Category: Labor & Employment

Jury Awards $1.6M to Sarbanes-Oxley Whistleblower

A New York federal jury awarded $1.6M in compensatory damages to a whistleblower in a Sarbanes-Oxley whistleblower retaliation lawsuit. The verdict is consistent with a recent trend of large jury verdicts in whistleblower retaliation claims, including a six million dollar verdict in the Zulfer SOX case. According to the verdict form, the full amount of the verdict awarded to whistleblower Julio Perez was for compensatory damages. Under the whistleblower provision of SOX, there is no cap on compensatory damages.

While employed at Progenics Pharmaceuticals as a Senior Manager of Pharmaceutical Chemistry, Perez worked with representatives of Progenics and Wyeth to develop Relistor, a drug that treats post-operative bowel dysfunction and opioid-induced constipation. In May 2008, Progenics and Wyeth issued a press release stating that the second phase of trials “showed positive activity” and that the two companies were “pleased by the preliminary findings of this oral formulation” of Relistor. Within two months of the issuance of the press release, Wyeth executives sent a memo to Progenics senior executives informing them that the second phase of clinical trials failed to show sufficient clinical activity to warrant a third phase of trials. The Wyeth memo specifically stated: “Do not pursue immediate initiation of Phase 3 studies with either available oral tablets or capsule formulations.”

Perez saw the confidential Wyeth memo and on August 4, 2008, he sent a memo to Progenics’ Senior Vice-President and General Counsel in which he alleged that Progenics was “committing fraud against shareholders since representations made to the public were not consistent with the actual results of the relevant clinical trial, and [Plaintiff] think[s] this is illegal.” The next day, Progenics’ General Counsel questioned Perez about the confidential Wyeth memo. Progenics then terminated Perez’s employment, claiming he had refused to reveal how he had obtained the Wyeth memorandum.

Perez brought suit under SOX, alleging that Progenics terminated his employment because of his August 4, 2008 Memorandum, and denying that he refused to answer questions about his access to the Wyeth memo. Progenics again claimed that it terminated Perez’s employment because he failed to explain how he got the memo. The memo’s intended recipients denied giving Perez a copy of the memo. During the litigation, Perez argued that the memo was distributed widely within Wyeth and that he had not “misappropriated” it.

Following an investigation, OSHA did not substantiate Perez’s SOX complaint. Perez removed his SOX complaint to federal court in November 2010. On July 25, 2013, Judge Kenneth Karas issued an order denying Progenics’ motion for summary judgment. The case was hard-fought, with more than 120 docket entries concerning pre-trial matters. Perez was represented by counsel when he filed his SOX claim in federal court, but proceeded pro seshortly before Progenics moved for summary judgment through trial.

Recent Sarbanes-Oxley Whistleblower Jury Verdicts

On March 5, 2014, a California jury awarded $6 million to Catherine Zulfer in her SOX whistleblower retaliation against Playboy, Inc. (“Playboy”).  Zulfer, a former accounting executive, alleged that Playboy had terminated her in retaliation for raising concerns about executive bonuses to Playboy’s Chief Financial Officer and Chief Compliance Officer.  Zulfer v. Playboy Enterprises Inc., JVR No. 1405010041, 2014 WL 1891246 (C.D.Cal. 2014).  She contended that she had been instructed by Playboy’s CFO to set aside $1 million for executive bonuses that had not been approved by the Board of Directors.  Id.  Zulfer refused to carry out this instruction, warning Playboy’s General Counsel that the bonuses were contrary to Playboy’s internal controls over financial reporting.  Id.  After Zulfer’s disclosure, the CFO retaliated by ostracizing Zulfer, excluding her from meetings, forcing her to take on additional duties, and eventually terminating her employment.  Id.  After a short trial, a jury awarded Zulfer $6 million in compensatory damages and also ruled that Zulfer was entitled to punitive damages.  Id.  Zulfer and Playboy reached a settlement before a determination of punitive damages.  The $6 million compensatory damages award is the highest award to date in a SOX anti-retaliation case.  Id.

The Ninth Circuit recently affirmed a SOX jury verdict awarding $2.2 million in damages, plus $2.4 million in attorneys’ fees, to two former in-house counsel.  Van Asdale v. Int’l Game Tech., 549 F. App’x 611, 614 (9th Cir. 2013).  The plaintiffs, both former in-house counsel at International Game Technology, alleged that they had been terminated in retaliation for disclosing shareholder fraud related to International’s merger with rival game company Anchor Gaming.  Id.  Specifically, plaintiffs alleged that Anchor had withheld important information about its value, causing International to commit shareholder fraud by paying above market value to acquire Anchor.  Van Asdale v. Int’l Game Tech., 577 F.3d 989, 992 (9th Cir. 2009).  When the plaintiffs discovered the issue, they brought their concerns about the potential fraud to their boss, who had served as Anchor’s general counsel prior to the merger. Id. at 993.  International terminated both plaintiffs shortly thereafter. Id. 

In addition, a former financial planner at Bancorp Investments, Inc. who alleged that he was terminated for disclosing trade unsuitability obtained a $250,000 jury verdict in the Eastern District of Kentucky in late 2013.   Rhinehimer v. Bancorp Investment, Inc., 2013 WL 9235343 (E.D.Ky. Dec. 27, 2013), aff’d 2015 WL 3404658 (6th Cir. 2014).

Zulfer, Van Asdale, and Rhinehimer highlight the importance of the removal or “kick out” provision in SOX that authorizes SOX whistleblowers to remove their claims from the Department of Labor to federal court for de novo review 180 days after filing the complaint with OSHA.

ARTICLE BY Jason Zuckerman of Zuckerman Law

© 2014 Zuckerman Law

Delaware Adds to Growing Patchwork of Social Media Laws

On August 7, Delaware Governor Jack Markell signed a law to prohibit employers from interfering with the personal social media accounts of their prospective and current employees.  The new law, which also took effect on August 7, defines “personal social media” to encompass any account on a social networking site created and operated by a prospective or current employee exclusively for his or her personal use.  The term does not include accounts created or operated by an employer and that are operated by an employee as part of his or her employment.

Specifically, the new law prohibits an employer from requesting or requiring a prospective or current employee to:

  • disclose a username or password for the purpose of allowing the employer to access personal social media;

  • access personal social media in the presence of the employer;

  • use personal social media as a condition of employment;

  • divulge any personal social media (except as otherwise permitted by the new law);

  • add a person, including the employer, to the list of contacts associated with the prospective or current employee’s personal social media,

  • invite or accept an invitation from any person, including the employer, to join a group associated with the prospective or current employee’s personal social media; or

  • alter settings on the prospective or current employee’s personal social media that affect a third party’s ability to view the contents of the medium.

The new law also forbids an employer from taking adverse action against a prospective or current employee for failing to comply with any of these requests or demands.

Despite these broad prohibitions, nothing in the new law prevents an employer from:

  • exercising its right or obligation under its personnel policies, federal or state law, case law, or other rules or regulations to require or request that an employee divulge a username, password, or social media “reasonably believed to be relevant” to an investigation of alleged employee misconduct or violation of applicable laws and regulations (so long as the social media is used solely for purposes of that investigation or a related proceeding);

  • requiring or requesting an employee to disclose a username, password, or other accessing credentials for (i) an electronic communication device supplied by or paid for in whole or in part by the employer; or (ii) an account or service provided by the employer, obtained by virtue of the employee’s employment relationship, or used for the employer’s business purposes;

  • accessing, blocking, monitoring, or reviewing electronic data stored on an employer’s network or on an electronic communications device supplied by or paid for in whole or in part by the employer;

  • complying with a duty to screen prospective or current employees, or to monitor or retain employee communications, (i) under federal or state law or by a self-regulatory organization, as defined in the Securities and Exchange Act of 1934 (like FINRA); or (ii) in the course of a law enforcement employment application or officer conduct investigation performed by a law enforcement agency; or

  • accessing, using, or viewing information about a prospective or current employee otherwise available in the public domain.

The new Delaware law continues a growing trend across the country.  Twenty-one other states have similar laws restricting employer access to a prospective or current employee’s personal social media account, including Arkansas, California, Colorado, Connecticut, Illinois, Louisiana, Maryland, Michigan, Montana, Nevada, New Hampshire, New Jersey, New Mexico, Oklahoma, Oregon, Rhode Island, Tennessee, Utah, Virginia, Washington, and Wisconsin.

ARTICLE BY Katharine H Parker & Daniel L. Saperstein of Proskauer Rose LLP

© 2015 Proskauer Rose LLP.

Temps May Have Multiple Employers

The Fourth Circuit Court of Appeals recently ruled that a temporary agency employee could be deemed an employee of the customer company as well as the temporary agency. The Fourth Circuit adopted a hybrid test and set forth nine factors that should be considered to determine if an employee is jointly employed by two or more entities. The nine factors are:

  1. Authority to hire and fire the individual;
  2. Day-to-day supervision of the individual, including employee discipline;
  3. Whether the customer furnishes the equipment used and the place of work;
  4. Possession of and responsibility over the individual’s employment records, including payroll, insurance, and taxes;
  5. The length of time during which the individual has worked for the customer;
  6. Whether the customer provides the individual with formal or informal training;
  7. Whether the individual’s duties are akin to the duties of the customer’s employees;
  8. Whether the individual is assigned solely to the customer; and
  9. Whether the parties intended to enter into an employment relationship.

The court made clear that none of the factors are dispositive, but that control is still the “principal guidepost” in making the determination. However, the court noted that the first, second and third factors were the most important in the analysis.

Based on the analysis of the factors provided by the court, prudent employers should note the following:

  • Authority to hire and fire can be found if the customer employer directs the temp agency to fire or discipline the employee even if the temp agency is actually the one that carries out the termination.
  • Temp employees working “side by side” with the company’s employees and performing the same tasks as the company employees is also an indicator of control.
  • Even though temp employees may wear a different uniform from the company employees, that is not dispositive of control.
  • Temp employees performing tasks essential to the business of the customer company such as producing goods or services core to the business also weighs in favor of control.
  • Although the temp agency may handle dispersal of paychecks, official terminations and employee discipline, this does not guarantee that the temp agency is the sole employer for purposes of liability.
ARTICLE BY Karla Turner Anderson of Poyner Spruill LLP

© 2015 Poyner Spruill LLP. All rights reserved.

New Joint Employer Doctrine and Hybrid Test Increase Possible Liability Under Title VII in Fourth Circuit

Over the last several years, there has been quite a push to broaden who is considered an employee – as well as who is considered an employer – under relevant federal (and even state) laws.  For instance, the Department of Labor has stepped up its efforts in singling out employers who misclassify workers as independent contractors.  Their recent memo on this subject – which we wrote about here – is the most recent evidence of that.  The National Labor Relations Board has also been active in this general area, issuing complaints against McDonald’s arguing that a number of its franchisors have as much control over employees as the franchisees do, and therefore are just as legally responsible for ensuring compliance with certain employment laws.  These arguments have been advanced by more than just government agencies, however.  They have been made by private plaintiffs under anti-discrimination law, too.

In a recent Fourth Circuit opinion, Butler v. Drive Automotive Industries of America, Inc., No. 14-1348, 2015 WL 4269615 (4th Cir. 2015), the court found that two parties can be considered joint employers under Title VII.  In reaching that conclusion, the Fourth Circuit adopted a new employee-friendly “hybrid test” to determine whether a company qualifies as an employer.  Employers everywhere – but especially those in the Fourth Circuit, including in West Virginia – should pay particular attention to this decision because it increases potential liability for them.  This is especially true for employers who use contract or temporary employees through staffing agencies.  Let’s take a deeper look at the case.

In Butler, the Plaintiff, Brenda Butler, was hired by ResourceMFG, a temporary employment agency, to work at Drive Automotive in Piedmont, South Carolina.  Butler sued ResourceMFG and Drive Automotive alleging sexual harassment under Title VII of the Civil Rights Act of 1964.  She alleged that her supervisor made constant, inappropriate comments about her body.  Additionally, she alleged that after she reported an altercation in which Butler’s supervisor called her an inappropriate name and told her to go home, she was referred to ResourceMFG for termination.  Further, Butler alleged that her supervisor called before she was terminated and suggested that he could save her job if she performed sexual favors for him.  Soon thereafter, she was terminated by ResourceMFG.  The key issue in the case was not whether the temp agency, ResourceMFG, was Butler’s employer – that was undisputed – but was whether Drive Automotive also was considered her employer.

The District Court for the District of South Carolina, where the case was originally filed, dismissed Butler’s claims against Drive Automotive, finding that Drive Automotive was not Butler’s “employer” under Title VII because it did not “exercise sufficient control over Butler’s employment.”

On appeal, the Fourth Circuit formally adopted the joint employer doctrine for Title VII claims.  The Fourth Circuit stated that two parties can be considered joint employers and therefore both be liable under Title VII if they “share or co-determine those matters governing the essential terms and conditions of employment” over the same employees.  Additionally, the Fourth Circuit adopted a nine-factor “hybrid test” to determine who qualifies as an “employer” for Title VII.  The test is based on traditional common-law elements of control, as well as an “economic realities” test which has long been a factor used by the Department of Labor in issuing determinations in this area.  The nine factors are as follows:

(1) Authority to hire and fire the individual;

(2) Day-to-day supervision of the individual, including employee discipline;

(3) Whether the potential employer furnishes the equipment used and the place of work;

(4) Possession of and responsibility over the individual’s employment records, including payroll, insurance, and taxes;

(5) The length of time the individual has worked for the potential employer;

(6) Whether the potential employer provides the individual with formal or informal training;

(7) Whether the individual’s duties are similar to a regular employee’s duties;

(8) Whether the individual is assigned solely to the potential employer; and

(9) Whether the individual and potential employer intended to enter into an employment relationship.

According to the Fourth Circuit, the first three factors are most important.  However, the Court added that no one factor is determinative and courts can alter the test to fit specific industry contexts. In doing so, the Court said, the amount of control over the individual remains the principal guidepost in the analysis, with the first factor – the ability to hire and fire – being the most important to determine ultimate control.  In a footnote, the Court observed that the use of a form which disclaims an employment relationship will not defeat a finding of a joint employer relationship.

After setting out the new test, the Fourth Circuit concluded in Butler’s case that, while control remained the most important factor in the analysis, Drive Automotive was also Butler’s employer despite not having authority to hire, fire, discipline, or pay Butler.  In so concluding, the Fourth Circuit considered the aggregate circumstances, and found important the fact that Drive Automotive was responsible for determining Butler’s work schedule, training Butler, and supervising Butler’s work.

While these situations are always examined on a case-by-case basis, it’s hard to dispute that, in applying its new “hybrid test” and reaching the conclusion it did in Butler, the Fourth Circuit essentially created a very low threshold to qualify as an employer.  That, in turn, will make more entities – particularly in contracting and temporary relationships – more likely to be considered employers, including in discrimination claims under Title VII.

With another employee-friendly ruling from the Fourth Circuit court, businesses need to be especially vigilant about their employment practices in this area, which is why consulting competent counsel on the subject is becoming increasingly important.  At minimum, review your contracts and your policies to ensure that the practices you apply to your workers truly demonstrate and maintain the legal relationships which you wish to use.

ARTICLE BY Joseph U. Leonoro of Steptoe & Johnson PLLC

© Steptoe & Johnson PLLC. All Rights Reserved.

IRS Announces Major Changes to its Determination Letter Program for Individually Designed Retirement Plans

On July 21, 2015, the Internal Revenue Service (IRS) issued Announcement 2015-19 (the Announcement), which ends the five year remedial amendment cycles for individually designed plans effective January 1, 2017.  For remedial amendment cycles beginning after 2016, plan sponsors will no longer be able to apply for determination letters on their individually designed defined contribution and defined benefit plans, except for initial qualification and qualification upon termination. Effective on the Announcement date, off-cycle requests for determination letters will no longer be accepted. The IRS intends to publish additional guidance periodically, and seeks comments on the upcoming changes.

Background

The determination letter program allows retirement plan sponsors to request an IRS determination that the “form” of a plan (but not its operation) meets the requirements for favorable tax treatment under the Internal Revenue Code (Code). A determination letter is an IRS opinion that the terms of a retirement plan satisfy the complex requirements of Section 401(a) of the Code. It is standard practice to seek a favorable determination letter for an individually designed retirement plan. Plan sponsors, auditors, fiduciaries and others customarily rely on a favorable determination letter to establish that a plan’s terms comply with Code requirements.

Under the determination letter program, the sponsor of an individually designed plan generally applies for a determination once every five years according to staggered application cycles (Cycles A to E) based on the last digit of the plan sponsor’s employer identification number (EIN).

IRS Announcement 2015-19

The Announcement leaves unchanged the current remedial amendment period, Cycle E, ending January 31, 2016 for individually designed plans sponsored by employers with EINs ending in zero or five. Also unchanged is the next remedial amendment period, Cycle A, from February 1, 2016, through January 31, 2017, for EINs ending in one or six. Sponsors of Cycle A plans may submit determination applications until January 31, 2017. The Announcement ends the five year remedial amendment cycles for individually designed plans effective January 1, 2017. The end of the remedial amendment cycles will mean that required amendments generally must be adopted on or before the extended due date for filing the plan sponsor’s tax return for the year of a plan change. However, because the rules are changing, the IRS expects that a remedial amendment period will extend at least until December 31, 2017.

Future Compliance

The IRS and the Department of Treasury are considering ways to make it easier for sponsors to ensure that their plan documents satisfy the qualification requirements of the Code. This may include, in appropriate circumstances: (i) providing model amendments (safe harbor language), (ii) not requiring certain amendments to be adopted if they are not relevant for a particular plan (for example, because of the type of plan, employer, or benefits offered), or (iii) expanding plan sponsors’ options to document qualification requirements through “incorporation by reference.”

At a recent American Bar Association meeting, IRS officials informally discussed other possible compliance methods for plan sponsors including: (i) allowing plans sponsors to make minor changes to model amendments, (ii) making it easier to correct plan document failures under the Employee Plans Compliance Resolution System (EPCRS), and (iii) expanding the determination letter program for pre-approved plans.

In the Announcement, the IRS requests comments on the upcoming changes and specifically these issues: (i) changes to the remedial amendment period for individually designed plans, (ii) requirements for adoption of interim amendments, (iii) guidance to assist the conversion of individually designed plans to pre-approved plans and (iv) any modification of the EPCRS.

Observations

Cycle E and Cycle A plan sponsors should still submit timely determination letter requests for those plans. The Announcement on July 21, 2015, is likely just a first step, to be followed by other IRS guidance which may make it easier for plan sponsors to comply with documentary requirements. Questions and comments on the Announcement will probably be addressed later by the IRS. Plan sponsors with individually designed plans should consider the Announcement and subsequent IRS guidance in deciding on a course of action. When determination letters are no longer effective, sponsors of individually designed plans may decide to seek expert opinions that plan terms comply with Section 401(a) of the Code. Some sponsors of individually designed plans will consider transitioning those plans to a pre-approved format (Master and Prototype, or Volume Submitter), to take advantage of IRS opinion letters issued to pre-approved plans.

ARTICLE BY David Diaz, Alan D. Nesburg, PC & Stephen Pavlick, PC of McDermott Will & Emery

© 2015 McDermott Will & Emery

OSHA Enforcement Directive on HazCom Compliance a Mixed Blessing

A new directive from the Occupational Safety and Health Administration on enforcing the agency’s Hazard Communication (HazCom) standard describes requirements that appear to impose new, unforeseen paperwork and compliance burdens on employers even while providing useful clarifications on some issues for employers and enforcement personnel. The “Inspection Procedures for the Hazard Communication Standard (HCS 2012)” was released July 20, 2015, and explains how the standard is to be enforced during the current transition period and after the standard is fully implemented. OSHA’s HazCom rule was amended in 2012 to align U.S. HazCom mandates with a globally harmonized system of classifying and labeling hazardous chemicals.osha-logo

Observers identified at least three areas of concern about the new policy. They involve requirements for documentation of good-faith compliance efforts, written HazCom program instructions, and procedures for classifying chemicals. Critics believe they could lead to added costs, including from citations.

According to the directive, inspectors are to determine if all applicable provisions of paragraphs (e) through (h) of the standard have been covered in the written program and implemented in the workplace. These provisions include the chemical inventory, which must show a product identifier for each chemical known to be present that aligns with the Safety Data Sheet (SDS) and label. The inventory is to include chemicals present in storage or otherwise not in use.

In addition, the written program must designate the person(s) responsible for obtaining or maintaining SDSs, how the data sheets are to be maintained, procedures on how to retrieve SDSs electronically, including backup systems to be used in the event of failure of the electronic equipment, and how employees obtain access to SDSs. Also required are procedures addressing what to do if an SDS is not received at the time of the first shipment, if there is reason to believe the SDS is not appropriate (e.g., missing hazards), to determine if the SDS is current, and, for chemical manufacturers or importers, for updating the SDS when new and significant health information is found. In addition to the written program, there are detailed requirements for labeling, training, evaluating chemicals, and much more.

OSHA appears to be using the policy to push enforcement priorities at the agency. It is a means of requiring staffing firms that provide temporary employees to train those employees to protect themselves from hazardous chemicals they may encounter at the host employer’s worksite. Inspectors also are given detailed guidance on how to evaluate an SDS for a general duty clause violation in cases where there is potential exposure to a chemical with no permissible exposure limit (“PEL”). Frustrated with its inability to update outdated PELs, OSHA has long-hinted it would use the general duty clause in this way.

“They are clearly encompassing their enforcement initiatives into this directive,” said Jackson Lewis attorney Tressi Cordaro. “The approach not only lacks any legal basis in the standard or in OSHA’s governing statute, but also circumvents the regulatory process. That is rulemaking without notice and comment,” she contended.

Cordaro noted that the directive provides useful clarification on some issues, such as employer reliance on Department of Transportation (DOT) labeling for shipping of hazardous chemicals. “There’s some value in this directive. OSHA gave some clarification to DOT labeling,” she said. “That’s guidance that was needed in the industry.”

Enforcement of the standard is in transition. Employers were required to train workers on the new label elements and safety data sheets by December 1, 2013. Chemical manufacturers, importers and distributors had to comply with revised SDS requirements by June 1, 2015. Manufacturers and importers had to comply with new labeling provisions by June 1, 2015. Distributors have until December 1, 2015, to comply with labeling provisions as long as they are not relabeling materials or creating SDSs, in which case they must comply with the June 1 deadline. Full implementation begins on June 1, 2016.

ARTICLE BY Avi Meyerstein of Jackson Lewis P.C.

Jackson Lewis P.C. © 2015

New York Becomes First State Raise Minimum Wage to $15 . . . For Fast Food Workers

A panel appointed by New York Governor Andrew Cuomo recommended a minimum hourly wage increase to $15 for fast food service workers on Wednesday.  The recommendation comes just three months after Governor Cuomo tasked the state’s acting Labor Commissioner to empanel a Wage Board to investigate and make recommendations on increasing the minimum wage in the fast food industry.

The Labor Commissioner now has to adopt the recommended changes, but it is largely expected that he will, even if he first makes minor changes.  The minimum wage hike would be phased in over time, with the first increase to $10.50 for City fast food workers and to $9.75 for State fast food workers coming at the end of the year.  The minimum wage rate for City workers would then rise by $1.50 each year for the next three years until it tops out at $15 in 2018.  For the rest of the State, the wage rate would rise incrementally each year until it tops out at $15 in 2021.

The wage order covers Fast Food Employees working in Fast Food Establishments.  Fast Food Establishments mean any establishment in the state of New York serving food or drink items:

  1. where patrons order or select items and pay before eating and such items may be consumed on the premises, taken out, or delivered to the customer’s location;

  2. which offers limited service;

  3. which is part of a chain; and

  4. which is one of thirty (30) or more establishments nationally, including: (i) an integrated enterprise which owns or operates thirty (30) or more such establishments in the aggregate nationally; or (ii) an establishment operated pursuant to a Franchise where the Franchisor and the Franchisee(s) of such Franchisor owns or operate thirty (30) or more such establishments in the aggregate nationally.

Fast Food Employee covers anyone whose job duties include at least one of the following: customer service, cooking, food or drink preparation, delivery, security, stocking supplies or equipment, cleaning, or routine maintenance.

San Francisco, the City of Los Angeles and Seattle each have raised their minimum wage rates to $15 for all employees.  But New York becomes the first state to do so, even though it is limited to the fast food industry.  Many believe this hike will serve as a precursor to wage hikes in other low wage industries and possibly state-wide.  Similar efforts are being made on the left coast, where on the same day that the New York Wage Board released its recommendations, the County of Los Angeles Board of Supervisors voted for a $15 minimum wage.  Moments later, the University of California, which employs nearly 200,000 workers statewide, announced that it will pay its workers at least $15/hr.  We will continue to track these developments.

ARTICLE BY Michael S. Arnold of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
©1994-2015 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. All Rights Reserved.

Minor League Baseball Players’ Minimum Wage, Overtime Claims Proceed to Class Certification Stage

Former minor league baseball players are one step closer to gaining class certification of their wage and hour lawsuit against 22 Major League Baseball (“MLB”) franchises. The players allege that the franchises have been paying them less than minimum wage, denying them overtime pay, and requiring them to train during off-season without any pay. They contend the MLB and its clubs violated the FLSA, as well as similar state wage and hour laws in eight states by paying them a total of only $3,000 to $7,000 over the course of a five-month season despite workweeks of 50 to 70 hours.

On July 13, a California federal district court denied a motion by the baseball franchises to dismiss the high-profile suit for failure to pay minimum wages and overtime pay under the Fair Labor Standards Act and state wage and hour laws, allowing the players to proceed to discovery “to determine whether certification is appropriate and whether the proposed class representatives have standing to represent the various proposed classes.” Senne v. Kansas City Royals Baseball Corp., No. 3:14-cv-00608 (N.D. Cal. July 13, 2015).

On May 2, the court dismissed claims against eight of the MLB franchises, finding they did not have sufficient contacts with California, where the suit is pending, to establish personal jurisdiction over them. In the July 13 ruling, however, the court denied Defendants motion to dismiss stating that “the named plaintiffs who are proposed as class representatives of the various state classes seek to represent unnamed plaintiffs who were employed by these other franchise defendants on the basis that they suffered a similar injury.  As to these claims, the court ruled that it is appropriate to defer addressing the question of standing until after class certification.” (Senne, p. 25). As a result, the players have established sufficient standing to pursue discovery by claiming that at least one of the named plaintiffs was denied minimum wages or overtime pay from each of the remaining 22 defendants, and that at least one of the named plaintiffs was employed in each of the states for which the players assert state wage and hour violations.

The franchises have yet to reveal their defense to the specific claims; however, they may argue the players are exempt from FLSA’s minimum wage and overtime requirements because they are employed by a “seasonal amusement or recreational establishment.” Employees of establishments that operate for up to seven months per calendar year, or whose average receipts for any six months of the calendar year are not more than one-third its average receipts for the other six months of the year, are exempt from the FLSA’s minimum wage and overtime requirements.

Rulings on the applicability of the exemption to non-player employees in baseball have been inconsistent.  In 1998, members of the Cincinnati Reds maintenance staff sued the team, demanding overtime pay. An Ohio district court initially ruled in favor of the Reds, describing the team as “an amusement or recreational establishment” that played its games during a season that lasted seven months or less. That decision was overruled when the United States Court of Appeals conducted a detailed accounting analysis of the team’s operation and determined that the Reds did not qualify for a seasonal exemption.

The Detroit Tigers won a similar lawsuit in 1997 when bat boys sought overtime pay for their work in excess of 40 hours in a week. The Tigers claimed the seasonal exemption as a defense and were successful as the court recognized that Tiger Stadium only operated on a seven-month schedule, making its operation seasonal.

The Sarasota White Sox, a former minor league franchise in the Florida State League, also won a lawsuit by claiming a seasonal exemption in 1995 when a groundskeeper sued for overtime. The court ruled that the team played in a six-month season and made 99 percent of its revenue during that time period.

The question of whether the franchises will be safe from potentially significant wage and hour liability in this latest litigation may be a close call.

ARTICLE BY Keith L. Hammond & Gregg E. Clifton of Jackson Lewis P.C.
Jackson Lewis P.C. © 2015

High Tech and New Media: Organized Labor’s New Frontier

When one thinks of industries where union activity remains strong and additional organizing is likely, one may think of health care, education, retail, heavy manufacturing, and other “old school” fields, but not high tech and “new media.” Recent developments, however, including targeted campaigns focusing on employers in the Silicon Valley, its East Coast cohort Silicon Alley, and online, demonstrate that these assumptions may not be correct. High tech and new media are in the sights of not only some of America’s most actively organizing unions but also a coalition of interest and advocacy groups that are partnering with a coalition of unions with the common goal of increasing union representation at high-tech companies and the various contractors, subcontractors, and vendors that clean their facilities, feed their employees, and drive them to and from their facilities.

Taken together with the recent rule changes adopted by the National Labor Relations Board (“NLRB” or “Board”) to allow for much faster union representation elections in smaller units defined by unions, and the Board’s continuing emphasis on the application of the National Labor Relations Act to employees who are not represented by unions and who work in non-union workplaces, employers in the high-tech and new media fields should be aware of how these forces can impact their businesses and the ability to maintain dynamic workplaces.

Silicon Valley Rising: An Industry-Targeted Movement

When 1930s legendary bank robber Willie Sutton was asked why he robbed banks, he replied that was where the money was. Today’s labor unions, with their emphasis on income inequality and the gap between the 1 percent and the 99 percent have realized that Silicon Valley and technology companies are where the money is today and that there are many more employees in these industries who are not receiving the high salaries, stock options, and perks that many think of when they think of Silicon Valley.

A well-financed effort by a coalition of unions—including the Teamsters, the Service Employees International Union (SEIU), the Communication Workers of America (CWA), UNITE-HERE, the South Bay Labor Council, the NAACP, and other community organizations—have banded together to establish “Silicon Valley Rising” to organize employees of high-tech employers and the various vendors and service providers that they rely upon.

Silicon Valley Rising’ describes its goal as addressing what it sees as a two-tiered economic system in which, in its view, direct employees of the companies in the technology and media industry are paid well and receive good benefits, while those who support the industry as employees of contractors and suppliers are not. Silicon Valley Rising’s focus includes the vendors and contractors that Silicon Valley employers rely upon for transportation, maintenance, food service, and the like.

One of Silicon Valley Rising’s first successes came earlier this year, when it was certified as the bargaining representative of the company that Facebook relies upon to provide shuttle bus services between its various facilities at its headquarters. Soon after it won a representation election, Teamsters Local 853 negotiated a first contract with Loop Transportation that significantly increased wages and benefits and changed work rules and the like. In its campaign, Local 853 made clear that it saw the party that ultimately controlled the purse strings as being Facebook and media reports demonstrated the fact that Facebook was dragged into the matter and was ultimately responsible.

SiliconBeat (the “tech blog” of the San Jose Mercury News), theLos Angeles Times, USA Today, and other publications are all reporting that while apparently not a direct party to the negotiations between Loop and the union, Facebook has now “approved” the collective bargaining agreement, which it had to do before the contract could go into effect. In fact, Loop and Local 853 announced in their joint press release, “The contract, which workers overwhelmingly voted to ratify, went to Facebook for its agreement as Loop’s paying client before implementation.” Such economic realities are the type of consideration that the NLRB’s General Counsel has been urging the Board to look at in deciding whether a joint-employer relationship exists.

High-tech and new media companies often rely upon third-party vendors to provide a range of non-core support services so that their own employees can focus on their primary activities. But if, as expected, the NLRB rewrites its definition and standards for determining who is a joint employer, the risks are increasing that high-tech and new media companies, like other employers, will face the prospect of having to stand alongside their vendors as employers of the vendors’ personnel, including bargaining with their unions when they are represented.

ARTICLE BY Steven M. Swirsky of Epstein Becker & Green, P.C.

©2015 Epstein Becker & Green, P.C. All rights reserved.

U.S. Equal Employment Opportunity Commission Rules That Sexual Orientation Discrimination Violates Title VII Of The 1964 Civil Rights Act

In a potentially groundbreaking decision that increases legal protections throughout the U.S. for lesbian, gay and bisexual employees, the Equal Employment Opportunity Commission (EEOC) ruled on June 15, 2015, that existing civil rights law bars sexual orientation-based employment discrimination.  The EEOC addressed the question of whether the ban on sex discrimination in Title VII of The Civil Rights Act of 1964 (“The Civil Rights Act”) bars anti-LGB discrimination in a charge brought by a Florida employee.

EEOC Employment discrimination LGB discrimination sexual orientation

The ruling was issued without objection from any members of the five-person commission, and while it technically only applies directly to federal employees’ claims, the EEOC also applies such rulings across the nation when it investigates claims of discrimination in private employment.  Although only the Supreme Court can issue a final, definitive ruling on the interpretation of The Civil Rights Act, EEOC decisions are given significant deference by federal courts.

Although the EEOC had been moving in this general direction with cases and field guidance addressing specific types of discrimination faced by gay people, the July 15 decision unequivocally states that sexual orientation is inherently an unlawful “sex-based consideration,” reasoning that sexual orientation discrimination “necessarily entails treating an employee less favorably because of the employee’s sex” and constitutes “associational discrimination on the basis of sex.”  In making this ruling, the EEOC joins approximately 22 states that provide sexual orientation discrimination protections in employment.

Given that this EEOC decision is entitled to deference by federal courts, employers across the U.S. should anticipate that practices that could be construed as discriminatory on the basis of a worker’s sexual orientation will be challenged in federal court and subject the employer to potential liability.

For EEOC guidance on this issue, click the following link: http://www.eeoc.gov/eeoc/newsroom/wysk/enforcement_protections_lgbt_workers.cfm

ARTICLE BY Gary M. Gansle of Squire Patton Boggs (US) LLP

© Copyright 2015 Squire Patton Boggs (US) LLP