The new Final Rule increases this benchmark to a salary level af at least $107,432 annually (up from $100,000 annually). 

There are other changes too which you can see in the DOL’s announcement.  While these changes are significant, they represent essentially half the increases the Obama Administration sought approximately 3 years ago.  These regulations take effect January 1, 2020.

You Can Swipe Right for Cooks and Other Help Now, But Will They Be There in the Morning?

posted Sep 9, 2019, 9:04 AM by Christopher Vrountas

Another Labor Day has passed, but don’t let new developments in the market for labor pass you by without notice. The New York Times recently reported that apps such as Pared and Instawork are the latest inroads the gig economy has made into the restaurant industry. Briefly, these apps are helping restaurants fill gaps in their workforce during the current labor shortage, and they are apparently helping workers such as servers, cooks and other kitchen help find more opportunities beyond the single job for any one restaurant. Think Uber for restaurant labor.

Both these apps were founded in San Francisco in 2015 and workers have since then boasted of higher salaries and greater opportunities while restaurants have expressed relief that their labor needs can be met flexibly and on a real time basis. Pared reportedly has 100,000 people signed up on its platform while Instawork reportedly has nearly 500,000 people. Pared is now in the San Francisco Bay Area and New York, and it plans to expand to Boston, Philadelphia and Washington, D.C. soon. Instagram operates in several U.S. markets including San Francisco, Chicago, Los Angeles, San Diego, Phoenix and is also growing.

While much potential exists with these apps, everybody should check the fine print. From a legal perspective, these apps present important questions, among other things, about who serves as the worker’s employer. You want to be sure that the worker is being correctly treated for tax and worker compensation purposes as well as for all the other employee-based workers’s rights and safety net laws that protect employees in the workplace. And, you want to be clear who has the duty to ensure these obligations are being met.

From a relationship perspective, these apps may undermine loyalty on both sides as employers may not invest in employee training and development as much as otherwise and workers may not invest time to get to know any particular business or to grow with any particular organization or clientele.
While needs do need to be met in the short term, the quick fix should not distract either restaurants or the labor force from the long term benefits of commitment to a business or organization. Relationships are the basis of all business and the success of any organization, and swiping right alone does not a relationship make.

Here’s a link to the article in the New York Times —> 

https://www.nytimes.com/2019/09/01/business/restaurant-jobs-apps.html





New Hampshire Passes New Law Concerning Youth Employment and EEOC Pay Data Is Due Soon

posted Aug 26, 2019, 12:10 PM by Allison Ayer

There have been some recent developments in state and federal law that may affect employers in New Hampshire set forth below:   

               New Hampshire Amends Youth Night Work Statute

Employers in New Hampshire should be aware that the legislature just recently passed amendments to the laws concerning youth night work.  Effective July 14, 2019, the new R.S.A. 276:13 provides that any youth that is part of an employer’s workforce who works more than twice during a week past 8 p.m. or before 6 a.m. cannot work more than 8 hours in any shift during that particular week.  According to the NH DOL, this new law pertains to youth 16 or 17 years old.  The law is more restrictive for younger workers.  Under RSA 276-A: 4, IV, no youth under 16 years of age shall work earlier than 7 o'clock a.m. or later than 9 o'clock p.m.

Be aware that the new statute is different from the old R.S.A. 276-A:13, which has been repealed.  The old law merely prohibited youths from being “permitted to work at night…more than 8 hours in any 24 hours nor more than 48 hours during the week” and defined “night work” for youths as being “permitted to work more than 2 nights each week, for any time between the hours of 8 o'clock p.m. and 6 o'clock a.m. of the day following.”    

Given the new law, New Hampshire employers should take a close look at their scheduling practices and make sure that any youth employee who works more than 2 times in a week does not get scheduled or does not work any shift longer than 8 hours during that same week.  To put it simply, all shifts worked must be 8 hours or less in any week in which the youth employee works more than 2 times between the hours of 8 p.m. and 6 a.m. 

Employers should keep in mind that, for purposes of determining compliance with this law, the workweek generally is not the employer’s designated workweek but rather the 7-day period running Sunday through Saturday (unless otherwise noted in the statute).  See RSA 276-A:4,VI.  For more information, employers can visit the DOL website announcing the new amendment.  

Don’t miss the September 30 Deadline to Submit Pay Data to the EEOC


Employers with 100 or more employees should also be aware that, as a result of a Federal Court ruling this past Spring, they must submit to the Equal Employment Opportunity Commission their pay information about employees (sometimes referred to as Component 2 data), by race, ethnicity and sex, by September 30, 2019. 

 

This requirement has been the subject of contention as the current administration has tried, so far in vain, to turn back the actions of the prior administration in this area.  As the fight continues in court, the deadline stands.  Whether the requirement changes again in the future remains to be seen. 

 

For those who are interested, here’s the back story:  Originally, large and mid-size employers were required to submit information about the number of employees in each job category by race, ethnicity and sex (Component 1 data) to the EEOC by May 31.  This reporting requirements expanded to include hours worked and pay information (Component 2 data), and the deadline was extended accordingly.  The Obama administration’s revision to the EEO-1 form requires employers to report wage information from Box 1 of the W-2 form and total hours worked for all employees by race, ethnicity and sex within 12 proposed pay bands.  But it was the addition of this Component 2 data that became the subject of legal battles, that until recently left ambiguous when and if employers would be required to comply with these Obama-era revisions.

 

The fight started when the EEOC under the Trump administration stayed these pay-data provisions in 2017.  The National Women’s Law Center challenged the Trump EEOC’s suspension of the pay-data collection provisions and on March 4, 2019, a federal judge lifted the EEOC’s stay, effectively ruling that the EEOC must start collecting the Component 2 information. See National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).   On May 3, 2019, the Department of Justice filed a Notice of Appeal in the above case.  But the EEOC further notes that the filing of “this Notice of Appeal does not stay the district court orders or alter EEO-1 filers' obligations to submit Component 2 data.” 

 

Thus, as of now, according to the EEOC’s website, EEO-1 filers should submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, as Ordered by the court's recent decision in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).  The URL for the portal set up by the EEOC to submit this information can be found at:  https://eeoccomp2.norc.org.   

  

   

 

 

 

 

 

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