LaborSphere, Author at Laborsphere

New Guidance May Help Employers Avoid Significant Penalties: How to Prepare for 2014 and the New Employer Shared Responsibility Rules and Waiting Period Limitation

From our friends in the Employee Benefits and Executive Compensation Group: New guidance is available to help employers prepare for the significant new rules that become effective in 2014, including the employer shared responsibility mandate (i.e., the penalties that may be imposed on an employer that doesn’t offer certain health care coverage) and the prohibition on waiting periods in excess of 90 days, under the Patient Protection and Affordable Care Act of 2010 (health care reform).

Employers may rely on the new guidance through the end of 2014. Employers will not be required to comply with any subsequent guidance that is more restrictive until January 1, 2015 at the earliest. This is good news because it provides employers a measure of certainty about how to prepare for the 2014 employer shared responsibility mandate – particularly those employers concerned about what must be done to avoid significant penalties for failing to provide coverage, or for providing unaffordable coverage.

Click here to download a summary of the current rules to help determine who is a full-time employee for purposes of the employer shared responsibility mandate and the 90-day waiting period limitation, as well as suggested steps employers should take now to prepare for 2014.

New Jersey Employers Required to Post and Distribute Notice of Gender Pay Equality

On September 21, 2012, New Jersey’s Governor Chris Christie signed Assembly Bill No. 2647 (A-2647) into law, supplementing the New Jersey Equal Pay Act which will take effect on November 19, 2012, and applies to all New Jersey employers with 50 or more employees. A-2647 imposes several new obligations on employers, who must conspicuously post the notification in an accessible and conspicuous place in English, Spanish and any other language spoken by 10% of the workforce within 30 days of the time the Commissioner first issues the form notice.

The notice must detail employees’ rights to be free of gender inequity or bias in pay, compensation, benefits or other terms and conditions of employment. In addition, the notice must be given to new employees upon hire and to any employee upon request. Employers must redistribute the notice annually and obtain a written acknowledgment that the employee has read and understood the notice. Distribution of the notice may be made by paper or electronically via email or a website, “if the site is for the exclusive use of all workers, can be accessed by all workers, and the employer provides notice to the workers of its posting.”

However, the law does not require posting or distribution on the effective date, November 19, 2012, or even within 30 days of the effective date. The posting and distribution requirements will not be triggered until the Commissioner of Labor and Workforce Development issues the notification by regulation, the notice has passed through the regulatory approval process and is published in the New Jersey Register. This process will likely take several months.

NLRB Signals Intent To Scrutinize Facially Neutral Handbook Policies

The Acting General Counsel of the NLRB is apparently rummaging through handbooks and policy statements to charge nonunion employers with unfair labor practices for enacting seemingly innocuous rules that could conceivably be read as interfering with the right of employees to engage in protected concerted activity. And as can be seen from the Board’s recent opinion in Karl Knauz Motors, Inc., 358 NLRB No. 164 (2012), the current Board majority has apparently bought into that misguided theory.

Under existing Board law, employers violate Section 8(a)(1) of the Act by maintaining work rules or policies that “would reasonably” be construed by employees as prohibiting or chilling their right to discuss or object to the terms and conditions of their employment. In this case, the car dealership had a seemingly innocuous and facially neutral “Courtesy” Rule in its employee handbook requiring employees to be “courteous” and “polite” to customers, suppliers and co-workers:

(b) Courtesy: Courtesy is the responsibility of every employee. Everyone is expected to be courteous, polite and friendly to our customers, vendors and suppliers, as well as their fellow employees. No one should be disrespectful or use profanity or any other language which injures the image or reputation of the Dealership.

The rule would reasonably appear to require employees to refrain from being disrespectful and from using language which would reflect poorly on the Dealership when interacting with customers and suppliers, or with one another in the presence of customers and suppliers.

Although the rule was not applied to discipline or discharge any employee, the Acting General Counsel nevertheless charged the employer with an unfair labor practice for maintaining the rule, and the Board majority agreed. Citing its recent social media policy decision in Costco Wholesale Corp., the Board noted that there was no protected activity disclaimer in the handbook and held that the “Courtesy” Rule is unlawful based on the strained conclusion that the Dealership’s employees would reasonably assume that they had been disrespectful in violation of the rule if they objected to or criticized anything concerning their working conditions. The reliance on Costco would appear to be misplaced, however, as that case involved a rule prohibiting employees from posting disparaging comments about the employer on the Internet. In this case, the Board’s majority improperly reads the “Courtesy” Rule as if the sentence prohibiting disrespectful conduct and profanity was a stand-alone requirement as in Costco, ignoring completely the context in which that sentence is part of the overall expectation that employees be courteous to customers and one another in order to maintain the Dealership’s good reputation and image. Context matters, however, and in this context it appears the Board will find rules to be unlawful if they “could conceivably” be read as chilling protected rights, as it strains credulity to think that employees “would reasonably” read a rule addressed to courteous behavior towards customers as interfering with their right to object to working conditions. Because the Acting General Counsel will continue to prosecute nonunion employers for handbook policies that “could conceivably” be read as chilling protected activity, employers need to review and modify their policies to avoid facing unfair labor practice charges.

Former Employee Fails To Convince Court Of Underpayment In First And Last Weeks Of Employment

Methodically navigating the arcane maze of regulations surrounding the Fair Labor Standards Act (“FLSA”), the Court in Kirchoff v. Wipro, Inc., W.D. Wash., No. 2:11-cv-00568, 10/2/12, held that a technology consulting company (“Wipro”) did not violate the FLSA or Washington law by using the “Pay Period” – rather than the “Work Week” – method to calculate a fired senior manager’s salary for the first and last weeks of his employment.

Wipro provides consulting services to technology companies such as Microsoft Corp., Cisco Systems, Inc. and AT&T, Inc. Wipro employed Kirchoff as a Senior Manager at an annual salary of $140,000 from July 26, 2010 to January 27, 2011, when Wipro terminated his employment. Kirchoff then sued Wipro, claiming that he and other employees had been underpaid because Wipro used the “Pay Period” method to determine their pay for the first and last weeks of their employment.

An employer must generally pay an exempt employee his or her full salary for any workweek in which the employee works at all, regardless of the number of hours. However, Department of Labor (“DOL”) regulations provide that “[a]n employer is not required to pay the full salary in the initial or terminal week of employment. Rather an employer may pay a proportionate part of an employee’s full salary for the time actually worked in the first and last week of employment. In such weeks, the payment of an hourly or daily equivalent of the employee’s full salary for the time actually worked will meet the requirement.” 29 C.F.R. §541.602(b)(6). Additionally, “[w]hen calculating the amount of a deduction from pay allowed under paragraph (b) of this section, the employer may use the hourly or daily equivalent of the employee’s full weekly salary or any other amount proportional to the time actually missed by the employee.” 29 C.F.R. §541.602(c).

Under the “Pay Period” method of calculating an exempt employee’s pay for a partial first or last week of employment, the employer divides the employee’s annual salary into twenty-four semi-monthly pay periods to obtain a semi-monthly rate, which the employer then divides by the number of working days in the semi-monthly pay period to yield a daily rate for the pay period. The employer then multiplies the daily rate by the number of days actually worked by the employee to determine the final compensation for the first and last weeks of employment.

Under the “Work Week” method, the employer divides the employee’s annual salary by fifty-two to calculate the weekly rate and then divides that rate by five, the number of working days in a week, to determine the daily rate. The employer then determines the employee’s final pay by multiplying the daily rate by the number of days that the employee actually worked.

Kirchoff argued that 29 C.F.R. §778.113(b) requires employers to use the “Work Week” method. While acknowledging that the approach specified in this regulation “matches” the “Work Week” method, the Court rejected Kirchoff’s argument. According to the Court, Part 778, of which this regulation is a subpart, deals with Overtime Compensation, and Kirchoff’s dispute did not involve overtime, nor does the applicable regulation, 29 C.F.R. §541.602, incorporate or reference the overtime regulation. The Court further noted that Section 541.602(c) permits the employer to use “any amount proportional to the time actually missed by the employee.” The Court explained that Kirchoff’s interpretation that only the “Work Week” method is permitted would render the remaining language of the regulation meaningless, which runs counter to basic rules of statutory construction that presume that every word has some effect.

Focusing on Section 541.602(c), the Court found that Wipro’s method based on the percentage of days worked in the pay period was mathematically correct as a “proportionate part” of Kirchoff’s full salary. The Court granted summary judgment to Wipro on Kirchoff’s FLSA and state law claims.

Employers must be careful when addressing application of FLSA regulations and be aware that the FLSA provides employers with multiple options for calculating employees’ pay for the first and last weeks of work.

U.S. Supreme Court to Define Who is a Supervisor Under Title VII

In a development that could have far reaching implications for employers, the U.S. Supreme Court has agreed to hear a case, Vance v. Ball State University, in which the central issue is the definition of “supervisor” for purposes of determining an employer’s liability for harassment under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq. (“Title VII”). Under Title VII, if the alleged harasser is a supervisor, liability is generally imputed to the employer (unless the employer can show they it had an effective anti-harassment policy that the plaintiff unreasonably failed to utilize). On the other hand, if a hostile work environment is created by co-workers, not supervisors, the employer is liable only if the plaintiff proves that the employer failed to take reasonable measures to stop the harassment, a considerably more difficult standard for plaintiffs.

Although determining whether an employee is a “supervisor” is important in many cases, neither Title VII nor Supreme Court case law specifically defines the term. However, various circuit courts have crafted their own definitions of “supervisor” and two primary definitions have emerged. The First, Seventh and Eighth Circuits define a “supervisor” as an employee who possesses the power to make “consequential employment decisions” such as decisions about hiring and firing, promotions and demotions, and disciplinary actions. In contrast, the Second, Fourth, and Ninth Circuits (as well as the Equal Employment Opportunity Commission) have adopted a broader definition, holding that an individual qualifies as an employee’s supervisor if the individual: (1) has authority to undertake or recommend tangible employment decisions affecting the employee; or (2) has authority to direct the employee’s daily work activities. Under this broader definition, far more employees are “supervisors” and, as a result, may potentially subject their employers to vicarious liability.

In Vance, the plaintiff worked in Ball State University’s catering department. She alleged that another employee, Davis, subjected her to racially discriminatory remarks. According to the plaintiff, Davis directed her work and was, therefore, a “supervisor.” The district court granted summary judgment to Ball State, holding that Davis was not a supervisor because she did not have the power to hire, fire, or discipline Vance. The Seventh Circuit affirmed.

Whether the Supreme Court, in deciding Vance and resolving the split among the circuit courts, adopts a narrow or expansive definition of “supervisor” will have a significant effect on employer exposure in harassment suits. If the Supreme Court adopts a broader definition, the pool of employees who can potentially subject their employers to vicarious liability will be significantly greater, likely resulting in more suits against employers. Moreover, it will be more difficult for employers to prevail at the summary judgment stage of litigation, because a more fact-based inquiry will be needed to determine whether someone is a supervisor. While it is relatively straightforward to show whether an employee is responsible for hiring, firing, promotions and the like, the broader standard requires a more detailed examination of the employee’s role.

Oral argument is scheduled for November and a decision is expected early next year.