Interns or Employees? Courts Continue to Wrestle with Internships under the FLSA

Interns continue to create confusion for employers.  A recent lawsuit highlights the risk posed by utilizing unpaid student interns.  In Schumann v. Collier Anesthesia, P.A., No. 14-13169, (11th Cir, 2015), the U.S. Court of Appeals for the Eleventh Circuit overturned a dismissal of an action brought by 25 former students in a nursing master's degree program and remanded the case back to the trial court to determine whether these student interns were actually employees under the Fair Labor Standards Act.

According to the Department of Labor (DOL), there are six factors to consider to determine whether an individual is an intern or employee:

1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees, but works under close supervision of existing staff;

4. The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job at the conclusion of the internship; and

6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

DOL, Wage & Hour Div., Fact Sheet #71, Internship Programs Under The Fair Labor Standards Act (April 2010).

 

What is disturbing for employers is the fact that the Schumann Court expressly rejected the lower court's reliance on the factors above and the guidance contained in the DOL's Field Operations Handbook.  Further, the court distinguish the U.S. Supreme Court decision of Walling v. Portland Terminal Co., 330 U.S. 148 (1947) that formed the basis for the above six factor test. The Schumann Court, however, held that long-term "intensive modern internships that are required to obtain academic degrees and professional certification and licensure in a field are just too different from the" facts of the Portland Terminal case in the 1947.  The court went on to explain that “courts reviewing cases involving students and trainees … have, for the most part, concentrated on evaluating the ‘primary beneficiary' of the training or school program to determine whether participants constituted ‘employees' under the FLSA” because this approach “reveals the ‘economic reality' of the situation.”

In the case of the students in the nursing program, the court noted that "both the intern and the employer may obtain significant benefits.” Consequently, it decided “to focus on the benefits to the student while still considering whether the manner in which the employer implements the internship program takes unfair advantage of or is otherwise abusive towards the student.”

The court, following the lead of a recent Second Circuit decision, held that the following non-exhaustive list of factors should be used:

1. The extent to which the intern and the employer clearly understand that there is no expectation of compensation. Any promise of compensation, express or implied, suggests that the intern is an employee—and vice versa.

2. The extent to which the internship provides training that would be similar to that which would be given in an educational environment, including the clinical and other hands-on training provided by educational institutions.

3. The extent to which the internship is tied to the intern's formal education program by integrated coursework or the receipt of academic credit.

4. The extent to which the internship accommodates the intern's academic commitments by corresponding to the academic calendar.

5. The extent to which the internship's duration is limited to the period in which the internship provides the intern with beneficial learning.

6. The extent to which the intern's work complements, rather than displaces, the work of paid employees while providing significant educational benefits to the intern.

7. The extent to which the intern and the employer understand that the internship is conducted without entitlement to a paid job at the conclusion of the internship.

See also, Glatt v. Fox Searchlight Pictures, Inc., 791 F.3d 376 (2d Cir. 2015).

Based on these factors, the court ordered the case to go back to the trial court so that the Judge could consider the case based on the above seven-factor test.

Different courts are handling internship issues in different ways.  If, however, the recent Second and Eleventh Circuit decisions are any indication of a trend, companies should review their relationships with interns to ensure compliance with the FLSA.

EEOC Must pay Nearly $1M in Fees for Background Check Case

The EEOC has recently been pursuing cases against companies for allegedly discriminating in its use of background checks.  In the recent case of EEOC v. Freeman, 2015 BL 288334, D. Md., No. 8:09-cv-02573, 9/4/15, the EEOC pushed its position too far.  The Court in Freeman summarized the facts of the case as follows:

Freeman, as a regular part of its hiring process, conducted criminal background checks on all applicants who were offered a position, and conducted credit background checks on applicants who were offered financially sensitive positions. EEOC v. Freeman, 961 F. Supp. 2d 783 , 787 (D. Md. 2013). Importantly, applicants were not turned away for any negative information. Rather, Freeman limited in scope the type of negative information that would disqualify an applicant. For example, as to the criminal background check, Freeman generally did not consider arrests, but only convictions that had occurred within the past seven years. Id. at 788 . Furthermore, Freeman did not consider all convictions, but only those for certain crimes. Id . Similarly, with regard to credit checks, only certain negative items would exclude an applicant from being hired. Id. at 789 .

Freeman rejected a job applicant for a position based on information on her credit report and the applicant then filed a charge of discrimination with the EEOC.  The EEOC took the position that Freeman’s use of background checks had a disparate impact on Arica-American, Hispanic, and male applicants. In support of this claim, the EEOC relied on statistical evidence from an “expert.”  The court found that the expert’s statistical analysis was “inexplicably shoddy,” and dismissed the case for lack of any evidence of disparate treatment.  Freemen then moved for attorneys fees against the EEOC.  The Court found that the EEOC statistics were “divorced from any reference to” the allegations against Freeman and therefore required the EEOC to pay Freeman’s attorneys fees for defending the case.  Freeman was awarded nearly a million dollars in fees.

The EEOC has had issues with its statistical analysis before.  In EEOC v. Kaplan Higher Education Corp., 748 F.3d 749, (6th Cir. 2014), the Sixth Circuit upheld the exclusion of EEOC expert statistics as well.

But, the EEOC has also had success in pursuing litigation based on background checks.  The EEOC recently settled a case against BMW for $1.6 million and is continuing to litigate against Dollar General.  Employers should contact their employment counsel to review their credit and criminal background check policies.

FTC Issues Cyber Security Guidance: Good Advice for Employers and Business

The Federal Trade Commission has issued a guide for businesses that sets forth cyber security practices based on lessons learned from FTC cases.  Regardless of industry, the FTC guide can be used to help assess the cyber-security posture of an entity.  Employers should be aware that not all cyber security risks occur from distant hackers trying to break into a network.  In fact, many cyber issues begin with an "inside job" and can lead to huge liability.  The FTC's guide is a free resource that applies regardless of company size or sector.

Roanoke Journalist Murders are the Latest Violent Tragedies Caused by Co-Workers or Former Employees--What can Employers do?

A little known fact about yrs truly: I grew up in Roanoke, Virginia.  As a kid, I recall vividly how absolutely nothing ever seemed to happen in Roanoke.  Today, that has changed.  A TV news station's former employee murdered two journalists on live television while they were filming an on-site interview at Smith Mountain Lake near Roanoke. The murderer was apparently a former employee who was terminated earlier this year.  Given my history living in the area and the fact that one of the victims was a fellow JMU grad, this attack hits close to home for me.  Tragically, however, this horrific event is just the latest case of workplace violence that has been plaguing employers for decades. 

According to the most recent DOL statistics, in 2010, there were 506 workplace homicides including 405 due to shootings.

The Bureau of Labor Statistics’ Census of Fatal Occupational Injuries (CFOI) reported 14,770 workplace homicides between 1992 and 2012.  In addition to today’s tragedy, another famous example of this type of violence occurred in 2014 in Oklahoma.  In that case a food plant employee drove from his termination meeting with HR to another building at the plant and beheaded one employee and stabbed another.

In addition to workplace homicides, there are ever increasing numbers of registered sex offenders who are in the workplace or seeking employment.  I recently have had several clients who were dealing with employees convicted of indecent exposure or other criminal sexual acts outside of the workplace. 

While employers must grapple with these issues and strive to make their workplace as safe as possible for employees, clients, vendors, and customers, they are often forced with difficult choices.  For instance, the EEOC’s recent guidelines on criminal background checks create potential liability for employers whose background check policies create a “disparate impact” on minority groups.  According to EEOC statistics, these groups tend to have a disproportionate rate of criminal convictions and thus by refusing to hire them an employer may be discrimination.  According to the EEOC, an employer must consider:

·     The nature and gravity of the offense or conduct;

·     The time that has passed since the offense or conduct and/or completion of the sentence; and

·     The nature of the job held or sought

The EEOC Guidance further underscores the importance of an "individualized assessment" prior to an adverse action based on a criminal record.  Of course, some state laws require criminal background checks for industries such as nursing homes and daycare.  But other industries continue to struggle with the desire to provide a safe workplace and the EEOC guidelines on criminal background checks.

To add to the confusion, there can also be liability if an employer does not terminate an employee who is known to have certain criminal propensities.  Many states, including Michigan, recognize the torts of negligent hiring, supervision, and retention of an unsafe employee.  See Bradley v Stevens, 329 Mich 556, 46 NW2d 382 (1951) (employer who knew or should have known of employee’s violent propensities and criminal record before employee’s commission of intentional tort on customer liable for damages to customer).  To hold the employer liable for negligent hiring, supervision, or retention of an employee, the plaintiff must establish that (1) the company owed a duty to the victim, (2) the company breached that duty, and (3) the breach of duty was the proximate cause of plaintiff’s injuries. The amount of public contact the employee has, the nature of that contact, and the employer’s knowledge of the employee’s dangerous propensities are factors considered by courts.  For the claims to succeed, the plaintiff typically must establish the threat of physical injury or actual physical injury. In Vennittilli v Primerica, Inc, 943 F Supp 793 (ED Mich 1996), for instance, the court limited the application of the negligent hiring doctrine to circumstances in which an employee committed a foreseeable act of physical violence.

If an employer is found to have a duty of care to protect third parties coming in contact with its employees, it will be found to have breached this duty if it knew or should have known of the employee’s violent acts or bad character but nevertheless hired or retained that employee or failed to reasonably investigate the employee’s background. Tyus v Booth, 64 Mich App 88, 235 NW2d 69 (1975).

For employers who do conduct criminal background checks, there can also be potential liability if the employer denies employment based on a background check where the proper Fair Credit Reporting Act disclosures were not provided. Under the FCRA, if a person is not hired or retained in a job based on a “consumer report,” from a consumer reporting agency (including criminal records), the employer must provide notices to the employee that include: (1) providing preliminary adverse action notice to consumer, along with copy of consumer report and A Summary of Your Rights under the Fair Credit Reporting Act, (2) allowing consumer a designated period of time to contact CRA if consumer wishes to dispute any information in consumer report, (3) providing CRA contact information, 4) providing a final adverse action notice to consumer if a final adverse employment decision is made.  15 USC 1681a, 1681b.

For employers the legal balancing act will continue.  As a practical matter, there may be nothing an employer can do to prevent an off-site shooting like the one that occurred near Roanoke or a rampage by a knife wielding employee.  But employers should continue to try to weed out potentially violent individuals or those who have criminal sexual propensities.  The choice may come down to which lawsuit the employer would rather defend: a wrongful death or negligent retention case coming after a murder; or, an employment discrimination claim case based on the failure to hire or retain a potentially violent individual.   

Remarks from EEOC Commissioner Constance S. Barker at ACI Conference in NYC

I have just listened to a keynote address from Commissioner Constance Barker of the EEOC.  Here are a few takeaways from Ms. Barker's remarks:

• The EEOC will issue final rules "very soon" on the ADA and wellness plans as well as GINA.

• While the EEOC takes the position that its criminal background checks apply to employers irrespective of state law (even those requiring background checks for certain industries), as a practical matter the EEOC will not file suits against companies following background check laws such as nursing homes or day care centers.  The thought process behind the EEOC position regarding state law is a fear that some industries would lobby state legislatures for carve outs to end-run the background check requirement.

• The EEOC continues to crack down on severance and release agreements that it considers overly broad.  Title VII waivers should now be clearly set out and possibly put in bold print.

• The EEOC has not taken a formal position on releases that allow an employee or former employee to file administrative charges but require the employee to not obtain any monetary recovery as a result.

• The EEOC hiring freeze has been lifted and the EEOC recently hired 350 new employees--mostly intake and investigators to tackle the 75,000 agency's charge backlog.

• 27 percent of the EEOC's current litigation docket relates to "systemic" claims; i.e. cases where companies are accused of widespread practices that are discriminatory.

• The EEOC now utilizes 18 "lead systemic investigators" at its regional locations to oversee systemic investigations and will seek to aggressively pursue systemic cases.

• The bill currently pending before the Senate to fund the EEOC would require the EEOC to follow regulatory notice and comment rules where two commissioners request it.  This would mean that the EEOC would effectively be unable to simply issue "guidance" as it has done recently since the two Republican Commissioners could request a comment period just as when the EEOC issues regulations.  

EEOC Formally Includes Sexual-Orientation Discrimination as Part of “Sex Discrimination” Under Title VII; Michigan Treasury Issues Guidance on Same-Sex Spousal Benefits

The Equal Employment Opportunity Commission has issued a formal decision in a federal sector case finding that discrimination based on sexual orientation is a form of illegal “sex discrimination” under Title VII of the Civil Rights Act of 1964.  The case, Complainant v. Foxx, E.E.O.C., No. 0120133080, issued July 16, 2015, found that “[s]exual orientation discrimination is sex discrimination because it necessarily entails treating an employee less favorably because of the employee's sex.”  Title VII applies to employers with 15 or more employees. 

While the EEOC decision does not carry the force of law, it indicates how the agency will address claims of sexual orientation discrimination, and it can have persuasive effect when courts consider private sector lawsuits involving alleged sexual orientation discrimination.  So far, however, the Sixth Circuit Court of Appeals, the federal court of appeals that hears cases from Michigan federal courts, has consistently ruled that “sexual orientation is not a prohibited basis for discriminatory acts under Title VII.”  It remains an open question as to whether the Sixth Circuit, or any other court, will reverse itself based on the EEOC position.

The Sixth Circuit has held that Title VII does protect transsexual persons from discrimination for failing to act in accordance and/or identify with their perceived sex or gender.  The new EEOC ruling, however, goes a step beyond acting in accordance with a gender stereotype and expressly finds that sexual orientation discrimination is sex discrimination under Title VII. 

It is also important to recognize that based on the new EEOC ruling and in the wake of the United States Supreme Court’s decision legalizing same-sex marriage, this area of the law is in flux.  Courts and administrative agencies are quickly adopting new rules that will force new compliance mandates on employers.  For instance, on July 16, 2015, the Michigan Treasury issued guidance clarifying taxation of benefits for same-sex spouses.  Employers in Michigan should stop applying state income tax withholding to the portion of employee wages that is used to pay premiums for a same-sex spouse.  Further, an employee with a same-sex spouse may wish to file a new W-4 changing the number of deductions, marital status, and possibly adding a spouse’s dependents.  Employers are encouraged to contact counsel with any questions in this quickly-changing area of law.

Lynn McGuire contributed to this post.

Supreme Court Same Sex Marriage Decision and DOL Overtime Expansion -– What Employers Need to Know Today

Digest of Recent NLRB Decisions on Employment in the Digital Age

The NLRB has been active in its continued attempts to establish rules for both unionized and non-unionized employers regarding "concerted activity" in the digital age.  This includes guidance and attacks on social medial policies and rulings relating to company emails.  Below is a digest of some of the most recent NLRB cases on this issue.

Purple Communications, Inc., 361 NLRB No. 43 (2014), the NLRB has ruled that “employee use of email for statutorily protected communications on nonworking time must presumptively be permitted” by employers that provide employees with access to email at work.  While the majority in Purple Communications characterized the decision as “carefully limited,” in reality, it appears to be a major game changer.  This decision applies to all employers, not only those that have union-represented employees or that are in the midst of union organizing campaigns.  The NLRB reasoned that:

By focusing too much on employers' property rights and too little on the importance of email as a means of workplace communication, the Board (in its earlier ruling) failed to adequately protect employees' rights...and abdicated its responsibility ‘to adapt the Act to the changing patterns of industrial life.’

NRLB GC Guidance Memorandum, GC 15-04, March 18, 2015, Concerning Employer Rules.

This GC memo relates to numerous Employee Handbook rules.  Highlights of the GC position as it relates to electronic and social media polices are as follows:

Unlawful confidentiality rules: Any blanket bans on employee information outside of work, bans on publishing confidential information without limiting language, or any other ban that is broad enough that it might include employee wages, benefits, or terms and conditions of employment.  The GC does give examples of “lawful confidentiality rules” that are specific enough to not encompass terms and conditions of employment, such as “Misuse or unauthorized disclosure of confidential information not otherwise available to persons or firms outside employer is cause for disciplinary action, including termination.”

Rules regarding conduct toward supervisors: The GC provides examples of language that is inappropriate under Section 7 regarding employee rights to criticize or protest employer labor policies or treatment of employees.  The GC did state that policies requiring employees to be respectful to customers, without mentioning management, would not violation Section 7.  Likewise, rules requiring employees to cooperate with each other and management in the performance of their work would not implicate Section 7 rights.  These policies also could extend to social media behavior.

Rules regulating conduct toward fellow employees:  The NLRB will ban internet or social media policies that it feels prevent employees from debating with each other about unions, management, and the terms and conditions of employment.  For instance, the GC found a policy unlawful that stated “[d]on’t pick fights” online. 

The GC did find that anti-harassment policies were lawful.  For instance, a policy was acceptable that prevented “harassment of employees, patients or facility visitors.”  Likewise, an employer can ban “use of racial slurs, derogatory comments, or insults.”

Policies regarding interaction with third parties: Any policy that could be construed as banning an employee’s right to communicate with news media, government agencies, or other third parties about wages, benefits, or other terms and conditions of employment will be found unlawful by the NLRB.  Policies will be lawful if they clarify that the employee cannot speak on behalf of the company but that the employees can speak to outsiders on behalf of themselves.

Unlawful rules regarding logos and trademarks:  The NLRB claims employees have fair use to use company intellectual property in support of concerted activity.  For instance, the NLRB has found unlawful a policy preventing use of “any Company logos, trademarks, graphics, or advertising materials” in social media.

Wendy’s Social Media Policy: The GC memo contains a discussion of its settlement with Wendy’s International LLC.  The company social medial policy required anyone commenting about Wendy’s on social media to obtain advance approval from his or her supervisor.  This was found to be overly broad and could prevent employee’s from discussing protected activities.

Wendy’s also banned posting photographs taken at company property.  The NLRB found this could violate the NLRA because pictures of, for instance, employee’s picketing would be lawful. 

Another Wendy’s policy prevented the creation of a blog or online group “related to your job” without approval from the company.  Because employees have the right to discuss the terms and conditions of employment online, this policy was unlawful.

The Wendy’s anti-disparagement policy was also found unlawful.  The offending provisions stated: [d]o not harass, threaten, libel, malign, defame, or disparage fellow professionals, employees, clients, competitors, or anyone else.  Do not make personal insults, use obscenities or engage in any conduct that would be unacceptable in a professional environment.”

Pier Sixty, LLC  362 NLRB 59 (2015), a March 31, 2015 (post GC Memorandum) decision where the NLRB found that language of the most offensive degree was not “so egregious as to exceed the Act’s protection.” Id. at *3.  Two days before a union election, a frustrated employee on break posted of his supervisor on Facebook:

Bob is such a NASTY MOTHER F***** don’t know how to talk to people???  F*** his mother and his entire f****** family?? What a LOSER??  Vote YES for the UNION???!!

The NLRB applied, what the dissenting panel member described as the “Atlantic Steel test on steroids” of (i) the place of the discussion, (ii) the discussion’s subject matter, (iii) the nature of the employee’s outburst, and (iv) whether the employer provoked the outburst, the Board also cobbled together “totality of the circumstances” factors from previous Board cases in considering (i) employer’s antiunion hostility, (ii) whether employee was impulsive or deliberate, (iii) whether the employer considered language similar to that used by employee to be offensive, (iv) whether the employer maintained a specific rule prohibiting the language at issue, and (v) whether the discipline imposed upon employee was typical of that imposed for similar violations or disproportionate to his offense.  

The employee was reinstated from his termination as the NLRB found his post was protected concerted activity.

Boch Imports, Inc., 362 NLRB No. 83 (April 30, 2015).  The NLRB found the company’s social media policy overly broad. The handbook rule required employees to: (1) identify themselves whenever they posted comments about the employer, the employer’s business, or a policy issue, and (2) prohibited employees from using the employer’s logo “in any manner.” In finding this policy unlawful, the NLRB reasoned that the self-identification requirement could cover comments about the terms and conditions of employment, and the requirement to self-identify would reasonably interfere with employees' protected activities on social media. The NLRB took issue with the restriction on using the employer’s logo “in any manner.” This, the Board reasoned, could cover protected employee communications, such as an employee engaging in union activity while wearing a uniform bearing the company logo.

In Macy’s Inc., 01-CA-123640 (May 12, 2015), an administrative law judge found that Macy’s maintained an unlawful employee handbook that contained overbroad confidential information policies. Macy’s policies prohibited employees from divulging “the personal information of the Company’s employees and customers,” “information about employees ... which if known outside the Company could harm the Company or its . . . employees,” “confidential information,” “information such as names, home and office contact information,” “any information that is not generally available to the public that relates to the Company or the Company’s . . . employees,” and “personally-identifiable information (Personal Data) ... [which] includes names, home and office contact information.” The ALJ found that these provisions unlawfully restrict employees from discussing the terms and conditions of their employment.

Macy’s handbook included a “savings clause” stating that nothing in the handbook was intended to limit employees from engaging in their rights protected by the Act, including protected concerted activities. The ALJ, howver, found that this “savings clause” was insufficient and written in a “generic” manner, whereas the prohibitions on employee conduct were very specific.

Rocky Mountain Eye Center, P.C., 19-CA-134567 (May 6, 2015).  An administrative law judge found that the company violated the NLRA by terminating an employee based on an unlawful confidentiality provision. That policy stated that “information about physicians, other employees, and the internal affairs of [the employer] are considered confidential . . . Breach of either patient or facility confidentiality is considered gross misconduct and may lead to immediate dismissal.” An employee accessed a database that included contact information for both the employer’s patients and employees and provided the employee contact information to a union organizer. The ALJ held that the confidentiality policy unlawfully restricted protected activity and was applied to restrict the employee’s right to share information about other employees with the union. The judge went on to further conclude that the employer violated the Act by terminating the employee for engaging in protected concerted activity.

In Landry’s Inc. (Bubba Gump Shrimp Co.), 362 NLRB No. 69 (April 16, 2015), the NLRB found that a social medial policy was permissible. The employee claimed termination based on making protected negative statements in social media about the employer. The employer’s social media policy stated:

While your free time is generally not subject to any restriction by the Company, the Company urges all employees not to post information regarding the Company, their jobs, or other employees which could lead to morale issues in the workplace or detrimentally affect the Company’s business. This can be accomplished by always thinking before you post, being civil to others and their opinions, and not posting personal information about others unless you have received their permission.

The judge noted that the “cautionary language” in the first sentence could act to inhibit employees from exercising their Section 7 rights. But the judge went on to conclude that when read in conjunction with the second sentence, the policy was sufficiently narrowly tailored to the “manner and tone” with which employees discuss the terms and conditions of their jobs, and “not the content.” The judge concluded that the employer did not violate the Act.

Does the ADA Require Employers to Give Drivers to Blind Pharmaceutical Reps?

The Fourth Circuit Court of Appeals is currently considering an appeal of a case involving whether a legally blind Pfizer sales representative must be provided a driver as an ADA accommodation.  The case involves a long-time Pharm-Rep for Pfizer whose job was to travel to physician offices to make sales visits.  The sales territory was large parts of North Carolina that lacked public transportation.  After the sales representative became legally blind and could no longer drive, she asked Pfizer to hire a full-time driver to take her to physician offices as an ADA accommodation.  Pfizer denied the request.

The subsequent ADA lawsuit was dismissed by the federal court judge overseeing the case.  The plaintiff appealed to the Fourth Circuit Court of Appeals arguing that while traveling was an essential function of the employee's job, actually driving was not.  Therefore, a driver would have been a reasonable accommodation for that job function.

The U.S. Chamber of Commerce, National Federation of Independent Businesses, and Equal Employment Advisory Council filed an Amicus brief (a brief filed by interested parties who are not technically part of the lawsuit).  The Amicus brief argued that providing a driver would not be a reasonable accommodation and would represent and undue hardship to the employer.  Requiring a driver for a sales person would have far reaching consequences according to the brief.

The Amicus brief was filed in the wake of briefs filed by the EEOC and National Employment Lawyers Association (NELA) that argued that the employee should have been given a driver.  The briefs compared the case to providing an interpreter for a deaf employee, which is required as an accommodation.

The case remains pending.  In the meantime, to avoid such word games from Plaintiff attorneys, employers should specify that both traveling and driving are essential functions of the job for outside sales personnel.

EEOC Responds to Criticism During Senate Hearing, Defends Wellness Regulations and Conciliation Efforts

During a recent Senate Committee Oversight Hearing, the EEOC faced criticism for pursuing discrimination investigations where no individual has claimed discrimination and focusing on high-profile lawsuits relating to novel legal issues rather than handling the charges currently pending.  Senator Lamar Alexander (R-Tenn) noted that the EEOC backlog has grown to more than 75,000 pending charges.  EEOC representations and Republican Senators jousted over several additional hot topic issues during the hearing.

Wellness Plans:  For instance, during the hearing the GOP was critical of the EEOC's new proposed regulations regarding wellness plans.  On April 20, 2015, the EEOC issued proposed regulations under the ADA regarding whether certain wellness plans are discriminatory.  These plans may comply with the ACA but still be considered unlawful under the ADA.  Republicans have introduced legislation (H.R. 1189, S. 620) that would shield employers from ADA lawsuits as long as their wellness plans complied with ACA requirements. "We recognize that many employers wish to implement wellness programs in an effort to improve their employees' health and reduce health care costs," Yang noted in her prepared remarks. “We are also mindful that wellness programs must adhere to the ADA's requirement that disability-related inquiries (such as questions on a health risk assessment) or medical examinations (such as blood tests for cholesterol levels) that are part of employee health programs must be 'voluntary.'"

New GINA Regulations Coming Soon:  The EEOC is aiming for the end of July to propose regulations under the Genetic Information Non-Discrimination Act that would impact wellness plans as well.

Conciliation Efforts: The EEOC, in response to questions, stated that lawsuits from the EEOC are a "last resort" and noted it engages in conciliation efforts prior to filing any lawsuit. The EEOC Chair Jenny Yang noted that the recent Supreme Court case allowing narrow judicial review of the EEOC's conciliation efforts was a "positive step forward."

The battle will no doubt continue as administrative agencies like the EEOC and NLRB take a more active role in attempting to change interpretations of existing statutes.

For more information, contact Brett J. Miller
www.butzel.com

Do On-Call Hours Count Toward the 30-Hour per Week ACA Requirement?

Employers should be careful with this issue and it will depend on how the on-call time is structured.  Remember, the ACA requires you to count “hours of service” toward the ACA 30 hour requirement.  Hours of service goes well beyond simple “hours worked.”  To determine if on-call time should be counted toward the 30-hour requirement, there are several things that must be considered.  Is it paid-at-regular-rate on-call time? Is it on-call time paid at some discounted rate?  Is the employee required to be on-site?  The preamble to the final employer mandate rule states:

The Treasury Department and the IRS continue to consider additional rules for determining hours of service for purposes of section 4980H with respect to certain work arrangements, including on-call hours, or categories of employees whose hours of service are particularly challenging to identify or track or for whom the final regulations’ general rules for determining hours of service may present special difficulties. Until further guidance is issued, employers of employees who have on-call hours are required to use a reasonable method for crediting hours of service that is consistent with section 4980H. It is not reasonable for an employer to fail to credit an employee with an hour of service for any on-call hour for which payment is made or due by the employer, for which the employee is required to remain on-call on the employer’s premises, or for which the employee’s activities while remaining on-call are subject to substantial restrictions that prevent the employee from using the time effectively for the employee’s own purposes.

Certainly it is clear that if employees are paid at their standard rate for on-call hours, these hours should be counted as hours of service. It remains unclear, however, how to treat circumstances where employees receive other minimal compensation for on-call time but are not called to work or substantially restricted.  It seems clear that if the employee is not paid for on-call time and is free of “substantial restrictions that prevent the employee from using the time effectively for the employee’s own purposes” then those hours would not count toward the 30-hour requirement.

Don’t Let the Bed Bugs Bite Your Business: Add a Bed Bug Policy to Your Handbook.

Bedbugs have been an increasing problem for families and businesses.  For instance, in June 2012, the Detroit News ran a front page article entitled “Detroit Bus Drivers Seek Bedbug Relief.”  According to the article, bus drivers were complaining of bed bugs on the buses and seeking employer intervention.  According to the Michigan bed bug registry, these tiny pests have been reported throughout the Detroit area as well as in Ann Arbor, Lansing, Flint, Grand Rapids, Traverse City, Kalamazoo, and other populated areas of Michigan.  Walk into any Home Depot or Lowes and you can now find shelves full of bedbug treatments and sprays.  In short, bedbugs are a major problem.

This author has received numerous questions about bedbugs in the workplace, including a panicked call from a client in the furniture business.  A warehouse employee had reported bed bugs in her apartment and claimed that she had been bitten.  The client wanted to know what steps could be taken to keep her out of the warehouse given that a bedbug-infested furniture warehouse may not be the best business model.  The client had no bed bug policy and no precedent to guide him.

The details of the background of bedbugs and bed bug remediation are beyond the scope of this article.  For those interested, the State of Michigan has a website dedicated to bed bugs that can be accessed online (Google “bed bugs State of Michigan” to find the website).  

For employers, bedbugs can be a very serious problem.  Imagine, for instance, that an employee in hospital, nursing home, or home health setting reports a bed bug infestation in his or her home or body.  This could include direct care givers or laundry workers who may be spreading bed bugs to patients.

The potential for a bed bug infestation from any one of these employees is tremendous and can be damaging to a business.  But, what can an employer do?  One option is to establish an employment policy that sets forth expectations for an employee who may be carrying bed bugs to work.

In crafting a bed bug policy, an employer must answer several questions:

1.    How does the company plan to prevent bed bug infestations?  For instance, will the company conduct on-site inspections of work areas (if allowable under an applicable collective bargaining agreement) or will the employer rely on reports of bed bugs in the work place from other employees or customers?

2.    Will employees have a duty to report bed bugs seen in the workplace?

3.    Will your policy require employees to report bed bug infestations or bites from home?

4.    What is the employer’s plan if an employee does have an infestation?  Will the employee be granted leave to avoid the risk of spreading bed bugs in the work place?  Will the leave be paid or covered by sick time?

5.    Will the employer pay for an employee’s extermination costs at home or require the employee to fix the problem and trust that it is done competently?

How these questions are answered will depend on the employer’s industry and the severity of a potential bed bug threat.  We recommend, at a minimum, requiring employee’s to disclose bed bugs spotted in the workplace and any bed bugs at home.  Failure to so report could lead to discipline up to and including termination.  Employers should also reserve the right to conduct inspections of the work place where possible.

There is, of course, the potential for liability from employee bed bug issues regardless of how well crafted a bed bug policy may be.  For instance, there are OSHA concerns where there is a workplace bed bug outbreak.  While OSHA regulations do not specifically mention bed bugs, the general duty clause states that “every closed workplace shall be so constructed and maintained to prevent the entrance of vermin . .  . .”  Thus, bed bugs could lead to a host of problems under OSHA and its attendant record keeping and reporting requirements.  We recently defended a MIOSHA claim of retaliation for reporting bed bugs in a nursing home.  While it turned out to be a false report, the government investigated the claim nonetheless before dismissing the charge.

Likewise, there could be whistleblower lawsuits for employees who report or threaten to report a bed bug issue.  Workers’ compensation could also be implicated if any employee claims an illness based on a workplace-related bed bug bite. 

There can also be a potential for discrimination claims.  Any bed bug policy should be crafted to avoid having a disparate impact on certain protected classifications.   Bed bugs are often found in low income areas but can strike anywhere.  Employers should not single out any one group for bed bug inspections or other action. 

Finally, employers must be aware of common law negligence claims.  If any employer is aware of workplace bed bugs and takes no action, the employer could face a negligence lawsuit from employees who become infested.  

Given the potential for disruption of business and possible liability, health care employers should have an employee bed bug policy.  Employers should consult legal counsel before implementing such a policy and before taking any adverse employment actions against an employee who has a bed bug infestation.

By Brett J. Miller

U.S. Supreme Court Creates New Standard for Proving Pregnancy Discrimination: What Does This Mean for Employers?

The Background.  Young was a part-time driver for the United Parcel Service (UPS). When she became pregnant, her doctor advised her that she should not lift more than 20 pounds. UPS, however, required drivers like Young to be able to lift up to 70 pounds. UPS told Young that she could not work while under a lifting restriction.  Young filed a lawsuit under the Pregnancy Discrimination Act (she did not allege an ADA disability) and claimed that UPS accommodated workers who were injured on the job, had disabilities covered by the ADA, or had lost Department of Transportation (DOT) certifications.  She argued that these policies showed that UPS discriminated against its pregnant employees because it had a light-duty-for-injury policy for numerous “other persons,” but not for pregnant workers.  UPS responded that, since Young did not fall within the on-the-job injury, ADA, or DOT categories, it had not discriminated against Young on the basis of pregnancy, but had treated her just as it treated all “other” relevant “persons.” 

This dispute made it to the U.S. Supreme Court who, on March 25, 2015, issued a ruling on the case granting relief to neither party, setting forth a new standard for how to consider pregnancy claims, and remanding for the trial court to consider the evidence based on the new standard.

The Supreme Court’s Ruling.  The Court departed from the normal discrimination analysis to craft something new for pregnant workers.  The Court now held that a pregnant employee can prove discrimination by showing that (1) she is pregnant; (2) she sought an accommodation for her pregnancy—like the 20 pound lifting restriction Young requested, and (3) that the employer did accommodate others “similar in their ability or inability to work.”  This standard is a departure from the analysis used by courts to consider other forms of discrimination.  In particular, there had never been a duty under the PDA to “accommodate” a pregnant employee before but there now appears to be.  Further, in a traditional discrimination analysis, the courts generally consider how other employees who perform the same or similar work are treated.  The new Young analysis seems to broaden this by considering any employee who is similar in his or her ability or inability to work.  This new standard remains murky and it will probably take several years for courts to make rulings on what exactly this means.

The analysis, however, does not end there.  If a pregnant employee can meet the above factors, the employer may then seek to justify its refusal to accommodate the plaintiff by relying on “legitimate, nondiscriminatory” reasons for denying accommodation.  That reason normally cannot consist simply of a claim that it is more expensive or less convenient to add pregnant women to the category of those whom the employer accommodates.  If the employer offers a “legitimate, nondiscriminatory” reason, the plaintiff may show that it is in fact pretextual.  The plaintiff may reach a jury on this issue by: (1) providing sufficient evidence that the employer’s policies impose a significant burden on pregnant workers, and that the employer’s “legitimate, nondiscriminatory” reasons do not justify the burden; and (2) by providing evidence that the employer accommodates a large percentage of non-pregnant workers while failing to accommodate a large percentage of pregnant workers.  As Justice Scalia noted in his dissent, this standard may merge the disparate treatment and disparate impact analyses.  For the uninitiated, disparate impact does not require proof of discrimination, only that a company policy has an unwarranted negative impact on a protected group.  For instance, laying off the highest salaried employees in a company may lead to termination of most of the older workers, who tend to have higher salaries due to longer tenure. 

In sum, the new standard creates a duty to accommodate pregnant workers that never existed before, articulates a new standard that could require several test cases to clarify, and arguably imports the dreaded “disparate impact” analyses into a pregnancy discrimination case.  Justice Scalia described the Court’s holding as “inventiveness posing as scholarship—which gives us an interpretation that is as dubious in principle as it is senseless in practice.”

What this means for Employers.  There is now, essentially, a duty to accommodate pregnant workers under the Pregnancy Discrimination Act.  In addition, under the ADAAA, almost all ailments are potential “disabilities” as a matter of law, including some “temporary conditions” depending on their severity.  The bottom line for employers, it will be far less expensive to treat pregnant employees the same as you would any other employee who is able to work with similar restrictions as the pregnant employee.  Therefore, if you give employees on workers’ compensation light-duty, you must now also offer available light-duty to pregnant workers.

In Defense of the Employment Non-Compete Agreement

On March 18, 2015, Crain’s Detroit published an article entitled “Laws on noncompete agreements hurt Michigan, new study says.”  The article argues that Michigan can reverse a drain of talent by banning non-competes.  This article comes on the heels of a bill proposal in the Michigan Legislature to limit non-compete agreements to business owners.

The study on non-competes itself seemingly has numerous flaws, such as the assumption that non-competes are the sole factor of why “inventors” would move to states without non-competes.  It also ignores the history of Silicon Valley as a technology destination, the availability of venture capital, and, the existing tech companies that give inventors a start before going out on their own.  This assumption ignores other social, economic, and demographic trends of Michigan’s talent drain.  For instance, many non-inventors leave Michigan for a myriad of reasons that do not relate to non-compete agreements.

But let’s assume that banning or restricting non-competes in Michigan would help keep “inventors” in the state.  The article focuses on employees and ignores the impact on job creators.  Businesses prefer to protect their interests with reasonable non-compete agreements to ensure that the investment made in employees will not lead to disaster when that employee bolts to a competitor with the company’s customer lists and product knowledge.  As the article points out, even with non-competes essentially unlawful in California, Apple and Google had agreed not to poach employees from each other.  Michigan needs to attract business to the State and businesses prefer the protections a non-compete can offer.

It is this reasonable balance of interests that makes Michigan’s non-compete law so beneficial.  The Crain’s article ignores the practical way Michigan’s non-compete statute operates.  Under Michigan’s law, a non-compete must be reasonable to be enforced.  This includes a realistic protection of business interests.  For instance, Jimmy John’s attempting to restrict its delivery personnel from competing simply will not be enforced since there is no business interest in doing so.  The “freaky-fast” delivery guy does not have the company’s customer list or knowledge of a secret Jimmy John’s recipe and therefore there is no basis to prevent competition.

On the other hand, a court will uphold a non-compete that protects an employer’s reasonable business interest and is still fair to the employee.  For example, consider a company that provides medical support services to hospitals.  Because the company spends a great deal of money to train its employees, it is known in the industry as producing high quality talent.  As such, competitors, rather than investing in their own training, often attempt to poach the company’s employees.  Thus, after investing a great deal of money in these employees, these employees would leave for a competitor and end up in the same hospital where they were working, but now competing against the company.  The imposition of a reasonable two-year non-compete that prevents these employees from competing at the same hospitals where they worked for the company is a reasonable way to help prevent damage to its business.  In this way, the employee is not prevented from working at any hospital, she just cannot turn around and compete at the same hospital where she worked for the company.  The company, in turn, has a reasonable protection from the investment it made in the employee. 

But Michigan non-compete law goes even further to protect employee interests.  The law expressly allows a Judge to rewrite, or “blue pencil,” a non-compete that is unfair.  Therefore, if a company were to try to enforce an unfair non-compete, a court could rewrite the unfair provisions in favor of the employee.

    

The current bill before the Michigan legislature to restrict non-competes is sold as a protection for workers.  But, in reality it would only hurt job creators and that is not good for workers.

Brett J. Miller is a principal attorney at the Kitch Law Firm in Detroit.  He specializes in labor and employment law and has litigated non-compete lawsuits and lectured on the subject.