Obligations for Employers Before, During and After a Storm

By: William R. Horwitz

As cleanup from the Nor’easter that pummeled the East Coast last week continues, and the prospect of more snow looms, we hope that you and your families, as well as your businesses and employees, are safe and warm and that the lights are on. As this has been one of the more problematic winters in recent memory, we wanted to remind employers of some of their obligations before, during and after a storm.

Temporary Closings

Unless your agreements or policies provide otherwise, you are generally not required to pay non-exempt employees when they are not working. Therefore, if your business is closed and your employees do not report to work, you are not obligated to pay non-exempt employees. However, make sure that these employees are not checking work e-mails, communicating with supervisors about work-related issues or otherwise working from home, because non-exempt employees are entitled to receive pay for these activities even if they do not physically report to work.

Note that some states require an employer to pay employees for reporting to work, even if the business closes and the employer sends them home. For example, a New Jersey employer must pay employees who report to work at least one hour of pay. A New York employer must pay employees who report to work at least four hours of pay (or the number of hours in the scheduled shift if it is less than four hours). With regard to exempt employees, they are generally entitled to receive their full salaries, even if the business is closed – at least if the shutdown lasts for less than a week. If a business is closed for an entire week and an exempt employee performs absolutely no work during that time, the employer is generally not required to pay the employee for the week.

When a business is temporarily closed, the employer can require exempt employees to use accrued vacation time for the time off, but this requirement should be set forth clearly in the Employee Handbook and any employment contracts.

Cleanup

After a storm passes, employees whose homes remain without power, who are repairing damage to their property or whose children’s schools remain closed, may seek additional time off from work. While an employer that can afford to do so may allow additional flexibility to these employees in order to give them peace of mind and boost their loyalty and morale, these requests may otherwise be handled pursuant to the employer’s contracts and policies.

Other Issues

In addition to the above general points, employers should also be aware of state laws that affect certain employees and certain industries. For instance, in New York and New Jersey, the prohibition against mandatory overtime for health care personnel includes an exception for a declared state of emergency. New Jersey also provides protections for employees who miss work because of their responsibilities as volunteer first responders.

Conclusion

Extreme weather and natural disasters that disrupt business create big headaches for employers and employees. We recommend clear and consistent communication with your employees to avoid confusion about your expectations. Also, maintaining sound employment policies and consulting with counsel when issues arise is critical for avoiding additional headaches resulting from ensuing workplace legal liability.

California Employers: What You Need to Know for 2014 – Wage and Hour Laws and Penalties

A new year means new legislation and regulations for employers with operations in California.  Prepared by Kate Gold, partner in the Los Angeles office, and Alexis Burgess, associate in the Los Angeles office, this four-part series will take a look at some of the new laws and regulation affecting private employers doing business in California.

Wage and Hour Laws and Penalties

Minimum wage increase.  AB 10 raises the state-wide minimum wage from the current $8 per hour to $9 per hour, effective July 1, 2014, and then to $10 per hour, effective January 1, 2016.  Employers should note that employees currently classified as exempt must still meet the salary basis test to qualify for the particular exemption claimed.

Minimum wage penalties.  Under Labor Code section 1194.2, employees who have not been paid minimum wages may recover liquidated damages through civil actions or administrative wage hearings before the Labor Commissioner.  AB 442 extends the authority of the Labor Commissioner to award liquidated damages to affected employees through the labor commissioner citations process.  Thus, affected employees will be able to recover liquidated damages in an amount equal to the wages unlawfully unpaid plus interest thereon through either a civil action, an administrative hearing, or a citation issued by the Labor Commissioner.

Wage claim attorneys’ fees.  Labor Code section 218.5 awards attorneys’ fees and costs to the prevailing party in any action for nonpayment of wages, fringe benefits, or health and welfare or pension fund contributions, regardless of whether the prevailing party is the employer or employee.  Under SB 462, a prevailing employer may only recover attorneys’ fees and costs if the court determines that the employee filed suit in bad faith.

Domestic worker overtime.  AB 241 enacts the Domestic Worker Bill of Rights, which provides that a “domestic work employee who is a personal attendant” will be eligible for overtime at 1.5 times his or her regular rate of pay if he or she works more than nine hours in any workday or more than 45 hours in the workweek.  Individuals and entities employing in-home help should determine whether they or their employees qualify for an exemption.

Heat illness recovery periods.  Under Cal/OSHA regulations, employees that work outdoors in temperatures exceeding 85 degrees Fahrenheit must be allowed, and encouraged, to take a cool-down rest for at least five minutes when they feel the need to do so in order to avoid overheating.  SB 435 now adds this “heat illness recovery period” to the requirement in Labor Code section 226.7 that employers provide employees with meal and rest breaks.  Thus, an employer’s failure to provide a heat illness recovery period to non-exempt employees will now result in penalties under Labor Code section 226.7 amounting to one additional hour of pay at the employee’s regular rate of compensation for each workday that the recovery period is not provided.

Criminal withholding.  Labor Code section 218.5 makes it a crime for an employer to willfully fail to remit agreed-upon payments to health and welfare funds, pension funds, or other various benefit plans, with failure to remit more than $500 constituting a felony.  SB 390 amends section 218.5 to include an employer’s failure to remit withholdings from an employee’s wages made for state, local, or federal tax purposes.

Prevailing wages.  Employers who provide services or construction work for any public entities must pay current prevailing wages, which are usually significantly higher than the minimum wage.  Prevailing wage laws have been updated for 2014 in the following ways:

  1. AB 1336 and SB 377 amend the process and timeline for assessing prevailing wage violations.  Under these provisions, a notice of completion of a public work filed with a county recorder must also be given to the Labor Commissioner, and the awarding body or political subdivision which accepts a public work must also provide notice of that acceptance to the Labor Commissioner.  The new laws then extend the deadline for the Labor Commissioner to serve a civil wage and penalty assessment alleging a violation of the prevailing wage law from 180 days (roughly six months) to eighteen months after the filing of a valid notice of completion with the applicable county recorder, or after acceptance of the public work, whichever occurs last.  Moreover, if notice is not given in a timely manner to the Labor Commissioner, the deadline to serve an assessment shall be tolled for the length of the delay.
  2. AB 1336 also amends prevailing wage law to allow a court to award liquidated  damages and civil penalties, whereas such relief was previously recoverable only in an administrative action brought by the Labor Commissioner.
  3. Existing  law requires affected contractors to keep detailed payroll records  relating to public works and produce these as necessary, with names and  social security numbers redacted, to a joint labor-management committee.  AB 1336 amends this rule to require redaction of social security numbers only.
  4. SB 377 also establishes specific deadlines for the Director of the Department of Industrial Relations to respond to a request for a determination of whether a specific project or type of work is a public work within the meaning of the prevailing wage law.
  5. SB 7  prohibits a charter city from receiving or using state funding or financial assistance for a construction project if the city has awarded, within the prior 2 years, a public works contract without requiring the contractor to comply with prevailing wage provisions.  Small project exemptions apply.  SB 7 was enacted on the heels of a decision by the California Supreme Court holding that, under the California Constitution, the wage levels of workers employed by charter cities on locally funded public works projects are a municipal affair not subject to state regulation.  Thus, the constitutionality of this new law may be the subject of future litigation.
  6. SB 54  extends prevailing wage requirements to privately financed refinery construction projects.
  7. SB 776 prohibits contractors from counting payments for monitoring and enforcing prevailing wage laws towards their obligation to pay prevailing wages.

Unless otherwise noted the laws and regulations discussed above go into effect on January 1, 2014.  These summaries are not exhaustive, so employers who may be affected by California’s new laws should contact their attorneys to ensure that they are prepared for compliance and to update their employee policies and manuals as appropriate.

Employment Law Seminar Presented by the Federal Bar Association Chicago Chapter

Employment Law Seminar

The Chicago FBA invites you to attend its Employment Law Seminar on Thursday, January 23, 2014.  This program will feature eight judges from the federal and Illinois judiciary, including the Seventh Circuit Court of Appeals, the Northern District of
Illinois and the Circuit Court of Cook County, as well as representatives from the Equal Employment Opportunity Commission, University of Chicago Law School and private practitioners.

Do not miss this opportunity to hear firsthand from these experts about the ever-changing landscape of federal and state laws and regulations. Panel discussions will cover recent developments in employment discrimination law, procedural developments in individual and class litigation, settlement and mediation, and EEOC investigations and litigation, among other topics of utmost
importance to employment law attorneys, employers and employees.

To view the agenda and pricing information, click here.

Date:     
Thursday, January 23, 2014

Time: 
1 to 5 p.m.
Cocktails and Hors d’oeuvres to follow

Location:
Hosted by Drinker Biddle & Reath LLP
191 North Wacker Drive
Chicago, Illinois

CLE:
3.75 Illinois MCLE credit hours*

Register online:   www.fedbarchicago.org/employment-law-seminar

* FBA Chicago will be applying for accreditation for 3.75 Illinois MCLE credit hours. Continuing legal education credits for other states must be handled by individual attendees.

Unpaid Interns Deemed Employees Under the FLSA

By: Kate S. Gold and Elena S. Min

A federal district court in New York ruled last week that unpaid interns who worked on the production of films for Fox Searchlight Pictures Inc. and Fox Entertainment Group, Inc. were actually employees who should have been paid in accordance with the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”)Glatt v. Fox Searchlight Pictures Inc., Case No. 11-CV-06784 (S.D.N.Y. 2013).  This decision comes just weeks after another Southern District of New York judge issued a favorable defense ruling by denying class certification for unpaid interns at various Hearst-owned magazines.  See Wang v. The Hearst Corporation, Case No. 12-CV-00793 (S.D.N.Y. 2013).

In Glatt, the court applied the six-factor test set used by the Department of Labor (“DOL”)  and determined that two unpaid interns who worked on production of Black Swan were improperly classified  and did not come within the “trainee” exception to the FLSA’s coverage.  Instead, the interns should have been classified as employees subject to the FLSA and NYLL.  Specifically, in applying the DOL test, the court found that:

  1.  The internship was not similar to training in an educational environment because the interns did not receive any formal training or education, or acquire any new skills aside from those specific to the Black Swan back office during the internship;
  2. The internship had only incidental benefit to the interns – resume value and references– which were not the result of the structure of the internship, and that Fox also benefitted from the unpaid work;
  3. The interns displaced regular employees and performed tasks that would have otherwise been performed by regular employees, such as obtaining documents for personnel files, picking up paychecks for coworkers, tracking and reconciling purchase orders, making copies, and running errands, among other low-level tasks;
  4. Fox received immediate advantages from the activities of the interns, and there is no evidence that the interns impeded work;
  5. The interns were not entitled to a job at the conclusion of the internship; and
  6. The parties understood that the interns were not entitled to wages for time spent in the internship, although the court noted that this factor was not determinative.

While the plaintiffs to whom the court’s ruling applied did not seek class certification, the court granted another plaintiff’s motion for class certification of her NYLL claims and conditional certification of the FLSA claims.  In doing so, the court found that:  (1) the class was sufficiently numerous because it included at least 40 plaintiffs whose information was not easily identifiable by plaintiffs; (2) there are common questions or law and fact relating to the DOL’s six-factor test; (3) the plaintiff’s claims are typical of the class because she participated in the same internship program administered by the same set of recruiters as all class members and was classified as an unpaid intern like all class members; (4) plaintiff’s interest are not antagonistic to those of the class; (5) common issues of liability predominate over any individual damages claims; and (6) class action is a more efficient mechanism than individual claims because of the relatively small recoveries available.

The court’s reference to the evidence presented in the case provides a good lesson for employers.  The court noted an internal memo in which Fox stated that, in light of the DOL test, Fox would only provide paid internships unless a manager could comply with the six criteria provided by the DOL.  The outcome in Glatt demonstrates employers must remain vigilant not only in maintaining proper policies on internships, but also in training and oversight of managers, to ensure compliance with the DOL’s six-factor test and the FLSA.

Unpaid Internships – Training Programs or a Lesson in Class Actions?

By: Kate S. Gold and Elena S. Min

Summer is quickly approaching, and eager students are lining up for internship opportunities, some of which may be unpaid.  The whole topic has caused a firestorm of news stories lately – including an NYU students’ petition to remove unpaid internship postings from the campus career center, and an auction by an on-line charity website for a six week unpaid internship at the UN NGO Committee on Human Rights (the current bid is $26,000).  Do unpaid internships run afoul of federal and state minimum wage laws?  The answer potentially is yes, but given recent successful challenges to class certification, employers now have useful guidance in developing defense strategies against such claims.

Last week, in Wang v. The Hearst Corporation, U.S.D.C. S.D.N.Y. Case No. 12-CV-00793, the court denied class certification in a case brought by interns at various Hearst-owned magazines.  The interns challenged Hearst’s practice of classifying them as unpaid interns, allegedly to avoid minimum wage and overtime laws under the Fair Labor Standards Act (“FLSA”) and New York state law.  The court found that the plaintiffs could not satisfy the commonality requirement for class certification.  While plaintiffs could demonstrate a corporate-wide policy of classifying proposed class members as unpaid interns, the nature of the internships varied greatly from magazine to magazine.  The court noted there was no evidence of a uniform policy among the magazines regarding the interns’ specific duties, training, or supervision.

Days later, attorneys for the defendant in Glatt v. Fox Searchlight Pictures Inc., U.S.D.C. S.D.N.Y. Case No. 11-CV-06784, made a similar argument to defeat class certification in a case in which Fox interns challenged their unpaid status under federal and New York state minimum wage and overtime laws.  In that case, the interns worked on the sets of different films or were based out of corporate offices, and weren’t governed by a centralized policy or procedure.  The defendant in Glatt argued that class certification should be denied because of the lack of a uniform policy.  While the court in Glatt has not yet ruled, these two cases suggest that, although claims by unpaid interns may persist, plaintiffs may find it increasingly difficult to sustain them as class actions.

In light of these cases, now is a good time to review the rules for internships.  According to the Department of Labor, internships in the for-profit private sector will be viewed as employment relationships for which the FLSA minimum wage and overtime rules will apply, unless the intern is truly receiving training which meets six criteria:  (1) the internship is similar to training that would be given in an educational environment; (2) the internship experience is for the benefit of the intern; (3) the intern is not replacing employees and works under close supervision; (4) the sponsor of the intern does not derive immediate benefit from intern’s activities and at times, its operations may actually be impeded; (5) the intern is not entitled to a job at the conclusion of the internship; and (6) the sponsor and the intern understand the intern is not entitled to wages for the time spent in the internship.  As of 2010, the California Division of Labor Standards Enforcement (“DLSE”) relaxed the multi-factor test it previously applied and now uses the same criteria as the DOL.

While the Hearst ruling is good news for employers, the case did not address the merits of the interns’ claims and does not mean employers can relax their compliance efforts.  If an employer improperly classifies an internship as “unpaid,” the employer could be liable for failure to pay minimum wage and overtime, penalties for failure to provide meal and rest breaks, as well as potential liability for violations of anti-discrimination and anti-harassment laws that apply to employees.  The bottom line is that employers should apply the DOL/DLSE six-factor test and if their internships do not meet the criteria, the interns should be paid at least minimum wage.

Editors note: Be sure to check out Kate’s guest blog post for thewrap.com on the use of interns by entertainment and media companies.

California Court of Appeal Finds Employment Arbitration Agreement Barring Class Claims Unconscionable

By: Fey Epling

In Compton v. Superior Court of Los Angeles County, No. B236669 (2d Dist. Mar. 19, 2013), a divided panel of the Second District Court of Appeal reversed the Los Angeles Superior Court’s order compelling arbitration of her wage-and-hour class action complaint.

The Compton majority found the arbitration provision was substantively unconscionable because it was “unfairly one-sided” for four reasons.  First, the agreement exempted the employer from arbitration for injunctive relief on claims related to confidential information and trade secrets.  The majority did not find the carve-out of plaintiff’s claims for workers compensation, unemployment and disability claims sufficient to create parity.  Second, the majority found the imposition of a one-year time limit to arbitrate employee claims impermissibly shortened the applicable statutes of limitations; for a separate, but related reason, the court found this limitation was unfairly one-sided when compared with the three- and four-year statutes of limitation applicable to the unfair competition and trade secret claims preserved by the employer.  Finally, the majority found that the attorneys’ fees language undermined the employee-favorable statutory fee provisions.  Of some concern, the court declined to sever the offensive terms, finding the agreement to be “permeated by unconscionability.”

In an apparent effort to distance its opinion from AT&T Mobility, LLC v. Concepcion (2011) 131 S.Ct. 1740 and its progeny, the Compton majority emphasized that the Concepcion opinion arose out of a consumer arbitration agreement.  The court specifically found that Concepcion “did not abrogate the Armendariz one-sidedness rule,” i.e., “the doctrine of unconscionability limits the extent to which a stronger party may, through a contract of adhesion, impose the arbitration forum on the weaker party without accepting that forum for itself.”  Armendariz v. Foundation Health Psychcare Servs. (2000) 24 Cal.4th 83, 118.

The Compton court found that the agreement was also procedurally unconscionable because, regardless of “how conspicuous the arbitration agreement’s terms and advisements,” the employer’s reported conduct (hurried presentation and signature requested) “rendered them nearly meaningless” and demonstrated oppression.  The court also found that the information provided was one-sided because it did not sufficiently set forth the rights that were being waived, and because the rules of the applicable arbitration bodies were not provided to the employees in toto.

As a procedural side note, the panel was divided even on the basis for consideration of the appeal.  The dissent found that the appeal was appropriate pursuant to the “death knell” doctrine, and the majority side-stepped the issue by addressing the issue as a petition for writ of mandate.

The dissent raises a host of issues and highlights the unsettled conflicts between the Concepcion line of cases and California’s unconscionability principles, which have arisen primarily in the context of employee and consumer lawsuits.

Given the strong language in Compton and the court’s refusal to strike out the offensive terms, California employers may wish to engage in a review of their arbitration agreements in light of the Compton majority’s opinion.

Editor’s Update:

On June 12, 2013, the Supreme Court granted defendant’s petition for review, but deferred all briefing and further action in the matter pending its disposition of Sanchez v. Valencia Holding Co., S199119, the leading case on the related issue of whether the Federal Arbitration Act, as interpreted in AT&T Mobility LLC v. Concepcion (2011) 563 U.S. ___, 131 S.Ct. 1740, preempt state laws invalidating mandatory arbitration provisions in a consumer contract on grounds of procedural and substantive unconscionability.