Fifth Circuit Expedites DOL’s Appeal Concerning Overtime Rule

In June, we wrote about the United States Department of Labor’s new overtime rule which was scheduled to take effect on December 1, 2016.  The overtime rule would have increased the salary threshold for overtime pay to $47,476, nearly double the current level.  Employees earning less than that amount would have been owed overtime, or time-and-a-half, for working more than 40 hours per week.  As a result of a recent decision by a federal judge, the rule did not take effect on December 1. MORE

For further information about this issue or any other employment-related issue, please contact: Sam Samaro, Maxiel Gomez or Jim Boyan.

Municipal Paid Sick Leave Ordinances

By the Employment Group

One of the more remarkable developments in New Jersey employment law in recent years has been the emergence of city ordinances requiring employers to offer paid sick leave to employees who work in those cities.   These ordinances have been passed in reaction to the failure of the Governor and State Legislature to enact a statewide paid leave statute.  To date, eleven cities have adopted such laws:  Bloomfield, East Orange, Elizabeth, Irvington, Jersey City, Montclair, Newark, New Brunswick, Passaic, Paterson and Trenton.

While there are differences between them, the ordinances are all substantially similar and require most employers to provide one hour of paid sick leave for every 30 to 35 hours worked, up to a maximum of  40 hours per year.  Most of our clients offer at least that much paid sick leave to employees.  However, it is important to know that the ordinances were designed to ensure that paid leave is available to workers at the very bottom of the wage scale.  As such, employees only need to work 80 hours in a year to qualify for some paid leave, which may conflict with your policy on paid time off accrual.   Furthermore, the ordinances require employers to allow employees to “bank” up to 40 hours of paid sick leave for use in future years, which may also conflict with your policy.  Please let us know if you would like us to analyze your policies to ensure compliance with the ordinances in any of the cities where you have operations.

Municipalities have very limited authority to fashion civil remedies for violations of ordinances.  Thus, the paid sick leave ordinances impose quasi-criminal sanctions for violations of paid leave requirements, subjecting employers and employer representatives to fines and potentially even jail time.   Cases are to be brought in municipal courts.

These new ordinances raise many issues and undoubtedly there will be court challenges to their enforceability and perhaps constitutionality.   One important concern is the degree to which municipal courts, certainly not accustomed to such matters, will be asked to weigh in on the question of whether independent contractors are in fact statutory employees entitled to paid leave.  Another issue is whether employees who believe that they were discharged for complaining about the failure to provide paid sick leave will be able to use the ordinances to claim that their terminations were in violation of public policy, thereby providing them with a Superior Court wrongful discharge remedy.   Perhaps most alarmingly, it is possible that cities and towns will now attempt to regulate other aspects of the employee/employer relationship, thus creating numerous new, and possibly even conflicting, standards that will have to be learned and followed.

It is expected that unless the State Legislature acts to pass a statewide paid sick leave law, other cities and perhaps smaller towns will pass such ordinances.   Even if your operations are not covered by a paid sick leave ordinance today, they may be soon.

We are of course available to answer any questions you have about the paid sick leave ordinances.  If you would like a copy of any of the ordinances, please let us know.

Samuel Samaro
Maxiel Gomez
James Boyan

 

 

New Overtime Rules in Effect December 1st, 2016

The United States Department of Labor (DOL) recently announced new rules to determine whether an employee is entitled to overtime.  The new rules take effect on December 1, 2016.

Here is the bottom line:  Unless you are paying an employee at least $47,476 per year, he or she will be entitled to overtime (with some limited exceptions). If you pay them less, it does not matter what they do or how you pay them, they get overtime.  You can apply what employees receive in non-discretionary bonuses, commissions, and incentive pay toward 10% of the $47,476 threshold.

However, be aware that just because you pay employees at least $47,476 does not mean that they are exempt from overtime.  Employees must still qualify for one of the overtime exemptions (such as the Executive, Administrative or Professional exemptions).  Most of the exemptions require you to show that the employee is a white-collar employee, paid on a salary basis, who exercises authority or meaningful discretion in his or her daily activities.

There is also an exemption for highly-compensated employees which is easier to satisfy.  However, under the new rules, such employees must be paid at least $134,004 per year.  Also, they must still primarily perform non-manual tasks and so care must still be exercised to ensure that the exemption applies.

Perhaps the most important takeaway is that these new rules have received significant media coverage.  You must assume that your employees will be aware of them, particularly with regard to the new $47,476 salary threshold.  To the extent that you have made overtime determinations with which you are uncomfortable, now would be the time to address them.

For further information about this new rule or any other employment-related issue, please contact: Sam Samaro (ssamaro@pashmanstein.com), Maxiel Gomez (mgomez@pashmanstein.com), or Jim Boyan (jboyan@pashmanstein.com).

New Jersey Appellate Court Rules That Employers May Not Mandate Psychological Testing of Employees Based on Anonymous Tips

By Rachel Mills, Esq.
rmills@pashmanstein.com

The Americans with Disabilities Act (“ADA”) provides, in part, that an employer “shall not require a medical examination and shall not make inquiries of an employee as to whether such employee is an individual with a disability or as to the nature or severity of the disability, unless such examination or inquiry is shown to be job-related and consistent with business necessity.”[1]  A New Jersey appeals court recently interpreted this provision and ruled that an employer violated the ADA when it ordered its employee to undergo psychological testing based on anonymous and uncorroborated claims by the employee’s coworkers.[2]

Background

The Township Manager for the Township of Lakewood received an anonymous letter, purporting to be from a concerned employee of the Department of Public Works (“DPW”), relating to the Appellant, a truck driver for the DPW.  The letter claimed that “everyone knows he has some sort of mental issues” and that he puts other employees “at risk with his tirades and outbursts on a daily basis.”  It further described the Appellant as “a time bomb waiting to explode” and requested that something be done to ensure the safety of the other employees.

The Township took no action until eight months later when the Township advised the Appellant that he would be sent for a psychological examination to determine his fitness for duty.  Citing the ADA, the Appellant refused to submit to psychological testing.  The Township issued him a Preliminary Notice of Disciplinary Action and subsequently a Final Notice of Disciplinary Action, and ultimately, the Township terminated his employment based on his refusal to attend psychological testing contrary to the express directives of his superiors.

The Appellant appealed his termination to the Civil Service Commission, who transferred the matter to an Administrative Law Judge (“ALJ”) for a hearing.  At the hearing, only one witness testified for the Township, the director of the DPW.  The director testified that the DPW had some trouble with him over the years because he was “at times . . . confrontational, and at other times [he walked] away from someone who wished to speak with him.”  However, the director added that he was not afraid of the Appellant and that he was “no different than any other employee.”  The director further admitted that he had not investigated the allegations in the letter, and he was unsure what action, if any, the Township Manager had taken to verify its contents.

Based on the foregoing, the ALJ concluded that the Township’s demand that the Appellant undergo psychological testing was not reasonably “job-related and consistent with business necessity.”  The Civil Service Commission, however, reversed the ALJ and concluded that the Appellant was properly terminated for his insubordination.

The Appellate Division Decision

The Appellate Division reversed, concluding that the Township violated the ADA when it required the Appellant to submit to psychological testing based on the information in the anonymous letter.  His termination for refusing to submit to the psychological evaluation was therefore improper, and the panel remanded for his reinstatement.

The appellate panel reviewed the applicable regulations and interpretative guidance from the Equal Employment Opportunity Commission (“EEOC”) and summarized the governing standards as follows:

[T]he employer must reasonably believe, either through direct observation or through reliable information received from credible sources, that the employee’s perceived medical condition is affecting his or her work performance or that the employee poses a direct threat.  Then, and only then, may the employer lawfully require the employee to undergo a psychological fitness-for-duty examination.

With respect to the Appellant, the court explained that the Township failed to satisfy these standards because there was no evidence that he was unable to perform his essential job functions as a result of any suspected mental condition, that he had threatened other employees, or that he had a history of disciplinary infractions over his nine-year employment, aside from one incident wherein he was disciplined for refusing to help a coworker.  Notably, because the author of the anonymous letter was unknown, the letter did not provide the requisite reliable information from a credible source that the Township would have been justified in relying upon in ordering a psychological examination.  The panel explained that the information contained within the letter “was exactly the type of innuendo and rumor that the EEOC has advised employers is insufficient to support a mandatory evaluation.”  The appellate court advised that, had the Township wished to take action in response to the letter, the Township could have solicited information from the Appellant’s coworkers and supervisors concerning his job performance.

The Bottom Line

While anonymous complaint systems play a vital role in eradicating other forms of discrimination in the workplace, employers must be conscientious in ensuring that these systems themselves do not become a means of discrimination.  Thus, an employer should seek to corroborate and investigate any anonymous allegations of an employee’s mental health issues before requiring the employee to undergo psychological testing.

 

[1] 42 U.S.C. § 12112(d)(4)(A).

[2] In re Williams, — N.J. Super. —  (N.J. App. Div. Jan. 25, 2016).

 

Second Circuit “Likes” the NLRB’s Ruling on Facebook Activity

By Jim Boyan, Esq.
jboyan@pashmanstein.com

A federal appeals court recently affirmed an administrative agency decision that an employer unlawfully discharged two employees for their Facebook activity.    

The Facts

In January 2011, several employees of Triple Play Sports Bar and Grille (“Triple Play”) learned that they owed more than they expected in state income taxes.  On January 31, a former employee posted the following status update on Facebook:  “Maybe someone should do the owners of Triple Play a favor and buy it from them.  They can’t even do the tax paperwork correctly!!! Now I OWE money…Wtf!!!!”  One Triple Play employee, Vincent Spinella, “liked” the status update and another, Jillian Sanzone, commented:  “I owe too.  Such an asshole.”  After learning of their comments, Triple Play discharged Spinella and Sanzone for their “disloyal” Facebook activity.

The NLRB’s Decision

Sanzone and Spinella, who were not members of a labor union, filed an unfair labor practice charge with the National Labor Relations Board.  The NLRB ruled that their terminations violated Section 8 (a) of the National Labor Relations Act (“NLRA”).  More specifically, the Board found that the Triple Play unlawfully terminated Sanzone and Spinella for engaging in “protected concerted activity.”

The Second Circuit’s Decision

Triple Play appealed the NLRB’s decision to the Second Circuit Court of Appeals, which covers New York, Connecticut, and Vermont.  The Company argued that Spinella and Sanzone lost the protection of the NLRA because their Facebook activity contained obscenities that were viewed by customers.  Triple Play based this argument on a prior Second Circuit decision, Starbucks, which recognized the “legitimate concern of an employer not to tolerate employee outbursts containing obscenities in the presence of customers.”  The court rejected the Company’s arguments and affirmed the NLRB’s decision.  The Second Circuit explained that “[a]lmost all Facebook posts by employees have at least some potential to be viewed by customers” and concluded that the NLRB’s finding that “the Facebook activity at issue here did not lose protection of the [NLRA] simply because it contained obscenities view by customers accords with the reality of modern-day social media use.”

The Bottom Line

This case is important because it is the first time that a federal appeals court has ruled on the issue of whether social media activity can constitute “protected concerted activity” under the NLRA.   Although the Second Circuit’s decision in this case is “non-precedential” it is still a persuasive authority that could impact the outcome of future cases.  This case demonstrates that employers should exercise caution prior to taking an adverse employment action based on an employee’s social media activity.

EEOC Declares that Discrimination on the Basis of Sexual Orientation is Prohibited under Title VII

By Eleanor J. Lipsky, Esq.
elipsky@pashmanstein.com

Recently, the United States Equal Employment Opportunity Commission (“EEOC”) officially held that Title VII’s protections against sexual discrimination also encompass discrimination on the basis of sexual orientation. [1]  This ruling is an important update because it significantly expands the scope of a 2012 decision, where the EEOC held that discrimination against a transgender individual was discrimination because of sex and was therefore prohibited under Title VII.[2]    The EEOC now takes the broader position that discrimination against an individual because of that person’s sexual orientation is a violation of Title VII as well.   The Commission will accept and investigate charges alleging sexual orientation discrimination in employment.   The EEOC has listed protection of LGBT employees as one of its target priorities for 2013 through 2016.

In Baldwin v. Foxx, the EEOC stated that sexual orientation discrimination is inseparable from sexual discrimination because it is premised on “sex-based preferences, assumptions, expectations, stereotypes, or norms.”  Further, sexual orientation, as a concept, “cannot be defined or understood without reference to sex.”   The EEOC reasoned that, “[i]t follows, then, that sexual orientation is inseparable from and inescapably linked to sex and, therefore, that allegations of sexual orientation discrimination involve sex-based considerations.”

Although this decision is not binding precedent in federal courts and it is not certain whether courts will ultimately agree with the EEOC’s position, it is likely to be considered persuasive authority.   In addition, congressional action is not required to implement the EEOC’s decision because the holding is based on extending an already existing protected Title VII class.  Litigation relying on this EEOC decision will certainly take place in the future.  In light of these legal developments, employers are advised to consider their internal anti-discrimination policies with respect to gender identity and sexual orientation discrimination.

[1] See Baldwin v. Foxx, EEOC Appeal No. 0120133080 (July 15, 2015), at http://www.eeoc.gov/decisions/0120133080.pdf for the full EEOC decision.

[2] See Macy v. Department of Justice, EEOC Appeal No. 0120120821 (April 20, 2012).

Are Your “Independent Contractors” Entitled to Overtime?

By James W. Boyan III, Esq.
jboyan@pashmanstein.com

The United States Department of Labor recently proclaimed that “most workers are employees under the FLSA.”  On July 15, 2015, the DOL issued new guidance concerning the standard for determining whether an employee has been misclassified as independent contractor under the Fair Labor Standards Act’s (“FLSA”).   The FLSA, which was originally enacted 1938, is a federal law that requires employers to pay all covered employees overtime for all hours worked in excess of 40 hours per week.   Under the law, an individual is considered to be an “employee” of a person or entity that “suffer[s] or permit[s]” him or her to work.  Although the FLSA’s broad definition of the term “employ” has been around for over 75 years, courts have interpreted the standard in a variety of ways.

The DOL’s new guidance, entitled “Administrator’s Interpretation No. 2015-1,” makes it clear that the agency intends to interpret that definition in the broadest way possible.  To that end, the agency has concluded that the liberal “economic realities test” should be used to determine whether a worker is an employee or an independent contractor under the FLSA.  This test focuses on whether the worker is economically dependent on an employer or in business for him or herself.  If the worker is economically dependent on the employer, then he or she is deemed to be an employee who is potentially eligible for the protections of the FLSA.  Based on this expansive interpretation, the DOL has boldly asserted that “most workers are employees under the FLSA.”

The DOL’s economic realities test contains six factors:

• the extent to which the work performed is an integral part of the employer’s business;
• the worker’s opportunity for profit or loss depending on his or her managerial skill;
• the extent of the relative investments of the employer and the worker;
• whether the work performed requires special skills and initiative;
• the permanency of the relationship; and
• the degree of control exercised or retained by the employer.

The DOL has explained that each factor in the test must be “examined and analyzed in relation to one another, and no single factor is determinative.”  The agency has also emphasized that the “control” factor should not be given undue weight.  Finally, the DOL has stated that: “[t]he application of the economic realities factors is guided by the overarching principle that the FLSA should be liberally construed to provide broad coverage for workers.”

Companies that engage workers on a contract basis should carefully review the DOL’s recent guidance.  Employers who fail do so could be liable for back overtime wages, liquidated damages and attorneys’ fees under the FLSA.

New NYC Law Bans Use of Credit Histories in Employment Decisions

By Eleanor J. Lipsky, Esq.
elipsky@pashmanstein.com

Last month, New York City’s Mayor Bill de Blasio signed into legislation Intro. 261-A, or the Stop Credit Discrimination in Employment Act, which amends the New York City Human Rights Law.  The Act makes it unlawful for New York City employers to use an individual’s consumer credit history in making hiring and employment decisions.  The law goes into effect on September 3, 2015.

Proponents of the law argue that reliance on credit checks discriminates against minorities and low-income job applicants with poor credit histories and limits their ability to improve their credit status.  The New York City Council found that employers often use consumer credit information to make hiring decisions, despite the fact that there is little evidence linking an employee’s credit score or credit worthiness to job performance.  Credit checks may adversely affect those who have fallen behind on student loan payments or medical bills and can also have a disparate impact on women and victims of domestic violence, for instance.

The law defines “consumer credit history” as “an individual’s credit worthiness, credit standing, credit  capacity, or payment history, as indicated by: (a) a consumer credit report; (b) credit score; or (c) information an employer obtains directly from the individual…”.   The law makes it unlawful to both use an applicant’s credit history and to request a credit history for employment purposes, unless one of the exceptions to the law is met, as discussed below.

Note that New York City’s law is considered broader than most other jurisdictions that have adapted similar measures.   Other jurisdictions often provide exceptions for managerial positions, financial institutions, or positions were a credit report is substantially related to the position.   However, New York City’s law contains only a few limited exceptions that allow for the use of credit checks when necessary.  The exceptions include positions that require an employee to be bonded by the City, state or federal law; positions requiring security clearance under federal or state law; non-clerical positions with regular access to trade secrets; and positions allowing modification of digital security systems that protect employer or client networks or databases, among several others. [1]  Also note that the term “trade secrets” here does not include access to general proprietary company information and “regular access to trade secrets” does not mean access to client or customer lists.

This law applies to New York City employers of four or more individuals and is enforceable through the City Commission on Human Rights or by a civil action.  It is recommended that New York City employers therefore reassess their employment practices with respect to use of credit histories and ensure that the positions included in the carved-out exceptions to the law are distinguished from all other positions.

[1] See http://legistar.council.nyc.gov/LegislationDetail.aspx?ID=1709692&GUID=61CC4810-E9ED-4F16-A765-FD1D190CEE6C for the legislation’s full text.

Court Holds that State Worker Classification Law Is Pre-Empted by Federal Law

By Sean Mack, Esq.
smack@pashmanstein.com

On February 5, 2015, a federal judge in Massachusetts dismissed two lawsuits against JB Hunt and FedEx, which had alleged that those carriers violated a Massachusetts labor law by classifying their drivers as independent contractors rather than as employees.  The Federal judge concluded that the Massachusetts law was preempted by the Federal Aviation Administration Authorization Act and therefore could not be enforced.  The FAAA expressly provides that federal statutes will preempt or supersede state laws if they could affect “prices, routes and services” of motor carriers and interstate freight movement.

Drivers have previously had success challenging their classification as independent contractors instead of employees in various state and federal courts in obtaining rulings that they were improperly classified as independent contractors.    For example, the Ninth Circuit Court of Appeals, which covers California and other Western States, has twice overturned rulings by lower courts that had concluded that drivers were independent contractors, not employees.  A federal court in Indian also ruled against FedEx in a class action concluding that it had misclassified its workers in various states.

Following those rulings, several states have enacted legislation creating a presumption that drivers are employees, not independent contractors.  New Jersey currently has bills pending in the legislature that would create a presumption that drivers of motor carriers are employees.  In 2013, the NJ Assembly passed the Truck Operator Independent Contractor Act  (A1578) that would establish a presumption that port and parcel delivery truck drivers are employees unless companies can prove otherwise.  The NJ Senate labor committee has cleared similar legislation (S1450), but the law has not yet been adopted in NJ.

The ruling in Massachusetts most likely will be appealed, but if upheld, is significant as it would provide precedent to invalidate similar worker classification laws in other states, and may dissuade states like NJ from  adopting a classification law that will be subject to preemption.

Update on Mandatory Paid Sick Leave in New Jersey

By Eleanor Lipsky, Esq.
elipsky@pashmanstein.com

Paid sick leave has traditionally been a benefit employers could voluntarily select to provide, and often only for certain employees.  However, employers should be aware that an increasing number of states and cities have begun mandating that employers provide paid sick leave to some extent.   Further, in the recent State of the Union address, the Obama Administration made it clear that it is taking steps to provide nation-wide access to paid sick leave by calling on Congress, the States, and cities to pass more of such legislation.

In 2014, the New Jersey State Assembly introduced and amended a bill entitling all employees, including part-time employees, to receive paid sick leave.   Under the bill, businesses with 10 or more employees would be required to let workers earn up to 72 hours of paid time off that they could use either when they are sick or to take care of sick relatives.  Businesses with less than 10 employees would be required to allow 40 hours of sick leave.  Under the bill, for every 30 hours worked, the employee would accrue one hour of earned sick leave, though the amount accrued does not have to carry forward from one year to the next.  While the bill is considered a pro-worker and pro-health policy measure, critics have noted that the bill does not yet address issues employers might have with seasonal employees, along with the increased cost to employers.  However, others argue business owners have an incentive to keep employees happy and healthy.

This state bill was introduced in light of a trend among some New Jersey communities that have already adopted similar sick paid leave rules locally.  So far, Jersey City, Newark, Passaic, East Orange, Paterson, Irvington, Trenton, and Montclair have all approved their own paid sick leave laws in 2014.  Many of these recent municipal ordinances became effective on January 1, 2015.  Notably, the state bill would not preempt some of these more generous municipal laws.