Category Archives: Colorado

December 28, 2017

Colorado Minimum Wage Goes Up To $10.20 Per Hour On January 1

Minimum wage employees in Colorado will get a raise in the new year. The state minimum wage goes up by ninety cents per hour, from the current $9.30 to $10.20, beginning January 1, 2018.

Annual Increases Approved By Voters In 2016

The upcoming minimum wage increase is the result of a ballot effort last year to increase Colorado’s minimum wage to $12 per hour by 2020. In the November 2016 election, Colorado voters approved Amendment 70 which raises the state’s hourly minimum wage by 90 cents per hour each year, as follows:

$10.20 effective 1/1/18
$11.10 effective 1/1/19
$12.00 effective 1/1/20

After 2020, annual cost-of-living increases will be made to the mandatory minimum wage.

Tipped Employees

Under Colorado law, employers may take a tip credit of $3.02 off the full minimum wage for employees who regularly receive tips. Consequently, the minimum wage that must be paid to tipped workers will go up by 90 cents on January 1, 2018 as well. The applicable minimum wage for tipped workers for upcoming years is as follows:

$7.18 effective 1/1/18
$8.08 effective 1/1/19
$8.98 effective 1/1/20

Remember that if tips combined with wages does not equal the state minimum wage, the employer must make up the difference in cash wages.

Take steps now to ensure that your payroll system is ready to comply with the increased minimum wage beginning January 1.

November 20, 2017

Draw Against Commissions: Keeping FLSA Minimum Wage and Overtime Violations At Bay

By Mark Wiletsky

Paying sales employees on a commission basis can achieve multiple goals. Salespersons have an incentive to increase sales to earn more money while the company sees higher revenues without being locked into a guaranteed pay structure for underperforming employees.

Although various types of commission structures may be used, a common one is a draw against commission. Typically, this type of pay structure means that a sales employee is paid solely on the basis of commissions, but may be advanced a certain amount of money known as a “draw” for weeks in which the employee fails to earn a certain level of commissions. Then, the draw is deducted from future commissions when the employee’s commissions exceed the expected level. It sounds easy, but such arrangements can be fraught with FLSA traps.

Illustrative Case

The Sixth Circuit Court of Appeals (whose decisions apply to Michigan, Ohio, Kentucky, and Tennessee) recently examined an employer’s draw-against-commissions policy to determine whether the policy violated the minimum wage and overtime requirements of the FLSA. In that case, current and former retail and sales employees of hhgregg, Inc. and Gregg Appliances filed a lawsuit claiming that hhgregg’s commission policy violated the FLSA and state law in numerous ways. Here is a summary of the policy at issue:

In pay periods when an employee’s earned commissions fell below the minimum wage, the employee would be paid a draw to meet the minimum-wage requirement
In a non-overtime week (i.e., the employee worked 40 or fewer hours), the draw equaled the difference between the minimum wage for each hour worked and the amount of commissions actually earned
In an overtime week (i.e., the employee worked more than 40 hours), the draw equaled the difference between one and one-half times the minimum wage for each hour worked and the amount of commissions actually earned
Draw payments were calculated on a weekly basis
The amount of the draw would be deducted from commissions earned in future weeks
An employee could be subject to discipline, including termination, if he or she received frequent draws or accumulated a high draw balance
Upon termination of employment, an employee with a draw balance was required to immediately pay the company any deficit.

Retail and Service Establishment Exemption

The FLSA exempts retail or service employees from the overtime pay requirement but only if (1) “the regular rate of pay of such employee is in excess of one and one-half times the minimum hourly rate applicable” under the FLSA, and (2) “more than half his compensation . . . represents commissions on goods or services.” This exemption does not relieve employers from meeting minimum wage obligations.

In the hhgregg case, the employer argued that the exemption applied. The Sixth Circuit disagreed, pointing to the allegation that the commission policy paid exactly the minimum hourly rate in a normal, nonovertime week, thereby failing to meet the exemption requirement that it be “in excess of one and one-half times the minimum hourly rate.” Because the exemption didn’t apply, hhgregg could not escape overtime pay obligations.

Deductions of Draws From Future Earnings Was Not An Illegal “Kick Back”

Under the FLSA, when an employee earns less in commissions than was advanced through a draw, the employer may deduct the excess amount from later commissions, if otherwise lawful. In the hhgregg case, the plaintiffs argued that the deductions were not “otherwise lawful” because the draws to meet the minimum wage were not delivered “free and clear,” as is required by DOL regulation. Plaintiffs argued that the draws were loans that the sales persons were expected to repay, functioning as an unlawful “kick back.”

The Sixth Circuit rejected the plaintiffs’ argument, finding that because the employees could keep the full amount of the draw at the time it was “delivered,” it was not an unlawful “kick back.” Thus, deducting the draw payments from future commissions did not violate the “free and clear” regulation.

Immediate Repayment Upon Termination

Plaintiffs alleged that making employees immediately pay the company any deficit in draws upon termination of employment violated the FLSA. On that claim, the Sixth Circuit agreed, at least to the extent of allowing the lawsuit to proceed. The Court looked to hhgregg’s written commission policy to find that the sales employees could reasonably believe that they would be liable to hhgregg for any unearned draw payments at the time of termination. Because that provision could violate the DOL regulation that minimum wage be provided “free and clear,” the Court held that plaintiffs alleged sufficient facts in their complaint to support their claim that the policy violated the FLSA.

Off-The-Clock Work

Plaintiffs further alleged that the company encouraged sales employees to attend required training and store meetings “off the clock” in violation of minimum wage and overtime requirements. Specifically, plaintiffs alleged that hhgregg managers approved of and sometimes encouraged sales persons to work “off the clock” to avoid incurring a higher draw.

hhgregg argued that any practice of off-the-clock work would not violate the FLSA because “by allegedly under-reporting working time in draw weeks and thereby lessening their draw payments, [plaintiffs] increased the amount of commission pay they subsequently received by the same amount.” Therefore, “the ‘off-the-clock’ work allegedly performed did not deprive them of pay; it simply shifted it to a different week.”

The Court rejected the company’s argument. Because the FLSA requires employers to pay the minimum wage for all hours worked on a week-by-week basis, an employer may not “shift” pay for hours worked to a future week. Therefore, the Court ruled that plaintiffs’ claim could continue.

Review Your Commission Policy

This recent draw-against-commission case highlights the FLSA issues that employers may face when implementing commission policies. If you use commission payments for any segment of your workforce, we recommend that you review your policy to confirm that it pays employees for all hours worked (e.g., no “off-the-clock” time). In addition, if you offer a draw against commissions, make certain that it meets your minimum wage and overtime pay obligations. Finally, if you rely on an FLSA exemption, such as the exemption for retail and service establishments, compare your commission policy to the exemption to ensure you meet the exemption test. Because this is a tricky area, consult with experienced counsel to resolve any questions or compliance concerns.

October 12, 2017

Top Five Ongoing Challenges For Collective Bargaining and Organizing

By Steve Gutierrez

Most expect that the White House and federal agencies will take a more business-friendly approach than in recent years. Employers hope that will mean they can now look forward to a potential rollback of regulations and enforcement efforts that have stymied their business objectives. Yet when it comes to responding to union organizing campaigns and negotiating collective bargaining agreements, employers still face wide-ranging challenges. Here is my list of the top five ongoing challenges.

1. Affordable Care Act (ACA) Cadillac Tax

Many unions, such as the Teamsters, prioritize and bargain extensively over top quality, employer-paid health insurance. They often use it as a selling point to their members. Yet, the ACA’s 40 percent excise tax on workers with comprehensive insurance plans (the so-called “Cadillac tax”), set to be implemented in 2020, is seen by the unions as an affront to their hard-fought bargaining to obtain high quality health care for their membership.

In fact, reports show that unions, including the Teamsters, have actively lobbied members of Congress for a repeal of the Cadillac tax. Because health care reform has not yet passed, it may be unlikely that relief from the Cadillac tax is forthcoming anytime soon.

This opens the door for alternate bargaining tactics over health care plans and benefits. Economics can be based on the ultimate cost to the employees/members, when factoring in the tax. This issue remains a challenge for both employers and the union and can change the overall approach to structuring the economic package during contract negotiations.

2. Micro-units

In 2011, the NLRB issued its Specialty Healthcare decision permitting unions to establish bargaining units that include only a small fraction of a workforce. For example, in 2014, the Board certified a micro-unit of cosmetic and fragrance salespersons working at a Macy’s department store rather than requiring all employees at the store (or even all salespersons at the store) to make up the bargaining unit. The Board authorized the micro-unit by finding that the cosmetics and fragrances salespersons were a readily identifiable group and shared a community of interest. The Board also found that other Macy’s employees did not share an overwhelming community of interest with the cosmetics and fragrances employees, and prior NLRB cases involving the retail industry did not require a wall-to-wall unit.

These micro-units can make union organizing easier as they do not require a majority of the historical “wall-to-wall” bargaining units to vote in favor of the union. For example, a unit of only nine employees needs just five to vote “yes” and the union has its foot in the door with that employer. And organizing on that micro level can more easily go unnoticed by employers. Micro-units can also result in an employer having to negotiate with multiple unions affecting small segments of its workforce, and the headaches involved with administering varying contracts.

Numerous efforts are underway in the current administration to do away with micro-units. Current NLRB Chairman Phillip Miscimarra disagrees with the Specialty Healthcare standard for determining an appropriate bargaining unit, raising chances that the Board will abandon the approval of micro-bargaining units. However, Miscimarra has announced that he will leave the Board when his term expires in December 2017. Despite his impending departure, it is possible that a majority-Republican Board will reverse course on micro-units.

In addition, this past Spring, Senate Republicans introduced (again) the Representation Fairness Restoration Act (S. 801) which would do away with micro-units. That bill has been assigned to the Senate Health, Education, Labor, and Pensions committee where it is one of 250 bills currently being considered by the committee.

Until the law or Board precedent is changed, micro-units remain a challenge for employers. But because a more employer-friendly Board might rule against a micro-unit, it becomes vastly important to challenge proposed bargaining units and any potential outlier unit members. Increased pressure on the Board on this issue should be a continued focus.

3. Transparency with Employees/Members

Unions are becoming quite savvy in communicating with their members and potential members. Union leaders are increasingly focusing on being more transparent with their members during the bargaining process. They continue to build strong communications networks centered on social media and other online platforms, with development of mobile apps and company-specific websites, Facebook pages, and Twitter accounts.

To stay ahead of and counter union communications, employers facing a union organizing campaign or in the midst of negotiating a contract should institute and invest in more robust communication strategies with their employees as well. Social media and other online communications boards are essential in getting the company’s message out, especially to millennials and other employee demographics who will seek their information from such sources. But, be aware that in late 2014, the NLRB ruled that employees may presumptively use a company’s email system for statutorily protected communications as long as it takes place during nonworking time and does not interfere with productivity. That Board decision, Purple Communications, is on appeal in the Ninth Circuit Court of Appeals but remains a challenge for employers until such time it is reversed or overturned.

4. New Technology in the Workplace

As more technology comes into the workplace and robots threaten to replace workers, collective bargaining will likely face these issues head on. Just as outsourcing used to be (and in many cases, still is) a sore spot for unions, workplace automation is a similar threat to jobs and future expansion.

One example involves the Teamsters who recognize that autonomous driving vehicles are becoming a reality. The Teamsters are urging lawmakers to prioritize workers and safety when crafting legislation and rules regarding autonomous vehicles. Their concerns likely spill over into their contract negotiations as well.

As workplace technology accelerates, discussions of the use of such technology will likely become key in any bargaining where robots and automation are a possibility. Anticipating that topic, and the potential impact on workers, opens the door for employers to bargain for potential gains and/or trade-offs in their favor when the union opposes or seeks to limit autonomous technology.

5. Favorability of Unions on the Rise

According to a January 2017 Union Favorability Survey by the Pew Research Center (PRC), 60 percent of respondents viewed labor unions favorably while only 35 percent viewed unions unfavorably. This is the highest union favorability rating compiled by the PRC since March of 2001 and only the second rating at or above 60 percent since 1985.

Employers should be aware of this rising trend, especially when communicating with employees during an organizing or bargaining campaign. Opposing and criticizing unions too strongly could backfire so communications and strategies should be formulated to focus on issues, rather than the institution of unions and union membership itself.

Responding to organizing campaigns and preparing for collective bargaining is always a challenge but thinking ahead about these top five issues, and investing in some preventative training and education for managers, can help you manage the process and achieve a favorable outcome.

October 5, 2017

ADA Does Not Mandate Multi-month Leave of Absence As Accommodation, Says Seventh Circuit Court

By Mark Wiletsky

Rarely do we receive definitive guidance on reasonable accommodations. But the Seventh Circuit Court of Appeals came very close to providing that when it recently ruled that a multi-month leave of absence is beyond the scope of a reasonable accommodation under the Americans with Disabilities Act (ADA).

Back Condition Leads to FMLA Leave

In the recent Seventh Circuit case, Raymond Severson had long suffered from back myelopathy, a condition that caused degenerative changes in his back, neck, and spinal cord and impaired his functioning. Although he usually was able to perform his duties at Heartland Woodcraft, Inc., a fabricator of retail display fixtures, at times Severson experienced flare-ups that made it difficult for him to walk, bend, lift, sit, stand, or work.

Over the course of seven years of employment with Heartland Woodcraft, Severson rose from supervisor to shop superintendent and then to operations manager. The company, however, found that he performed poorly in the operations manager position and on June 5, 2013, notified Severson that it had demoted him to a second-shift lead position, which included performing manual labor in the production area.

That same morning, Severson had wrenched his back at home and he was visibly uncomfortable. He left work early and requested leave under the Family and Medical Leave Act (FMLA). He was granted FMLA leave, and his doctor provided certificates indicated that he had multiple herniated and bulging discs in his back which would make him unable to work until further notice.

Unable To Return To Work Following FMLA Leave

While out on FMLA leave, Severson’s doctor treated him with steroid injections, but they did not improve his condition. Severson scheduled disc decompression surgery for August 27, 2013, the same day that his 12 weeks of FMLA leave would expire.

About two weeks before his surgery, Severson requested an extension of his medical leave, explaining that typical recovery time for his surgery would be at least two months. The company contacted him on August 26, the day before his scheduled surgery, and informed him that his employment with Heartland would terminate on August 27 when his FMLA leave expired. He was told he could reapply for employment after he was medically cleared to work.

On August 27, Severson had his scheduled surgery, and on October 17, his doctor gave him a partial clearance to return to work with a 20-pound lifting restriction. On December 5, Severson’s doctor released him to work without restriction.

Leave As A Reasonable Accommodation

Severson sued the company for an ADA violation alleging that it failed to accommodate his physical disability by refusing to provide a three-month leave of absence following expiration of his FMLA leave. The federal court in Wisconsin rejected the claim as a matter of law, entering summary judgment in favor of Heartland Woodcraft, and Severson appealed.

The Seventh Circuit (whose decisions are binding on federal courts in Illinois, Wisconsin, and Indiana) affirmed judgment in favor of the employer. The Court was very clear in ruling that a long-term medical leave is not a reasonable accommodation under the ADA. Judge Sykes, writing for the three-judge panel, stated, “The ADA is an antidiscrimination statute, not a medical-leave entitlement.” The Court stated that a reasonable accommodation is intended to make it possible for the employee to perform his or her job. But a medical leave that lasts multiple months does not allow the employee to work and that inability to work removes the person from the class of “qualified individuals” protected by the ADA.

The Court stated that brief periods of time off may be an appropriate accommodation in some circumstances. For example, the Court noted that intermittent time off or a short leave of absence may be appropriate for someone with arthritis or lupus when brief periods of inflammation make it too painful for the individual to work. But the Court ruled that a multi-month leave of absence “is beyond the scope of a reasonable accommodation under the ADA.” Read more >>

September 12, 2017

Employer May Keep Tips As Long As Employees Are Paid Minimum Wage, According To 10th Circuit

By Brad Cave

By invalidating a U.S. Department of Labor (DOL) regulation that states that tips are the property of employees, the 10th Circuit Court of Appeals (whose opinions apply to Wyoming, Colorado, Utah, Kansas, Oklahoma, and New Mexico) rejected an employee’s wage claim based on her employer’s practice of keeping all tips. But employers in states with an analogous state law governing ownership of tips, such as Wyoming, need to be aware that the 10th Circuit’s ruling may not change how they handle tips.

Caterer Kept Tips But Paid More Than Minimum Wage

Relish Catering regularly receives tips from its customers in the form of a gratuity added to their final catering bill at the end of an event. Relish retains those tips for itself rather than passing them along to its employees who work at the events. However, it pays its employees at or above the federal minimum wage of $7.25 per hour as well as time and a half for overtime and does not rely on any sort of tip credit to meet the minimum wage.

Bridgette Marlow believed Relish was required to turn over her share of the catering tips under the Fair Labor Standards Act (FLSA). Despite making $12 per hour (and $18 per hour for overtime), she sued Relish and Brett Tucker, a manager and part owner of the company, alleging they violated the minimum wage provisions of the FLSA by retaining the tips.

FLSA Restrictions Apply Only When Tip Credit Taken

Marlow argued that by retaining all of the tips, Relish was essentially paying employees below minimum wage. For example, she suggested that if she received her $12 hourly wage but Relish retained $11 in tips for each hour she worked, the result was the same as if Relish turned over all of the tips to her and paid her a $1 hourly wage. In essence, she argued that the company could be paying less than the required amount for tipped employees.

The 10th Circuit didn’t bite on Marlow’s rationale. The Court stated that it doesn’t matter where the money to pay wages comes from so long as the company paid at least the minimum wage required under the FLSA. The Court rejected Marlow’s argument that the FLSA’s tip-credit provision applied to her case because Relish doesn’t take a tip credit.

The FLSA tip-credit provision allows employers of “tipped employees” to pay a reduced hourly wage of $2.13 per hour so long as employees receive sufficient tips to raise their earnings to the $7.25 hourly minimum. But this provision applies only if the employer counts tips toward the minimum wage, said the Court. The tip-credit provision does not apply if the employer doesn’t count tips toward the minimum and instead pays the full hourly minimum wage.

The Court stated that the FLSA tip-credit provision does not require that employers turn over all tips to employee in all circumstances, as Marlow urged. Instead, when an employer doesn’t take the tip credit, the tip-credit provision imposes no restrictions on what it may do with tips as long as it pays an hourly wage above the $7.25.

DOL’s Tip-Ownership Regulation Invalid

Marlow relied extensively on a 2011 DOL regulation that provides:

Tips are the property of the employee whether or not the employer has

taken a tip credit under section 3(m) of the FLSA. The employer is

prohibited from using an employee’s tips, whether or not it has taken a tip

credit, for any reason other than that which is statutorily permitted in

section 3(m): As a credit against its minimum wage obligations to the

employee, or in furtherance of a valid tip pool.

From the language of that regulation, it would seem that Marlow had a valid claim. But the 10th Circuit said not so fast and looked at whether the DOL had the authority to implement the regulation in the first place.

Relying on U.S. Supreme Court precedent, the 10th Circuit pointed out that federal agencies may create rules only to fill “ambiguities” or “gaps” in statutes. In a “friend-of-the-court” brief, the federal government argued that the FLSA is silent on the issue of who “owns” tips when an employer does not take the tip credit, and therefore, the DOL had the authority to create a tip ownership rule to fill in that gap.

Despite the Ninth Circuit’s acceptance of that argument, the 10th Circuit disagreed with it, finding that nothing in the FLSA directs the DOL to regulate the ownership of tips when the employer doesn’t take the tip credit. Because the FLSA limits the tip restrictions to employers who take the tip credit, the DOL lacked the authority to regulate otherwise.

The Court invalidated the DOL’s tip-ownership regulation, finding it was beyond the DOL’s authority, and affirmed the lower court’s judgment in favor of the employer. Marlow v. The New Food Guy, Inc., No. 16-1134 (10th Cir. June 30, 2017). Read more >>

August 31, 2017

Court Invalidates Overtime Rule That Increased Exempt Salary Levels

By Mark Wiletsky

The Department of Labor (DOL) exceeded its authority when it doubled the minimum salary levels for exempt executive, professional, and administrative employees under the Fair Labor Standards Act (FLSA), ruled federal judge Amos Mazzant of the U.S. District Court for the Eastern District of Texas today. Granting summary judgment in favor of the states and business plaintiffs who challenged the new overtime rule last November, Judge Mazzant determined that the DOL’s new overtime rule “effectively eliminates a consideration of whether an employee performs ‘bona fide executive, administrative, or professional capacity’ duties.”

Exempt Duties Are Part Of The Analysis

Judge Mazzant wrote that although Congress delegated authority to the DOL to define and delimit the white-collar exemptions, Congress was clear when enacting the FLSA that the exemption determination needs to involve a consideration of an employee’s duties, rather than relying on salary alone. He stated that the Obama-era overtime rule that significantly increased the minimum salary levels would result in entire categories of previously exempt employees who perform “bona fide executive, administrative, or professional capacity” duties being denied exempt status simply because they didn’t meet the salary threshold. Consequently, the elimination of an analysis of duties for those who failed to meet the new high salary level was inconsistent with Congressional intent.

A Minimum Salary Level Still Acceptable

When issuing a preliminary injunction last November, Judge Mazzant’s ruling raised the question as to whether any salary threshold could be used as part of the white-collar exemption tests. In his summary judgment order, Judge Mazzant appears to leave the salary-level part of the test stand, writing “[t]he use of a minimum salary level in this manner is consistent with Congress’s intent because salary serves as a defining characteristic when determining who, in good faith, performs actual executive, administrative, or professional capacity duties.” He notes that even though the plain meaning of Section 213(a)(1) does not provide for a salary requirement, the DOL has used a permissible minimum salary level as a test for identifying categories of employees Congress intended to exempt. Citing to a report on the proposed regulations, Judge Mazzant seems to approve of setting that salary level at “somewhere near the lower end of the range of prevailing salaries for these employees.”

No Automatic Increase Mechanism

The ruling also strikes down the mechanism in the DOL’s overtime rule that provided for automatic updates to the exemption’s salary levels every three years. In a cursory paragraph, Judge Mazzant wrote that having found the rule unlawful, the automatic updating mechanism was similarly unlawful.

Back To Square One

Now that the existing, never-implemented rule has been invalidated, the DOL is starting over with revising and updating the overtime exemption rule. The DOL recently published a request for information seeking public input on what the new salary levels should be, how updates should be made, whether duties tests should be changed, and other issues affecting the white-collar exemptions. We will have to see what new proposals the DOL puts out in the months to come. But in the meantime, employers can abandon plans to address the doubled salary thresholds under the Final Rule.

On Another Note, No Pay Data To Be Collected With EEO-1 Reports

In another development, on August 29, 2017, the Office of Management and Budget (OMB) directed the Equal Employment Opportunity Commission (EEOC) to immediately stay the requirement that certain employers provide pay data as part of a new EEO-1 report. The controversial pay-data rule would have required companies with 100 or more employees (and federal contractors with 50 or more employees), to submit the wage and hour information for employees according to race, gender, and ethnicity, with the information being used by the EEOC to analyze pay discrepancies and identify possible Equal Pay Act violations. Because of the stay, covered employers should use the previous EEO-1 form, which still collects data on employee race, ethnicity, and gender by occupational categories. Despite the reprieve for employers on the pay-data rule, EEOC Acting Chair Victoria Lipnic states that her agency remains committed to strongly enforcing federal equal pay laws.

If you have any questions about these new developments, be sure to reach out to the employment counsel with whom you typically work.

August 14, 2017

Only Certain Types of Speech Are Protected In The Workplace

By Steve Gutierrez

This past week, talk abounds over Google’s firing of a software engineer after he posted a lengthy memo criticizing the company’s diversity policy and culture on the company’s internal website. Google says he crossed a line and violated its Code of Conduct. The engineer says he engaged in protected speech and filed an unfair labor practice charge against Google with the National Labor Relations Board (NLRB). The case will be interesting to follow, especially to the extent that it resolves the dispute between Google’s conduct policy and this employee’s criticisms of his former employer.

No Free Speech Guarantee

Some discussions about the Google memo have centered around the belief that employees should have free speech protections to say whatever they like, even about their employer. U.S. workers employed by private entities, however, do not have so-called free speech rights. The First Amendment to the U.S. Constitution prohibits Congress from making any laws that abridge the freedom of speech. But it applies only to government actions and does not prohibit private employers from limiting or taking employment actions based on what an employee says or does.

NLRA Concerted Activities Are Protected

The National Labor Relations Act (NLRA) guarantees employees the right to form and join unions. But it also gives employees the right to engage in other “concerted activities for the purpose of collective bargaining or other mutual aid or protection.” These rights under Section 7 of the NLRA extend to protecting non-union employees who discuss and/or act together to try to improve the terms and conditions of their employment, such as their pay, benefits, policies, and workplace safety issues. Employers may not threaten, discipline, or fire employees who engage in such protected activities.

When it comes to employee memos and social media posts, content generally will be protected if it relates to or grows out of group action, such as when an individual employee solicits other employees to take action to fix work-related problems or seek improvements in the workplace. But mere griping by an individual employee will not be protected as a protected concerted activity. Additionally, even communications that would be deemed concerted activities can lose NLRA protection if they express egregiously offensive, abusive, or knowingly and malicious false statements.

When Company Policies Clash With Concerted Activities

When a company policy prohibits employees from engaging in certain conduct, such as prohibiting disparagement of the company or its managers, or restricting discussion among co-workers of confidential information, the NLRB may consider whether it restricts or “chills” employees’ Section 7 rights to engage in protected concerted activities. If the NLRB finds that a policy is overly broad and potentially restricts concerted activities, the company can be found to have violated the NLRA.

Before Discipline and Discharge

Anytime your organization seeks to discipline or terminate an employee for writing emails, posting on social media, or otherwise communicating about the company, consider the following:

Does the communication discuss with or seek to engage co-workers in relation to the terms and conditions of their employment?
Could the communication be seen as an effort to form a union or another form of group action related to the workplace?
Is the employee reaching out to a third party, such as the media or union organizers, on behalf of multiple employees?
If the basis for the discipline or discharge is a company policy, is the policy narrowly defined or is it too broad so that it interferes with employees’ Section 7 rights?

Employers have a great deal of authority to discipline or get rid of at-will employees based on inappropriate or undesired communications or actions. Just make sure to evaluate whether employees are engaging in protected concerted activities prior to imposing a detrimental employment decision so as not to violate the NLRA.

June 22, 2017

U.S. DOJ Files Brief Supporting Arbitration Agreements That Bar Employee Class Actions

By Emily Hobbs-Wright

Last September, the U.S. Office of the Solicitor General urged the U.S. Supreme Court to rule that arbitration agreements that prohibit employees from pursuing work-related claims on a class action basis are unlawful because they violate the National Labor Relations Act (NLRA). On June 16, 2017, however, the federal government filed a brief taking the exact opposite position, namely that class-action waivers in arbitration agreements should be enforced. This flip-flop in position is quite extraordinary, even with the change in administrations, making this important case one to watch next term. Here are the issues at stake for employers.

NLRB Appeal of Murphy Oil Case

With its controversial 2012 decision in the D.R. Horton case, the National Labor Relations Board (NLRB) has advocated that arbitration agreements between an employer and its employees that ban employees from pursuing work-related claims as a class or group are unenforceable as they violate employees’ rights to engage in concerted activities for their mutual aid and protection under the NLRA. In 2013, the Fifth Circuit Court of Appeals overturned the NLRB’s ruling in D.R. Horton, holding that the use of class action procedures is not a “substantive right” of employees under the NLRA and therefore, arbitration agreements with class-action waivers should be enforced under the Federal Arbitration Act (FAA).

The Fifth Circuit rejected the NLRB’s view on class-action waivers a second time when it ruled that Murphy Oil, which operates more than 1,000 gas stations in 21 states, did not commit an unfair labor practice when enforcing its arbitration agreements that required employees to resolve work-related claims on an individual basis. Two other appellate circuits – the Second and Eighth – have agreed with the Fifth Circuit’s position that class-action waivers are enforceable. Other circuits, however, including the Ninth and Seventh, have ruled in favor of the NLRB on this issue, creating inconsistencies concerning whether such agreements are lawful.

In the closing days of the Obama administration in September 2016, the Office of the Solicitor General (which is tasked with conducting government litigation before the Supreme Court) filed a petition with the Supreme Court asking it to decide the validity of class-action waivers in arbitration agreements through appeal of the Murphy Oil case. The government argued on behalf of the NLRB that such agreements were unlawful. Employers Ernst & Young and Epic Systems also sought Supreme Court review of their adverse decisions from other circuits on this same issue. In January 2017, just days before President Trump’s inauguration, the high court agreed to hear all three consolidated cases in its next term.

The NLRB Left To Go It Alone

When the United States filed its brief with the Supreme Court last week changing positions, it did so as a “friend of the court.” The June 16th brief is signed by lawyers from the Solicitor General’s office but not by any NLRB lawyers – although both offices were signatories to the original petition seeking review.

Under the Court’s briefing schedule, briefs from the NLRB and the employee-petitioners are due on August 9, 2017. According to a short statement on the NLRB’s website, the Solicitor General’s Office “authorized the National Labor Relations Board to represent itself” in the Murphy Oil case before the Supreme Court. This sets up a unique situation for oral arguments this fall when a lawyer from the Solicitor General’s office may argue against a lawyer for another federal agency, the NLRB.

What It Means For Employers

The change in position by the Solicitor General’s Office could lend additional weight to the employers’ arguments in favor of upholding class-action waivers in arbitration agreements. It is a business-friendly position that reins in the extensive reach of the NLRB in recent years. If the Supreme Court rules in favor of employers and against the NLRB, businesses will be able to enforce arbitration agreements containing class action waivers nationwide. We will keep you posted as this case proceeds to a ruling, which could be published about this time next year. Stay tuned!

June 20, 2017

No-Recording Policies: May Employers Ban All Worker Recordings?

By Steve Gutierrez

With a smartphone in almost every pocket, workers have high definition video and audio recording capabilities at their fingertips. It may be easier than ever before for employees to record workplace operations, meetings, disciplinary discussions, picketing, and other conditions and happenings in the workplace.

Some employers see potential worker recordings as detrimental to open and honest workplace dialogue and as well as potentially undermining a company’s protection of its proprietary or confidential information. These concerns may lead employers to adopt a policy to limit or prohibit employees from making recordings at work. After all, it seems inherently reasonable to require that employees get prior management approval before recording anything at work, or to limit what employees may do with video or audio recordings after they are made. So what’s the problem? Broad recording bans may infringe on employees’ rights under the National Labor Relations Act (NLRA).

How Policies May Violate The NLRA

Section 7 of the NLRA guarantees employees the right to “engage in . . . concerted activities for the purpose of collective bargaining or other mutual aid or protection.” This means that employees, whether unionized or not, have the right to take actions to help protect, enhance, or improve the terms and conditions of employment for themselves and their co-workers. Employers who interfere with or restrain employees’ Section 7 rights may be found to have committed an unfair labor practice (ULP) under the NLRA.

So how does a no-recording policy interfere with such rights? Even when a policy or rule does not expressly restrict protected Section 7 activities, mere maintenance of a policy can constitute a ULP in three scenarios: (1) if employees would reasonably construe the language in the policy to prohibit protected activity; (2) if the policy was implemented in response to union activity; or (3) if the policy has been applied to restrict the exercise of protected rights.

Overly Broad Restrictions May “Chill” Section 7 Rights

Typically, it is the first scenario that gets employers in trouble. You see, the National Labor Relations Board (Board) has held that in certain circumstances, employee recordings in the workplace can itself be a protected Section 7 activity. Generally, the Board finds that employee photographing, videotaping, and recording is protected by Section 7 when employees are acting in concert for their mutual aid and protection and there is no overriding employer interest. For example, employees recording images of employee picketing, or documenting discussions about unsafe working conditions, inconsistent application of work rules, or other terms of employment could be concerted activities protected under the NLRA.

When employers implement an overly broad policy that prohibits employees from making any workplace recordings, or permits recordings only with advance management approval, the Board takes the position that employees would reasonably construe that language as prohibiting protected Section 7 activities. As such, broad no-recording policies are seen as “chilling” employee rights, and therefore, a violation of the NLRA.

Second Circuit Recently Upheld ULP On Broad No-Recording Policy

In December of 2015, the Board ruled that Whole Foods had violated the NLRA by maintaining an overbroad no-recording policy. The company’s policy prohibited all recording without management approval. Whole Foods stated that its purpose for the policy was to promote employee communication in the workplace. The Board saw it differently, ruling that the policy’s overly broad language could “chill” an employee’s exercise of Section 7 rights because it was not limited to controlling those activities in which employees are not acting in concert.

Whole Foods appealed the Board’s decision to the Second Circuit Court of Appeals which recently issued its summary order affirming the Board’s 2015 decision. The appellate court wrote that the Board’s determination was supported by substantial evidence and was decided in accordance with law.

In a footnote, however, the Court noted that not every no-recording policy will necessarily infringe on employees’ Section 7 rights. But a lawful policy would have to be drafted narrowly so that it protects the company’s interests without interfering with employees’ protected activities.

Practical Policy Pointers

Employers generally have the right to control what goes on in their workplaces, so long as their policies do not violate specific employee rights. Legitimate business concerns, such as protecting confidential and proprietary information and fostering open and honest communications in the workplace, may justify a policy that limits employees from recording what goes on at work. In order to craft an enforceable policy that would likely avoid NLRB scrutiny, consider implementing the following practical tips:

Tailor the policy narrowly – identify those areas, activities, and/or times when employees are prohibited from recording, leaving non-problematic areas, activities, and times open to recording. An outright ban will likely be struck down.
Identify the legitimate reasons for the policy – by stating the strong business reasons for not allowing recording at certain times or places, employers help dispel the argument that the policy infringes on employee rights.
Be consistent – if your business permits visitors to your plant to take video or audio recordings of your operation, it will be difficult to argue a legitimate business reason for denying employees to make recordings in the same areas. Similarly, if your business has surveillance cameras throughout the workplace, it may be difficult to argue that employee recordings will harm your business interests. Also, be consistent in policy enforcement because allowing some employees to record while denying that ability to other similarly situated employees will lead to trouble.
Include a disclaimer – the policy should state that it is not intended to infringe on any employee’s right to engage in protected concerted activity.

Like most employment policies, a no-recording policy should reflect your specific business interests and industry and be narrowly tailored to achieve your end goal. If in doubt about whether you need or should revise a no-recording policy, please consult with your employment attorney.

June 7, 2017

DOL Withdraws Obama-Era Interpretations On Independent Contractors and Joint Employment

By Brad Cave

On June 7, 2017, the U.S. Department of Labor (DOL) announced that it was withdrawing two informal guidances, namely a 2015 administrator interpretation on independent contractors and a 2016 administrator interpretation on joint employment, effective immediately. The DOL’s short announcement states that the removal of the administrator interpretations does not change the legal responsibilities of employers under the Fair Labor Standards Act (FLSA) and the Migrant and Seasonal Agricultural Worker Protection Act (MSPA), and that the DOL “will continue to fully and fairly enforce all laws within its jurisdiction.” Here’s an attempt to read between the lines and determine the DOL’s position on these two issues.

Withdrawal of Independent Contractor Interpretation

When we wrote about the July 15, 2015 independent contractor interpretation here, we noted that then-Wage and Hour Division Administrator David Weil stressed that most workers meet the criteria to be deemed employees under the FLSA, and therefore, should not be treated as independent contractors. Although noting that multiple factors are used to determine independent contractor status, former administrator Weil stated that the DOL would focus primarily on whether the worker runs his or her own independent business or if instead, the worker is economically dependent on the employer.

Withdrawal of the 2015 interpretation guidance does not change the fact that to “employ” is broadly defined in the FLSA as “to suffer or permit to work” and consequently, most individuals hired to perform work fall within that definition as an employee. In addition, the long-standing multi-factor “economic realities” test used by courts to determine whether a worker is an employee or an independent contractor will continue to apply.

That said, the withdrawal of the 2015 administrator interpretation may be a signal that the DOL will no longer focus on misclassifications of independent contractors with the same fervor as it previously did. A more business-friendly DOL may choose to rely on certain factors, such as an independent contractor agreement setting forth the business relationship and the comparative degree of control over the work exerted by the two parties, over those factors that were highlighted in former administrator Weil’s interpretation, such as whether the worker runs his or her own independent business. The distinction between employees and independent contractors remains, but query whether this DOL, under the direction of new Secretary of Labor Alexander Acosta, will change the balance in determining independent contractor status.

Joint Employment Interpretation Withdrawn

When the DOL issued its administrator interpretation on joint employer status in February 2016, we wrote here that the DOL made it clear that the agency planned to examine dual employer relationships very closely, with an apparent intent to find joint employer status in more circumstances under both the FLSA and the MSPA. By withdrawing that interpretation, the DOL may be suggesting a contraction of its efforts to find joint employer status. If that is the case, employers who utilize workers employed by a staffing agency or other workers provided by a third-party may face less scrutiny (and potentially, less liability) for wage and hour violations as a potential joint employer. In addition, companies that use the same workers across different subsidiaries or among other legally distinct entities may see a relaxation of the DOL’s emphasis on joint employer status.

The Tea Leaves Say . . .

Employers should stay vigilant about ensuring that workers they treat as independent contractors meet the multi-factor tests for independent contractor status. Similarly, organizations that could be subject to the joint employer analysis should examine their status under the applicable tests and are urged to review their third-party staffing arrangements to ensure compliance with wage and hour (and other DOL-enforced) laws. But, with the withdrawal of some of the more proactive enforcement approaches of the past administration, the DOL may be signaling its more business-friendly stance. Perhaps the National Labor Relations Board (NLRB) will be next to announce a less aggressive view towards finding joint employer status and a retraction of other arguably expansive positions taken in past years. We’ll keep you informed as new developments arise.