A Primer and Legal Update on
Employment Claims and Strategy
for General Litigators
October 1, 2015
Steve Shardonofsky
Seyfarth Shaw LLP
sshardonofsky@seyfarth.com
(713) 225-1001
Nitin Sud
Sud Law P.C.
nsud@sudemploymentlaw.com
(832) 623-6420
EMPLOYMENT AT-WILL
• Employment is presumed to be at-will in Texas
 Employment can be terminated for good cause, bad
cause, or no cause at all (as long as it’s not an unlawful
reason)
• To rebut the at-will presumption, an employment
contract must directly limit in a meaningful and
special way the employer’s right to terminate the
employee without cause
– There must be an express agreement to modify
the at-will status (no implied agreement)
– The express agreement must be “clear and
specific”
– An employee cannot construct an agreement out
of “indefinite comments, encouragements, or
assurances.”
– A statement that an employee may be fired for
cause is not a specific agreement that the
employee may be dismissed only for cause
– An employment contract for a specific term may
still be at-will if the agreement allows for
termination for any reason
Discrimination / Retaliation /
Harassment / Rsnbl. Accommodation
• Disparate Treatment
– Treating someone differently because of that individual’s protected status
• Disparate Impact
– An employer’s neutral policy/practice that adversely affects a protected class
• Harassment
– Conduct that interferes with an employee’s work and creates a hostile or abusive
work environment
• Retaliation
– Affecting the employee because he or she complained of discrimination or
harassment, or exercised his/her rights in some way
• Reasonable Accommodation (Disability/Religion)
Major Federal EEO Laws
• Title VII of the Civil Rights Act of 1964
• Pregnancy Discrimination Act
• Americans with Disabilities Act (ADA)
• Age Discrimination in Employment Act (ADEA)
• Older Workers Benefits Protection Act (OWBPA)
• Section 1981 of the Civil Rights Act of 1866
• Family and Medical Leave Act (FMLA)
• Equal Pay Act (EPA)
• Uniformed Services Employment & Reemployment Rights Act
(USERRA)
• Rehabilitation Act of 1973
• Genetic Information Nondiscrimination Act of 2008 (GINA)
A Note About State
Employment Laws
This presentation covers only Federal Employment Laws.
State Employment Laws can vary between states.
For example, Title VII (federal) prohibits discrimination
based on race, color, sex, national origin and religion.
– The Texas Labor Code generally tracks Title VII, the ADA, and the ADEA
– California discrimination laws also include political affiliations as a
protected class.
– New York discrimination laws also include domestic violence victim status
as a protected class.
What are the Protected Categories
Under Federal Law?
• Race
• Citizenship status
• Age
• Veteran Status
• Religion
• Color
• Gender
• Ancestry
• Pregnancy
• Other characteristics
protected by law
• Disability
• Sexual Orientation
• National Origin
• Genetic Information
Discrimination is Illegal
in These Areas:
• Anything that is a term, condition or privilege of
employment:
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–
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Interviewing and hiring
Assignment or classification of employees
Performance reviews and disciplinary actions
Promotions, transfers, demotions, terminations
Compensation and bonuses
Benefits
Training
Testing
Social events
Who is Protected from Discrimination?
Employees
Applicants
Former
Employees
Title VII – Religious Accommodation
• Under Title VII, an employer has a duty to reasonably
accommodate sincerely held religious beliefs and practices
unless to do so would cause an undue hardship
– Time off for religious observance
– Eating restrictions
• Definition of Religion:
– Moral or ethical beliefs about right and wrong that are sincerely held
with the strength of traditional religious views
– Includes discrimination against someone because s/he is an atheist
• The US Supreme Court recently lowered the standard of
notice required to trigger the interactive process during the
hiring process. (EEOC v. Abercrombie & Fitch Stores, Inc. )
Harassment - Overview of the Law
•Elements
•Unwelcome/Patently offensive
•Conduct (verbal, non-verbal, physical)
•Because of Protected Class
•Results in a tangible employment action or is
sufficiently severe or pervasive to alter the
conditions of the complainant’s employment
and create a hostile work environment
•Employer liability (co-worker vs. supervisor
harassment)
Employer Liability For Harassment
• Co-worker harassment:
– Negligence standard
– ER liable if it knew or should have known of the harassment
and failed to take prompt, effective remedial action
• Supervisor harassment:
– Strict liability if there is a tangible employment action
– ER directly liable if supervisor imposes a tangible employment
action (replaced concept of quid pro quo harassment)
• TEA Definition: “a significant change in employment status, often but
not always resulting in economic injury”
– Where no tangible employment action is taken an employer
may raise Faraher/Ellerth affirmative defense
Affirmative Defense
Supervisor Harassment
• Did the employer act reasonably to prevent and
correct harassment?
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•
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•
Training
Policy (especially with multiple reporting channels)
No retaliation
Prompt/thorough/objective investigation
Prompt remedial action
• Did the employee’s unreasonably fail to use
available avenues provided by the employer to
avoid harm?
What is Retaliation? Basic Elements
• Protected Activity (explained below)
• Adverse Employment Action
• Casual Connection
– Employer Knowledge
– Direct evidence
– Circumstantial evidence
• Temporal proximity
• Inconsistent application of work rules
What is “Protected Activity”?
• Two types:
– Protected “Opposition”
– Protected “Participation”
• Protected “Opposition”
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–
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–
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Complaints
Non-verbal conduct
Requests for statutory rights
Employee must have only a “good faith reasonable belief”
What is not protected
• General and vague complaints
• Inappropriate workplace conduct
What is “Protected Activity”? (Cont’d)
• Protected “Participation”
– Filing a complaint with State or Federal agency
– Providing information
– Assisting in investigations
– Assisting in proceedings
– Even if unreasonable or in bad faith
Employer Cannot Take
Adverse Employment Action
• Adverse Employment Action:
– Any adverse treatment reasonably likely to deter protected
activity
– Plaintiff experienced a “materially adverse action,” i.e., one that
would “dissuade a reasonable worker from making or
supporting a charge of discrimination;” (Burlington & Santa Fe
Rwy v. White, 126 S. Ct. 2405 (2006))
• Still split in case authority:
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Lateral transfer to similar position
Low performance evaluation
Reprimands / criticisms
Cold shoulder / ostracism
Change in work assignments
“But-For” Causation Required in Title
VII Retaliation Actions
University of Texas Southwestern Medical Center v.
Nassar
• Employee must show that the adverse employment
action would not have happened “but for” an
unlawful motive to retaliate against the employee for
protected activity
• Contrast: in Title VII discrimination claims, an
employee need only show that an unlawful
discriminatory motive was a substantial motivating
factor for the adverse employment action
A Common Case Study -Workers’ Comp. Retaliation
• Texas Labor Code Chapter 451
• Factors Courts Look At:
– knowledge of the claim by the decision-maker;
– a negative attitude toward the employee’s injured
condition;
– deviation from company policy when disciplining an
employee who made a claim;
– discriminatory treatment of the employee when
compared to the treatment of other employees with the
same disciplinary problem; and
– (sometimes) timing of the termination in relation to the
workers’ compensation claim. (But “timing alone” is
insufficient to prove retaliation)
The Summary Judgment Battle
• Plaintiff Articulates A Prima Facie Case
• Defendant Articulates A Legitimate, Nondiscriminatory Reason For Termination
(e.g., “Performance Problems”)
• *Pretext* --- Plaintiff Tries To Prove
Defendant Is A Liar
Ways Plaintiffs Show Pretext
• Varying From Company Policies -- Seen as
to “Get” The Plaintiff
• Lack of Documentation to Support Decision
• Treating Plaintiff Differently from Other
Similarly Situated Employees
• Evidence of Discriminatory or Negative
Attitude Toward Condition
• Flip-flopping
• Other evidence of pretext, e.g., anecdotal,
subsequent filling of the position, etc.
Americans with Disabilities Act
(ADAAA)-- Basic Requirements
• Prohibits discrimination, retaliation, harassment
against disabled applicants and employees
• Requires employers to provide reasonable
accommodations to disabled applicants and
employees
Almost Everyone Is “Disabled”
Under The Law
• “Disability” Defined:
• A physical or mental impairment that substantially limits one
or more of the major life activities of such an individual
• A record of such an impairment
• Being regarded as having such an impairment
• (Those who have a relationship or association with someone
who has a known disability are also protected)
• Expanded List of Major Life Activities
• MLAs include “[c]aring for oneself, performing manual tasks,
seeing, hearing, eating, sleeping, walking, standing, sitting,
reaching, lifting, bending, speaking, breathing, learning,
reading, concentrating, thinking, communicating, interacting
with others, and working.”
• Operation of bodily functions including “the immune system,
special sense organs and skin; normal cell growth.”
Mitigating Measures Are Irrelevant
• Regulations reject Supreme Court decisions,
as did the Amendments Act
• Mitigating measures include medication,
medical supplies, equipment, prosthetics,
and mobility devices, among other things
• But not ordinary glasses and contact lenses
• Surgery counts as a mitigating measure only
if it “permanently eliminate[s] an
impairment”
29 C.F.R. § 1630.2(j)(1)(vi)
© 2015 Seyfarth Shaw LLP
Reasonable Accommodation
• Applies to those who have an actual disability or a
record of a disability, not regarded as
• Employer may choose accommodation as long as
it is effective
• Three categories of reasonable accommodation:
– Modifications/adjustments to job application process
– Modifications/adjustments to work environment or
how/when job is performed
– Modifications/adjustments that enable EE to enjoy
equal benefits and privileges of employment
• Must be provided absent undue hardship
© 2015 Seyfarth Shaw LLP
EEOC/TWC process
• Employee must file a charge of discrimination prior to
filing a lawsuit
– EEOC: Within 300 days after the adverse action
– TWC: Within 180 days after the adverse action
• The EEOC/TWC will issue a right-to-sue notice (usually
upon request)
– Employee has 90 days to file a lawsuit under federal law
after EEOC issues right-to-sue notice
– Employee has 60 days to file a lawsuit under state law
after TWC issues right-to-sue notice (no later than 2 years
after filing charge with TWC)
• Statements may be admissible in later proceedings
– Nasti v. CIBA Specialty Chemicals Corp., 492 F.3d 589, 594
(5th Cir. 2007) (“A court may infer pretext where a
defendant has provided inconsistent or conflicting
explanations for its conduct.”)
• Employee/Plaintiff
– Opportunity to conduct your own investigation and obtain
statements from witnesses
• Employer/Defendant
– Opportunity to gather information and documents
– Opportunity to dissuade a plaintiff’s attorney
– If high potential for liability, take advantage of mediation
TWC Unemployment – Impact on
Discrimination Claims
• Statements made under oath (by EE or ER) will likely be
admissible in later proceedings
• Employee/Plaintiff
• Can quickly and efficiently evaluate potential wrongful termination claim
and cross examine Employer’s representative
• Can better evaluate (and set up) wrongful termination / discrimination
case
• Develop evidence to present to the EEOC
• Employer/Defendant
• Just ignore the unemployment claim
• Prepare your witness
• If responding, make sure you are consistent at the EEOC stage and
litigation
• Obtain TWC files at start of litigation
Family Medical Leave Act (FMLA) -- Basic Rights
• An absolute entitlement to a certain amount of job
protected leave (in most case up to 12 weeks) in a
defined period of time (leave may be intermittent
or on a reduced leave schedule)
• The right to reinstatement to the same job
• The right to have health benefits continued as if
still working the same regular schedule
Eligibility
• To be eligible for FMLA leave an employee must:
– Have worked for employer for at least 12 months (need not be
consecutive)
– Have worked at least 1,250 hours in the 12 months prior to the
leave
•This is actual hours worked and does not include paid or unpaid time
off (vacation, holidays, sick/personal days do not count)
•Except . . . time the employee would have worked but for military
service counts as hours worked for purposes of determining FMLA
eligibility
• Employee must be eligible for each different leave
request (e.g., different condition or reason for leave).
Reasons for Leave
•
Employee Medical:
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Family Care:
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Birth/Placement:
•
Qualifying Exigency in connection with a covered family
Employee’s own serious health condition
that makes employee unable to perform one or more of the
employee’s essential job functions
Care for a family member (parent, spouse or child)
with a serious health condition
Birth of employee’s child or placement of a
child with the employee for adoption or foster care
member’s (parent, spouse or child) military service
•
Injured Servicemember:
Care for injured servicemember
with serious illness or injury who is employee’s parent, spouse,
child, or for whom employee is next of kin (26 weeks)
Intermittent and
Reduced Schedule Leave
• Intermittent leave: Leave taken in separate blocks of
time for same (or related) serious health condition,
for a qualifying exigency, or to care for injured service
member.
• Reduced Work Schedule Leave: Leave taken by
reducing the usual number of hours EE works
(workweek or day).
• Must be certified by a health care provider.
• Employee must make reasonable effort to schedule
leave so as not to unduly disrupt operations (subject
to the approval of the HCP).
Military Leave (USERRA)
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•
•
Available for employees who are called to active duty,
voluntarily enlist or are in the reserves or training.
Length: Up to 5 years, possibly more (there are many
exceptions).
Reinstatement Rights: Employees returning from a military
LOA are entitled to reinstatement rights, including:
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Must return to the same position as if had not taken leave.
Original hire date is intact
The rate of pay is where pay would have been if employee never left
No waiting period for benefits
Vacation accrual is at the same rate, as if employee never left
Employees may be entitled to 401(k) contributions
Bonus eligibility will be retained or may be gained
Employment Torts (Texas)
• Negligent hiring or retention
– Employer may be liable to the public and other
employees if it knows or should have known that
an employee was “incompetent or unfit.”
– Employer can be liable for employees’ acts
committed outside scope of employment if the
injury was foreseeable
– Common issues – criminal convictions, driving
accidents, drug/alcohol abuse
• Waffle House, Inc. v. Williams, 313 S.W. 3d 796
(Tex. 2010)
– Sexual harassment case brought under Texas
Labor Code and as negligent hiring claim
– Jury found in favor of employee under both
claims, and she elected common law claim
– Supreme Court held that because the claim was
premised on the same conduct that the statute
finds unlawful, Chapter 21 controls and employee
cannot recover under negligence theory
• No claim for a “negligent investigation”
• Limits on false imprisonment claims
– Employer is entitled to question an employee on
its premises regarding a violation of company
policy
• Limits on defamation claims
– Qualified privilege applies in employment
situations
• Allows for investigations into employees’ potential
wrongdoings
– Texas Defamation Mitigation Act (effective 2014)
• Sabine Pilot Service, Inc. v. Hauck, 687 S.W.2d
733 (Tex. 1985)
– The only common law exception to the
employment-at-will doctrine
– An employee cannot be fired for refusing to
perform an illegal act
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•
•
•
Must be the sole reason of the termination
The “illegal act” must carry criminal penalties
The employee must refuse to perform the illegal act
The employee must be terminated
– Very narrow exception
• Employer asking the employee not to report a criminal
act is not protected
EEOC’s Criminal History
Guidance (2012)
• Use of criminal history has “disparate impact” on
certain minority groups based on race and national
origin.
• “We don’t hire felons” policy per se unlawful
• Criminal History Question
– ERs should not consider expunged or sealed convictions
– Recommends not asking about crim. history on applications
– Recommends only asking about convictions relevant to a
specific job
• Use of arrests has a per se disparate impact
– But – employers may base a hiring decision on underlying
conduct if the conduct makes the individual unfit for a position
38 |
Employers May
Consider Convictions
• Excluding candidates based on convictions:
– Nature and gravity of the offense
– Time since the conviction and/or complete of the sentence
– Nature of the job held or sought
• All convictions or only specific types?
– Timing? (7 years or some other or all?)
• EEOC recommends an “individualized
assessment” of applicants
39 |
FCRA Adverse Action Requirements
• Before adverse action is taken employer must
provide:
– A copy of the consumer report
– A summary of the consumer’s rights under the FCRA
– Any state law right disclosures/information
• Waiting period:
– Between pre-adverse and adverse action an employer must WAIT
– FTC has opined that 5 business days is reasonable
– To allow consumer to dispute accuracy of report BEFORE adverse action
• Adverse Action:
– Notice of the adverse action
– Name, address, and toll-free number of the CRA that furnished the consumer
report
– Various other statutory disclosures
40
“Ban the Box” Laws
• Laws requiring removal of criminal history questions from
employment applications and/or interviews. Generally prohibit
employers from inquiring into an applicant’s criminal history
until after a first interview or conditional offer of employment
is made.
• While most of these laws apply only to state and local
governments, the laws in seven of these states (Hawaii, Illinois,
Massachusetts, Minnesota, New Mexico, Oregon, and Rhode
Island) apply to private employers as well. (Many cities and
counties have also enacted some form of “Ban the Box”
legislation for private employers, including Philadelphia, San
Francisco, and Seattle).
Wage & Hour Laws 101: Substantive
Rights of Employees
• Federal Law: Fair Labor Standards Act (“FLSA”)
– Applies in all 50 states
– Sets the floor for wage and hour law and starts with the
assumption that everyone is entitled to minimum wage and
overtime for hours over 40
– Incudes limited “exemptions” to overtime based on (1) salary
level; (2) salary basis; and (3) job duties
• State Wage & Hour Law:
– Great amount of overlap with federal law
• Some states simply adopt the FLSA as the state law standard or
mirror FLSA with respect to overtime eligibility
• Most differences between federal and state laws are in procedures
and remedies available in a lawsuit
• Texas has OT statute, but it doesn’t apply if you are covered by FLSA
42
Wage & Hour Federal Court Lawsuits*
9000
8160
8,125
8000
7,500
7,310
6,825
7000
6,336
6,073
6000
5,393
5000
4000
4,207
3,617
3000
2000
4,039
3,904
2,751
1,717
1,580 1,558 1,633 1,562
1,457 1,545
1,935 1,960
1000
0
* Fiscal year ending September 30th per the Annual Report of
the Director, Administrative Office of the United States Courts
Wage & Hour Laws 101: Procedures
– “Opt in” versus “Opt out” – under federal law,
the class is made up of individuals who
affirmatively sign up
– Collective-Action Certification
• Conditional
• De-certification?
• Certification
– Statute of limitations (i.e., the number of years
the Court looks back from the date of the
lawsuit)
• FLSA – 2 years or 3 years if violation is deemed “willful”
• States vary – NY has a 6 year statute of limitations; Kentucky
possibly up to 5
44
Wage & Hour Laws 101: Remedies
Under the FLSA, successful plaintiffs receive:
– Back wages for the overtime owed during the
statute of limitations period;
– Double the overtime owed (“liquidated damages”)
unless employer can show good faith
– Plaintiffs’ receive reimbursement for their attorneys’
fees and costs
Under some state laws, additional remedies are
allowed, e.g., in Massachusetts, the damages are tripled
(not doubled) automatically, even if the employer shows
good faith
45
Three Requirements For Exemptions
• Salary level ($455 /wk)
• Salary basis
– Regularly receives a predetermined amount of
compensation each pay period (on a weekly or less
frequent basis)
– Cannot be reduced because of variations in the quality or
quantity of the work performed
– Must be paid the full salary for any week in which the
employee performs any work (limited exceptions to “no
pay docking rule”)
– Need not be paid for any workweek when no work is
performed
• Job duties
Seven Exceptions To The
“No Pay-Docking” Rule
• Absence for 1+ full days for personal reasons (not sickness/disability)
• Absence 1+ full days due to sickness or disability if deductions made under
a bona fide plan, policy or practice of providing wage replacement
benefits for these types of absences (STD/LTD)
• To offset any amounts received as payment for jury fees, witness fees, or
military pay
• Penalties imposed in good faith for violating safety rules of “major
significance”
• Unpaid disciplinary suspension of one or more full days imposed in good
faith for violations of workplace conduct rules
• Proportionate part of an employee’s full salary may be paid for time
actually worked in the first and last weeks of employment
• Unpaid leave taken pursuant to the Family and Medical Leave Act
The “White Collar” Exemptions
The FLSA exempts executive,
administrative, professional and outside
sales employees from its overtime and
minimum wage requirements*
BUT, the FLSA does not define what these
terms mean. Instead, the FLSA directs the
Secretary of Labor to define these terms.
*Note: there are other less common exemptions
Executive Duties
• Primary duty is management of the enterprise
or of a customarily recognized department or
subdivision;
• Customarily and regularly directs the work of
two or more other employees; and
• Authority to hire or fire other employees or
whose suggestions and recommendations as
to hiring, firing, advancement, promotion or
other change of status of other employees are
given particular weight.
Administrative Duties
• Whose primary duty is the performance of
office or non-manual work directly related to
the management or general business
operations of the employer or the employer’s
customers; and
• Whose primary duty includes the exercise of
discretion and independent judgment with
respect to matters of significance.
Management or General
Business Operations
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•
•
•
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Tax
Finance
Accounting
Budgeting
Auditing
Insurance
Quality Control
Purchasing
Procurement
Advertising
Marketing
•
•
•
•
•
•
Research
Safety and Health
Human Resources
Employee Benefits
Labor Relations
Public and Government
Relations
• Legal and Regulatory
Compliance
• Computer Network,
Internet and Database
Administration
Overtime
• Generally, non-exempt employees who have
more than 40 hours of compensable work time in
any workweek are entitled to time and one-half
for all hours over 40.
• Standard is “suffer or permit” to work
– Need not be requested
• This requirement cannot be waived, even if:
– “off-the-clock”
– forbidden by employer
– volunteered by employee
Calculating Overtime Rate of Pay
• Not simply “time-and-a-half”
• Requires the payment of 1.5 times the
“regular rate of pay” for all hours worked in
excess of 40 hours in a workweek
• Every workweek stands alone
• All remuneration for employment paid to, or
on behalf of, the employee – with certain
limited exceptions – divided by the number of
hours worked.
Payments That May Be Excluded
From Regular Rate
1. contributions to profit-sharing or savings plan
2. contributions to benefit plans
3. gifts
4. expense reimbursement (e.g. per diem)
5. pay for vacation, PTO, sick leave
6. premium pay for work in excess of daily or weekly
standard
7. premium pay for work on Saturdays, Sundays, or
holidays
8. discretionary bonuses
Hours of Work
• General areas of interest
– Waiting time
– Rest and meal periods
– Sleeping time
– Preparatory and concluding activities
– Lectures, meetings, and training programs
– Travel time
– Civic and charitable work
Waiting Time
• Whether waiting time is hours worked depends
upon the particular circumstances.
– Generally, the facts may show that the employee was
engaged to wait (which is work time) or the facts may
show that the employee was waiting to be engaged
(which is not work time).
– For example, a secretary who reads a book while
waiting for dictation or a fireman who plays checkers
while waiting for an alarm is working during such
periods of inactivity. These employees have been
"engaged to wait."
On-Call Time
• An employee who is required to remain on call
on the employer's premises is working while
"on call."
• An employee who is required to remain on call
at home, or who is allowed to leave a message
where he/she can be reached, is not working
(in most cases) while on call.
– Additional constraints on the employee's freedom
could require this time to be compensated.
Meal and Rest Periods
• Federal Law:
– Rest periods of short duration, usually 20 minutes or
less, must be counted as hours worked.
– Bona fide meal periods (typically 30 minutes or more)
generally need not be compensated as work time.
• The employee must be completely relieved from duty for the
purpose of eating regular meals.
• The employee is not relieved if he/she is required to perform
any duties, whether active or inactive, while eating.
Preparatory and Concluding Activities
• Donning and doffing of “nonunique” gear such as
hairnets, goggles, hardhats, smocks, sterilized clothing
• Typically must take place at work
• Focus is on “integral and indispensable”
• If deemed “first principal activity,” may make
subsequent transportation time compensable
– concepts have been used in other contexts (e.g., checking
assignments from home, blackberry usage)
• Computer start-up/shut-down time
• Card swipes/clock punches
Lectures, Meetings, and Training Time
• Attendance at lectures, meetings, training
programs and similar activities need not be
counted as working hours if:
– Attendance is outside of the employee’s regular
working hours
– Attendance is in fact voluntary
– The course, lecture, or meeting is not directly
related to the employee’s job
– The employee does not perform any productive
work during such attendance
Travel Time
• The principles which apply in determining
whether time spent in travel is compensable
time depends upon the kind of travel involved.
– Home to Work Travel
– Home to Work on a Special One Day Assignment
in Another City
– Travel That is All in a Day's Work
– Travel Away from Home Community
Home-to-Work Travel
• An employee who travels from home before
the regular workday and returns to his/her
home at the end of the workday is engaged in
ordinary home to work travel, which is not
work time.
Home to Work on a Special One Day
Assignment in Another City
• An employee who regularly works at a fixed
location in one city is given a special one day
assignment in another city and returns home
the same day. The time spent in traveling to
and returning from the other city is work time,
except that the employer may deduct/not
count that time the employee would normally
spend commuting to the regular work site.
Travel That is All in a Day's Work
• Time spent by an employee in travel as part of
their principal activity, such as travel from job
site to job site during the workday, is work
time and must be counted as hours worked.
Travel Away from
Home Community
• Travel that keeps an employee away from home
overnight is travel away from home.
– Travel away from home is clearly work time when it
cuts across the employee's workday.
– The time is not only hours worked on regular working
days during normal working hours but also during
corresponding hours on nonworking days.
– As an enforcement policy the Wage and Hour Division
will not consider as work time that time spent in
travel away from home outside of regular working
hours as a passenger on an airplane, train, boat, bus,
or automobile.
Upcoming Changes… What the
DOL Proposal Contains
DOL issued its Notice of Proposed Rulemaking on July
6, 2015:
• DOL estimates that there are currently 4.6 million
employees classified as exempt “white collar”
employees who are paid $455 to $921 per week
• Increase in salary level for standard exemption $50,400 in 2016 ($970 per week) with automatic
increases
• Requests for comments on:
– Duties tests
• Time-based test like California is the better approach?
• How to deal with “concurrent duties”
– Use of nondiscretionary bonuses to satisfy salary level
Misclassification of
Independent Contractors
Independent contractor status is determined based
on various legal tests, not choice of the parties
•
An independent contractor relationship cannot be
created simply by calling a worker an independent
contractor
•
Issuing a 1099 rather than a W-2 is not
determinative
•
Employee status can not be waived by an employee’s
choice or desire to have different taxes
•
Written contracts are not controlling
Determining Contractor Status
• Different agencies use different tests
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–
–
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National Labor Relations Act: Common Law Agency Test
Fair Labor Standards Act: Economic Realities Test
Internal Revenue Service: Right to Control Test
Employment Retirement Income Security Act: Common Law
Agency Test
– Title VII of the Civil Rights Act of 1964: Combined Test
– Unemployment Insurance Acts: ABC Test
• Most tests focus on the right of control and
entrepreneurial nature of contractor’s business
• Tests often applied in an outcome-determinative way –
factors weighted differently
• All tests focus on reality, rather than writing
How Liability Arises
• “Contractor” files unemployment claim upon
contract termination
– Likely to trigger review and audit – IDES almost always finds employee
status
– IDES is required to notify IRS, which may choose to audit
• IRS random audit
• Contractor gets injured and files workers
compensation claim
• Contractor is disgruntled or wishes to challenge
termination of contract and:
– makes claim for severance benefit or other retirement, welfare
benefits
– claims entitled to past overtime compensation
– files charge or lawsuit and gets attorney involved on other issues
Determining Contractor Status
Independent Contractor
Inquiry
Employer – Employee
Contractor tasked with results
only – works out details
Who Controls
Details of Work?
Employer dictates and
monitors details; requires
regular reporting
Independent business; risk of
profit/loss; provides services
to others; may subcontract
Entrepreneurial
Nature?
Exclusive to employer; may
not subcontract; reimbursed
for expenses; paid hourly
Services provided incidental
to core business of client
Are Services Core
to Business?
Services are the employer’s
core business; employees
performing same work
Provides own tools,
instruments and place of work
Who Provides
Tools?
Employer provides tools and
instruments or reimburses;
provides workplace
Determining Contractor Status
(cont.)
Inquiry
Employer – Employee
Independent Contractor
Services performed in one
year or less; definite period
Length of
Service?
Services performed for longer
than one year or indefinite
Highly skilled work requiring
independent judgment
Skill and
Judgment?
Unskilled work requiring
little independent judgment
Paid by the job, by the
project, or by the piece
Nature of
Payment?
Paid by the hour or
fixed salary per pay period
Provides own bid, negotiated
contract, and invoices for
services; waives benefits
Parties’
Intent?
Employer provides terms, or
terms unclear, and pays
regardless of invoices
Work customarily performed
by independent profession
Industry
Norm?
Work typically performed
by employees in industry
Potential Liability for Misclassification
• Overtime Liability
– If contractor would be non-exempt as employee
• Minimum Wage/Reimbursement/Tip Issues
– Insufficient reimbursement for vehicle use; tip-sharing; minimum wage?
• Workers’ Compensation
– Percentage of wages plus fines; no immunity from tort
• Federal Employment Laws
– Joint employment liability
• Employee Benefit Coverage
– Contractor claims 401(k), severance, health/welfare coverage, ESPPs
• Federal Taxes
– Back taxes if tax unpaid, 1.5% penalty for failure to withhold
• Social Security & FICA
– 6.2% of wages for failure to withhold
• State and Federal Unemployment Tax
– State = 5%; Federal = 0.8% of wages, interest & penalties
Worker Adjustment and Retraining
Notification (WARN) Act
• Applies to businesses employing:
– 100 or more full-time employees; or
– 100 or more employees, including part-time
employees, who in the aggregate work at least
4,000 hours per week exclusive of overtime
• Requires giving 60 days’ notice (or 60 days’
pay in lieu of notice) prior to a “plant closing”
or “mass layoff.”
WARN Act (continued)
• Plant closing
– Permanent or temporary shutdown of a single site
of employment, or one or more operating units
within the site, during a 30-day period that results
in an employment loss for 50 or more employees,
excluding part-time employees.
• “Single site of employment” can include separate
buildings/areas if they are in reasonable geographic
proximity, used for the same purpose, and share the
same staff and equipment
WARN Act (continued)
• Mass layoff
– Employment loss at a single site of employment
during any 30-day period involving:
• 50 or more employees, other than part-time
employees, provided those affected constitute at least
33% of the active workforce at the site, not counting
part-time employees; or
• At least 500 employees, other than part-time
employees, regardless of the affected workforce
percentage
WARN Act (continued)
• Allows for aggregation of separate reductions
that occur within a rolling 90-day period,
which by themselves are not of a sufficient
size to trigger the Act
• “Part-time” employee defined: Employed for
– an average of fewer than 20 hour per week; or
– fewer than 6 of the 12 months preceding the date
on which the WARN notice would be required
WARN Act (continued)
• “Employment loss” defined:
– An employment termination other than a
discharge for cause, voluntary departure, or
retirement;
– A layoff exceeding six months; or
– A reduction in work hours by more than 50%
during each month in a six-month period.
• No “employment loss” if an employee is
discharged for cause, voluntarily leaves, or
retires.
WARN Act (continued)
• Exceptions allow for no or reduced notice
– Sale of business exception
– Faltering company exception
• Applies to businesses actively seeking capital or business at
the time the 60-day notice would be required and if it had
given notice, it would have been precluded from obtaining
the needed capital or business
– Unforeseeable business circumstances exception
• Focus is on the employer’s reasonable business judgment,
not hindsight
– Natural disaster exception
COBRA
• Consolidated Omnibus Budget Reconciliation
Act of 1985
• Applies to employers with 20 or more
employees
• Generally allows for continued coverage for
employees and covered dependents up to 18
months (or longer in certain situations)
COBRA (continued)
• A “qualifying event” triggers COBRA obligation:
–
–
–
–
–
Death of covered employee
Voluntary or involuntary termination of employment
Reduction in hours of work of the covered employee
Divorce or legal separation
Covered employee becoming entitled to Medicare
benefits
– Dependent child of the covered employee ceases to
be a dependent child under the terms of the plan
COBRA (continued)
• When a COBRA notice must be sent
– A qualifying event occurs
– A new employee becomes subject to group healthplan coverage
– COBRA coverage is unavailable or denied
– Continuation coverage will terminate before the end
of the maximum coverage period
• Sending notice is the responsibility of the plan
administrator (unless the employer is also the
plan administrator)
COBRA (continued)
• Employer must notify the plan administrator
within 30 days
• Plan administrator must then send the COBRA
notice within 14 days of that notification
• Notice should be sent to employee and
dependents by first-class mail to their last
known addresses
– A single mailing should include separate notices
for each qualified beneficiary
COBRA (continued)
• The failure to provide a COBRA notice results in liability
against the employer and/or plan administrator of up to
$110 per day per covered employee and beneficiary, plus
costs and attorney’s fees. See 29 U.S.C. § 1166(a)(4); 29
C.F.R. 2590.606-4; 29 C.F.R. § 2575.502c-1; 29 U.S.C. §
1132(c)(1); 29 U.S.C. § 1132(g).
• The amount of penalty to actually award is discretionary
for a judge and depends on two factors: 1) the presence or
absence of good faith on the part of the employer; and 2)
the presence or absence of prejudice to the plaintiffs. See
Slipchenko v. Brunel Energy, Inc., C.A. No. H-11-1465, 2013
U.S. Dist. LEXIS 124159, *53 – 54 (S.D. Tex. Aug. 30, 2013).
Ethics for Labor and Employment
Counsel
• An employee has made an internal complaint of
harassment and you are conducting an
investigation. While meeting with a witness, the
witness says he would like to tell you details
about the allegations but wants to make sure you
agree to keep it confidential. Do you agree?
• No. You are not the witness’ attorney and
cannot agree to keep his statements to you
confidential.
No ABA Model Rule
Comments To Texas Rules
85
• A former employee sued the company for wrongful
termination. During trial he leaked to the press
allegations that the company hid known safety
concerns from federal regulators. Can the company
publically respond that it was the former employee
who met with federal regulators and covered up the
safety issues without the company’s knowledge or
consent?
• Yes, a lawyer may make a statement that a reasonable
lawyer would believe is required to protect a client
from the substantial undue prejudicial effect of recent
publicity not initiated by the lawyer or the lawyer's
client.
ABA Model Rule 3.6
Texas Rule 3.07
86
• An employee’s husband lost his job and she starts
stealing supplies like toilet paper from the company.
Her manager catches her in the act and fires her. The
manager wants to get back at the former employee for
embarrassing him at a company event and wants you
to file a lawsuit to recover damages for the stolen
property. Should you file the lawsuit?
• No, because the company is filing the lawsuit
primarily for the purpose of harassing or maliciously
injuring the former employee.
ABA Model Rule 3.1
Texas Rule 3.01
87
• Your sales manager quits and starts working for your
largest competitor. She never signed a non-compete
but you are concerned she has confidential
information, including information on her
iPad/iPhone, she could use to unfairly compete. You
seek a TRO, serve discovery, subpoena her
iPad/iPhone, and notice several depositions. Can you
do this?
• Yes, because the company is not seeking the
discovery to gain an advantage in resolving the matter
unrelated to the merits of its claim.
ABA Model Rule 3.2
Texas Rule 3.02
88
• You are representing the company at mediation.
At the end of the day, the mediator asks you to
disclose your authority so she can get the case
settled. You tell her $50,000, when your actual
authority is $80,000. Is this an ethical violation?
• No, because in the context of mediation, this
statement is viewed merely as a negotiating
position rather than a representation of material
fact.
ABA Model Rule 4.1
Texas Rule 4.01
89
• The company terminates a 62 year old female
employee for performance reasons. The
company offers her a severance and release
agreement. She comes to you (an attorney for
the company) to ask questions about the
agreement. Do you: (a) answer her questions as
neutrally as possible; (b) refuse to discuss with
her; or (c) advise her to obtain counsel?
• (c) You advise her to obtain counsel.
ABA Model Rule 4.3
Texas Rule 4.03
90
• A terminated employee sues the company for
employment discrimination and retaliation. You learn
during the course of discovery that the employee
falsified her expense reports and over the course of
five years stole $10,000 from the company. Can you
threaten the former employee with criminal charges if
she does not drop her lawsuit?
• No, attorneys cannot use or threaten to use the
criminal process solely to coerce a party in a private
matter.
ABA Model Rule 4.4(a)
Texas Rule 4.04
91
• During the discovery phase of a case, Company’s lawyer suspects
Plaintiff may have posted relevant pictures on her Facebook page.
Plaintiff’s Facebook page is set on private and thus only her Facebook
“friends” can see the pictures. What methods may the attorney use to
obtain the pictures?
A. Send a discovery request for production
B. Hire private investigator to send a “friend” request to see if the
plaintiff will accept it
C. A & B
• A -- A lawyer is forbidden from communicating with a person whom the
lawyer knows to be represented by counsel without first obtaining
consent from the represented person’s lawyer. This prohibition extends
to any agents (secretaries, paralegals, private investigators, etc.) who may
act on the lawyer’s behalf.
ABA Model Rule 4.2, 8.4.
Texas Rule 4.02, 8.04(a).
92
Questions??
93 | © 2014 Seyfarth Shaw LLP
THANK YOU!!
Steve Shardonofsky
Seyfarth Shaw LLP
sshardonofsky@seyfarth.com
(713) 225-1001
Nitin Sud
Sud Law P.C.
nsud@sudemploymentlaw.com
(832) 623-6420