On December 9, 2014, the U.S. Department of Labor (“DOL”) announced that it had achieved $4.5 million dollars in settlements from private employers as a result of a two year investigation into contractors working in the Marcellus Shale region of Pennsylvania and West Virginia. The DOL press release can be found here.
This investigation highlights the increased scrutiny on employers in the oil and gas industry, and the importance of regular compliance audits of wage and hour practices. With a highly mobile workforce, operating under ever-changing working conditions and schedules, following complicated state and federal overtime regulations can be a nightmare. The following are some important tips for maintaining compliance in this difficult area.
Make sure that any salaried exempt managers or other professionals meet the duties tests under federal law. It is not enough to simply call an employee exempt and pay him or her a salary.
If you classify an employee as exempt and pay him or her a salary – remember that the salary cannot change based on quantity or quality of the work performed. Before making any deductions, seek legal advice.
For hourly employees, be wary of day rates and other flexible pay arrangements which conflict with the overtime rules. Federal law requires all non-exempt employees to be paid overtime for hours worked in excess of 40 in a work week, with rare exceptions.
Federal law requires overtime to be paid at time and one half times the employee’s regular rate of pay for that work week. This rate must include all compensation, including bonuses, piece rates, and any other incentives.
When you have employees living at or near the worksite (like in the shale regions) it is important to have clear policies prohibiting “off the clock” work, and trained supervisors to enforce such policies. Supervisors should know whether and when employees are to be paid for safety training, waiting time, on call time, or other “gray areas” that are common in the industry.
Lastly, ensure you are fully and accurately recording all work time for non-exempt employees. Under federal law, it is the employer’s obligation to maintain accurate pay records, and such records are critical in providing a defense to government investigations or lawsuits.
Employers are under increased pressure to secularize religious holidays like Christmas. No one wants to be the Grinch, but at the same time, many companies are concerned that they will being perceived as favoring Christian holidays over Muslim or Jewish ones. I was interviewed for the linked article, which appeared on the Society for Human Resource Management’s (SHRM) website. It addresses many of these concerns and adds some practical tips on navigating the holiday season without being sued for religious discrimination.
Election day 2014 brought more than just a wave of new Republican politicians, it also brought a wave of minimum wage increases across the country. For employers with operations in multiple states, payroll just got more complicated. Five states approved minimum wage hikes, including Alaska, Arkansas, Nebraska and South Dakota. Illinois approved a non-binding measure which won’t immediately impact current law.
Alaska voted to raise its minimum wage to $9.75 by 2016; Arkansas will raise the minimum wage to $8.50 by 2017; Nebraska’s minimum wage will rise to $9.00 by 2016; and South Dakota’s minimum wage will increase to $8.50 by 2015. Illinois voters approved a non-binding measure to raise its minimum wage to $10.00. The cities are also getting into the game with San Francisco voting to increase its minimum wage to $15.00 by 2018, matching Seattle with the highest minimum wage in the country.
The takeaway from the election is that HR departments are going to have to work overtime to keep up with the patchwork quilt of minimum wage laws across the country. If you have employees who travel across state lines or into city limits with a higher minimum wage (even if they don’t live or office in those locations), you may have obligations under the respective laws. Also, the increases in minimum wage will have a ripple effect on wages in these regions. Employees who were comfortably above minimum wage may now find themselves working for slightly above the new rates, which will drive wage inflation up the chain.
Lastly, this election is likely not the end of the road for local minimum wage hikes. There have been 15 states with minimum wage ballot measures since 1996 and all 15 have passed. This trend is likely to continue and, if anything, only pick up steam.
Currently, 23 states and the District of Columbia have medical marijuana laws which allow a lawful level of marijuana use. One question which comes up often in such states is whether an employer can lawfully terminate an employee who fails a drug test. Until now, the answer appeared to be “yes” since an employer has a right to establish its own work rules, and can generally fire an employee for any reason absent a statutory restriction. Even if the employees had a right to use marijuana, they would not have a right to be under the influence at work, which could pose a safety risk or detract from performance.
A recent case out of Michigan, however, has upset this convention wisdom. A Michigan appeals court ruled last week that workers fired for failing a drug test were qualified for unemployment benefits because the medical marijuana law preempted the unemployment law. The appeals court reversed the Michigan Compensation Appellate Commission’s denial of unemployment benefits for three workers, holding that a provision in the state’s medical marijuana law prohibits penalties “in any manner” for those who are legally allowed to use marijuana. In this case, the employees were fired only for failure of a drug test and not for performance reasons or because they were acting intoxicated while on the job.
This decision is expected to be appealed to the Michigan Supreme Court and could very well be reversed. That said, the takeaway from this decision is that these state medical marijuana laws are relatively new and the law in this area is evolving. In some of the more liberal states, there is an increasing tendency for the courts to interpret the laws broadly to protect employees who lawfully use marijuana. Some states have already interpreted their state marijuana laws to not protect employees from termination (e.g., Washington State), while the question is still open in other states. Employers should also be aware of employees using other state laws to bootstrap protections for marijuana users. For example, some states have laws which make it unlawful to terminate an employee who engages in lawful conduct outside the workplace. These laws were originally intended to protect smokers from discrimination, but could easily be construed as providing similar protections to those who engage in lawful marijuana use. The next time you face a termination decision involving a medical marijuana user, it might make sense to consult with legal counsel and double-check the state law. The answer to this question might not be as easy as it looks.
Tomorrow, the Houston office of Cozen O’Connor will be sponsoring an informative seminar, which will include guest speaker Joe Bontke from the EEOC. Joe is the Outreach Manager and Ombudsman for the Houston EEOC office and is an excellent speaker. If you have not signed up, please click on the link below, which has all of the details. Guests can also register at the door.
Joining Joe will be Leila Clewis and Norasha L. Williams of Cozen O’Connor for this seminar being held from 8:30 to 11 a.m. at the Crowne Plaza Houston River Oaks, 2712 Southwest Freeway, Houston, TX 77098. Attending this event will earn you 2.0 hours of CLE – State Bar of Texas and 2.0 hours of CLE – SHRM. There is $40.00 registration fee, which includes valet parking.
The number of discrimination charges filed with the U.S. Equal Employment Opportunity Commission each year has steadily increased over time. And, for some employers, those charges have resulted in EEOC enforcement suits, including both direct lawsuits filed by the EEOC and intervention actions where the Agency joins in the litigation. This briefing will identify the most common and emerging issues that have received particular focus and interest by the EEOC, and will also explore ways in which employers can effectively respond to and defend against charges of discrimination or other EEOC actions. Employers can learn about:
- EEOC’s “Hot Button Issues”
- Developments in the EEOC’s Strategic Plan
- How to Effectively Defend Against an EEOC Claim
- Recent Litigation Trends Involving the EEOC
To register for this event, click HERE.
In many industries, it is common to pay incentives in the form of restricted stock options payable in the future if certain conditions are satisfied. In Exxon-Mobil v. Drennen, decided on August 29, 2014, the Texas Supreme Court reviewed the question of whether a clause in an incentive plan, which allowed the company to declare a forfeiture if the employee left and went to work for a competitor, constitutes a non-compete or just a loyalty bonus. The Texas Supreme Court concluded: “There is a distinction between a covenant not to compete and a forfeiture provision in a non-contributory profit-sharing plan because such plans do not restrict the employee’s right to future employment; rather, these plans force the employee to choose between competing with the former employer without restraint from the former employer and accepting benefits of the retirement plan to which the employee contributed nothing.” The employee, who left Exxon to work for rival Hess Corporation, ended up losing 57,200 shares of Exxon stock.
Notably, the Supreme Court also chose to honor a choice of law provision in the agreement which selected New York law. This choice of law provision was respected notwithstanding the fact that the employee worked in Texas and Exxon is headquartered in Texas. The Court instead relied heavily on the fact that New York has well-developed law in the area of stock and securities because the stock exchanges are located in New York, and Exxon’s stated desire to have uniformity in how its employee incentive agreement are interpreted. Although the Court’s decision was ostensibly rendered under New York law, it appears likely the Supreme Court would have no problem reaching the same result under Texas law as the opinion states “the enforcement of these provisions does not contravene any public policy in Texas” and concludes that loyalty agreements are distinct from non-competes under Texas law.
The takeaway from this case is that employers now have another tool in their tool kit in terms of drafting appropriate agreements to discourage key employees from leaving to work for a competitor. One option is the stick – the non-compete – which will be subject to a rigorous review for reasonableness under Texas law. The carrot option – loyalty bonus – will not be subject to the same strict review for enforceability and can be used either alone or in conjunction with a non-compete. Moreover, for any company that is publicly traded on a stock exchange in New York, the Exxon case lays out the roadmap for ensuring the enforceability of such loyalty agreements by bypassing Texas law altogether.
It has been a busy year for executive orders, especially if you are a federal contractor. Although the President cannot unilaterally implement new employment laws affecting private employers, there has been no shortage of new labor requirements for those doing business with the federal government. Cozen O’Connor just issues an alert entitled “Obama Issues Executive Order Scrutinizing Labor Practices of Federal Contractors,” which can be found here.
This latest executive order, issued July 31, 2014 is entitled the “Fair Pay and Safe Workplaces Executive Order” and contains three parts: (1) requires disclosure to the federal government of all labor law violations over the 3 years preceding the contract; (2) requires written disclosure of certain pay information to employees, including their exemption or independent contractor status; and (3) prohibits pre-dispute arbitration agreements covering claims under Title VII or state law claims related to harassment or sexual assault. The most concerning part of this new executive order is the requirement to disclose labor law violations (which will supposedly be defined by upcoming regulations from the Dept. of Labor). This provision opens up the potential for abuse by unions who target a federal contractor and use the threat of lawsuits and unfair labor practice charges as a means to pressure the company into surrender to avoid losing a lucrative federal contract.
This latest executive order also comes on top of prior orders this year barring employers from discriminating on the basis of sexual orientation or sexual identity, requiring contractors to provide compensation data broken down by gender and race, and also from retaliating against employees who disclose pay information.
Employees at a Chicago plant are picketing over a new employer policy to time unscheduled bathroom breaks and discipline employees who exceed what the company deems as a reasonable amount of time. The company even went so far as to install swipe card systems on the bathroom so that it can track the entry and exit times for all employees. An article providing details of the company policy can be found here.
This case raises the question as to how far an employer can go in punishing employees who would prefer to be in the bathroom than at their work station, and the legal risks associated with such a policy. In this case, the employees chose to exercise their rights to collectively complain about the policy through a union, and this case serves as a good example of how policies which look like they will save money on paper may result in far more expense in the long run. Also, some employers have asked why not just dock the employees’ pay for bathroom breaks? The answer is that federal law (and some states) prohibit deductions for break periods less than 20 minutes where the employee is not completely relieved of work duties (i.e. can leave the facility and use the free time as desired). Short bathroom breaks therefore must be paid.
Another legal pitfall in disciplining employees for excessive bathroom breaks is the risk for discrimination claims. It is not hard to imagine that a pregnant employee or one with a bowel disorder might reasonably require an accommodation in this area. Treating everyone the same might seem like a good idea, but there will likely be the legal need to make exceptions in some cases.
The takeaway from this post is that employee bathroom time can be a risky area to regulate. A better approach is to discipline based on productivity (or lack thereof) as employees who are in the bathroom likely won’t be meeting measurable work requirements.
Today, the Supreme Court issued a long-awaited decision addressing the question of whether three recess appointees to the NLRB passed Constitutional muster. These three NLRB members were appointed by President Obama during a three-day recess in the middle of a Senate term, while it was still in a “pro forma” session. For all practical purposes, the recess appointments occurred over a long weekend. The Supreme Court found this to be an abuse of a procedure that was intended to be used in the rare circumstance where the Senate is out of session and the President needs to quickly appoint an executive branch employee in a position that cannot wait for the Senate to return to work. Notably, the Supreme Court did not decide exactly how long a Senate recess must be to qualify as a “legitimate” recess, but made clear that three days won’t cut it.
The result of this decision is that any NLRB Order issued during the tenure of these three recess appointees will be instantly called into question and potentially invalidated. That is a great “get out of jail free” card to the losing party in any Board litigation, and will likely keep lawyers busy for years sorting out the mess.
For more details, Cozen O’Connor’s Labor & Employment Alert on the decision can be found here.