Employer Alert

Pizza Maker ordered to pay $800k in wage theft

5 June 2016

 

A Papa John’s pizza franchise in New York must pay its workers nearly $800,000 in unpaid wages over allegations the business underpaid employees and failed to pay overtime, a state judge ruled last week.

New York Attorney General Eric Schneiderman in December sued Emstar Pizza Inc., which operates seven Papa John’s franchise locations in Brooklyn and Queens, alleging that Emstar underreported hours worked by employees over the past six years, rounded employee hours down to the nearest hour, and did not pay overtime.

Attorney General Schneiderman is also considering legal action against the franchisor, Papa John’s International Inc., on the theory that it is a joint employer and thus liable for the actions of its franchisees, according to reporting from the New York Post.

The National Labor Relations Board in July ruled McDonald’s a joint employer and thus liable for labor or wage violations at its franchise locations in a first-of-its-kind decision that represents a significant victory for workers’ rights advocates. Corporations like Papa John’s and McDonald’s employ about two-thirds of the low-wage workers in this country, but have so far mostly avoided liability for the illegal actions of their franchise owners under the theory that, despite sharing a common corporate brand, each franchise is independently owned and operated.

Seven Days Paid Vacation for Federal

 (From the Washington Post, September 7, 2015)

President Obama rallied union workers here Monday, unveiling a new executive order that will require federal contractors to offer employees up to seven days of paid sick leave, a move he sought to contrast with Republican economic policies.

Obama announced the new directive, which the White House said could benefit more than 300,000 workers, during a Labor Day speech in Boston. It was the latest in the White House’s year-long effort to pressure Congress to approve legislation that would provide similar benefits for millions of private-sector workers.

“Right now, you have parents who have to choose between losing income or staying home with a sick child,” Obama told a crowd of 765 supporters, including many labor officials, during the annual Greater Boston Labor Council breakfast, sponsored by the AFL-CIO.

Under the executive order, workers on federal contracts would be eligible for paid leave if they are sick or caring for a sick relative. They will earn one hour of leave for every 30 hours worked, with a maximum of seven days a year, officials said. The new order won’t take effect until after Obama leaves office in early 2017.

With the campaign for his successor underway, the president drew a sharp contrast between his administration’s policies and those of Republicans. The GOP believes the best way to stimulate the economy is to cut taxes and loosen regulation, Obama said.

Republicans think “just wait, look up in sky, and see prosperity come raining down on us on top of whatever high-rise is in New York City,” he said. “That’s not how the economy works.”

In particular, Obama mocked Wisconsin Gov. Scott Walker (R), a presidential hopeful whose support for anti-union laws in his state made him popular within the national GOP but angered labor leaders. Without mentioning him by name, the president ridiculed Walker for suggesting, in February, that “busting unions prepared him to fight ISIL” — a reference to the Islamic State militant group.

During a campaign appearance at a diner in Rochester, N.H., Walker responded by saying that while Obama “stands with the big government union bosses, we stand with hard-working people.”

Walker added that “the president and his allies fear us more than anybody else in the race because they know we don’t just talk about it, we get it done. We fight, we win, we actually get results and we’ve done it without compromising our conservative principles.”

The president’s Boston trip was intended to serve as a rallying point with organized labor heading into the 2016 elections. Obama and labor leaders butted heads this spring over the president’s successful push to win additional authority from Congress to complete international trade deals.

But big labor has been buoyed by the White House and congressional Democrats’ commitment to championing parental leave and sick leave laws, as popular support has grown for such measures in many parts of the country. An estimated 44 million private-sector workers — about 40 percent of the workforce — do not have access to paid sick leave, according to the White House.

Labor Secretary Thomas Perez and a host of labor leaders joined Obama on Air Force One for the quick trip to Boston. Sen. Elizabeth Warren (D-Mass.), who attended the speech, was among those who traveled home on the presidential jet.

Before heading home to Washington, Obama made an unannounced lunchtime stop at Union Oyster House, a historical landmark established in 1716, where he surprised patrons by ordering 10 clam chowders to go.

“We’ll eat them on Air Force One,” he told the bartender.

Obama signed a presidential memorandum in January directing agencies to allow federal workers to take six weeks of advanced paid sick leave to care for a new child or ill family members.

Despite a heavy push by the Obama administration, however, proposals for paid sick leave have languished in the GOP-controlled Congress, much like efforts to increase the minimum wage.

The United States is one of just a handful of countries that do not offer paid leave; congressional Republicans have introduced measures offering workplace flexibility and tax credits in some instances, but they have opposed mandating paid leave.

The push for paid leave has gained momentum across the country, although it tends to be in Democratic-leaning states and cities. The president highlighted a Massachusetts law, approved by voters in November, that provides employees with up to 40 hours of sick leave per year. That law went into effect in July.

During his remarks at the breakfast, Obama playfully noted that New England Patriots quarterback Tom Brady, whose four-game suspension by the National Football League was overturned last week by a federal judge, had the strong backing of the players association.

“Even Brady’s happy he’s got a union,” Obama said. “They had his back. You know if Brady needs a union, we definitely need unions.”

EMPLOYER ALERT – NO DIPLOMA, NO JOB?

A hard and fast rule that all job applicants must have a high school diploma can get you in trouble.  The Equal Employment Opportunity Commission has published new rules about how the Americans with Disabilities Act (ADA) applies to people without a high school diploma. Immediately rejecting someone for lacking a high school diploma could be considered discrimination. At first, this sounds like a terrifying and ridiculous rule, but it’s much more nuanced than it first seems. As long as an employer is aware of the rule and how it works, there shouldn’t be any issue (you don’t have to hire someone who isn’t qualified).

The rule has to do with people who did not complete high school because of some disability that prevented them from doing so. If you require a high school diploma to be hired for a job, and an applicant tells you that they were unable to get a high school diploma because of a disability, then all this rule means is you should allow the applicant to show some other evidence proving that they are qualified.

It’s still your decision who to hire, and you can choose another candidate if they are more qualified or simply a better fit for your organization. What’s important though is to give everyone a chance to prove their qualifications, instead of simply rejecting an applicant out of hand solely because they don’t have a diploma.

In practice, this won’t actually affect smart businesses much at all (since just allowing someone a chance to prove qualifications in other ways is a pretty minor accommodation), but it could hurt businesses who are unaware of the new rule. Luckily, you now know how this works, and so you know how to avoid getting in trouble with the EEOC.

Read more about this new rule here:

http://www.eeoc.gov/eeoc/newsroom/wysk/high_school_ada.cfm

EMPLOYER ALERT – SOME FMLA RIGHTS ACCRUE PRIOR TO ELIGIBILITY FOR LEAVE

Can an employee who has worked for a company less than one year sue the company for violating the Family and Medical Leave Act (“FMLA”)? The answer, according to January 10, 2012 decision of the federal Eleventh Circuit Court of Appeals, is yes.

In Pereda v. Brookdale Senior Living Communities, Inc., the plaintiff, Kathryn Pereda, had been employed by Brookdale for eight months when she told her employer that she was pregnant and would be requesting FMLA leave upon the birth of her child. By the time of her expected delivery date, she would have been employed by the company for 13 months, thereby satisfying the one-year of employment requirement for leave eligibility under the FMLA.

After 11 months of employment, however, she was terminated, allegedly to prevent her from becoming eligible for leave. She sued in federal district court in Miami, claiming that her employer violated the FMLA by interfering with her right to leave and by retaliating against her for requesting FMLA leave. The district court dismissed the case, stating that she had no right to bring a suit under the FMLA because at the time the events occurred, she was not an eligible employee under the FMLA since: (1) she had not worked for the company for more than one year; and (2) the triggering event that would entitle her to leave – the birth of her child – had not yet occurred.

On appeal, the Eleventh Circuit reversed that decision and remanded the case to the trial court for further proceedings. Recognizing that Pereda had a right to file a lawsuit under the FMLA even though she was not yet eligible to take leave on the date she was fired, the court stated as follows: “We are simply holding that a pre-eligible employee has a cause of action if an employer terminates her in order to avoid having to accommodate that employee with rightful FMLA leave rights once that employee becomes eligible.”

In the underlying case, the plaintiff claimed that prior to advising her employer that she was pregnant and would be requesting FMLA leave, Pereda was considered “a top employee.” Afterward, according to the allegations in the lawsuit, her employer began harassing her “and denigrating her job performance and placed her on a performance improvement plan with unattainable goals.” She was then written up for excessive absenteeism (absences for medical appointments that she claimed had been authorized by her supervisor), and was fired during her 11th month of employment. Based upon the Eleventh Circuit’s ruling, this case will now proceed to trial, and a jury will determine whether or not the employer in fact did interfere with Pereda’s FMLA rights, and fired her in retaliation for her intention to take leave.

The best approach for employers is to review carefully any sudden change in performance evaluations for an employee who has provided notice of intent to take leave under the FMLA, regardless of whether the employee is eligible for FMLA at the time the request is made. If there has been a decline in performance, make sure it is objectively documented, and be certain that the supervisor is not biased by the fact that an employee who has been with the company less than one year is planning to take up to 12 weeks leave as soon as they become FMLA-eligible.

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EMPLOYER ALERT – “CAT’S PAW” THEORY OF DISCRIMINTION CAN TAINT IMPARTIAL FIRING DECISION

The phrase ‘garbage in, garbage out’ doesn’t just apply to the computer business, where it’s long been recognized that if you input faulty data into a computer program, it will process that information and yield a predictably faulty result. Likewise, an impartial decision-maker can still subject your company to liability for violation of one of the federal employment discrimination laws if their hiring or firing decision was based on “facts” or “opinions” that were tainted by another employee’s discriminatory intent.

A March 2011 decision of the U.S. Supreme Court, Staub v. Proctor Hospital, describes this as the “cat’s paw” theory of discrimination, and in the nine months since that decision was rendered it has been relied upon by federal courts throughout the country in allowing discrimination clams to move forward even though the actual decision-maker was admittedly unbiased. In a nutshell, the “cat’s paw” theory allows a plaintiff to prove his or her case by demonstrating that the otherwise impartial decision was tainted by discriminatory animus on the part of the plaintiff’s supervisor. The name is derived from a fable in which a monkey persuades a cat to reach into the fire to retrieve chestnuts. The cat burns its paws, and the money makes off with the chestnuts, unscathed.

In Staub, a case arising under USERRA (the federal law that protects members of the armed forces from discrimination in employment based on their military service), a supervisor fabricated a disciplinary action, based on the supervisor’s animosity toward the military obligations of the employee, who was a member of the U.S. Army Reserve. The employee’s file was later reviewed by an HR manager, who made the decision to terminate the employee without researching the underlying merits of the disciplinary action. The employee, Straub, filed a grievance about the dismissal, claiming that his boss had fabricated the disciplinary action because he was angry that Straub’s military reservist obligations interfered with scheduling in the department. The HR manager, however, failed to investigate that allegation, and refused to reconsider the termination of employment. A jury found in favor of Straub, but the case was reversed on appeal due to the lack of any intentional discrimination by the HR manager who made the firing decision. Straub then appealed to the Supreme Court, and won.

The Supreme Court held that the HR manager’s lack of intent to discriminate – and lack of knowledge that the underlying disciplinary action was contrived – did not insulate the company from liability for wrongful termination in violation of USERRA.

The decision is Straub is not limited to USERRA cases. Rather, the “cat’s paw” approach it articulates has been used uniformly by federal courts in all types of employment discrimination cases.

The best approach for an employer is not to make a hasty termination decision. If you are the decision maker and you don’t have personal knowledge of the alleged misconduct by the employee, you should investigate the facts before making the decision to terminate. Make sure your disciplinary forms provide a space for employee comments on any write-up, and that there is an internal reporting procedure for employees to follow if they believe they are the victims of discrimination.

EMPLOYER ALERT – DOL AND IRS CRACK DOWN ON INDEPENDENT CONTRACTOR VS EMPLOYEE CLASSIFICATIONS

The IRS and the Department of Labor (DOL) are working together conducting random audits of companies looking for workers who have been improperly classified as independent contractors instead of employees. In 2011, the DOL hired an additional 250 investigators to conduct audits.

The IRS goal is to raise additional tax dollars, since employers do not withhold income taxes or FICA from independent contractors. The DOL goal is to require companies to pay improperly classified workers back pay for all overtime that would have been due if they were classified as employees. The consequence can be economically disastrous for your business, in terms of back overtime, liquidated damages, penalties, and tax liability. In addition, the improper classification of workers as independent contractors instead of employees has implications in unemployment compensation and workers compensation.

One of the red flags to both agencies is an employer who reclassified a group of workers during the year, resulting in issuance of both a W-2 and a 1099 to the same worker for performing, basically, the same services. If your company has made a decision to reclassify workers as a cost-saving measure, make sure those workers can legitimately be hired as independent contractors under the law, or the cost-cutting effort may backfire.

Both the IRS and the DOL look at the following factors.

How closely do you supervise and instruct the worker? Workers who must comply with your instructions as to when, where, and how they work are more likely to be employees than independent contractors. It’s the difference between telling them what to do, and telling them how to do it.

Do you control the hours of work? Although there are situations when the work by its nature must be performed at a certain time or in a certain sequence, in general workers for whom you establish set hours of work are more likely employees. In contrast, independent contractors generally can set their own work hours. Also, an independent contractor usually doesn’t work for you full-time, although there are exceptions.

Do you provide training or did the worker obtain specialized knowledge from outside your business? The more training your workers receive from you, the more likely it is that they’re employees. The underlying concept here is that independent contractors are supposed to know how to do their work and, thus, shouldn’t require training from the purchasers of their services.

Where does the worker fit in your organization? The more important the worker’s services are to your business’s success, the more likely it is that they’re employees.

Does the worker need to perform the services personally? Workers who must personally perform the services for which you’re paying are more likely employees. In contrast, independent contractors usually have the right to substitute other people’s services for their own in fulfilling their contracts. Also, workers who are not in charge of hiring, supervising, and paying their own assistants are more likely employees.

Is the worker performing a specific project with an expected end-date, or do they provide continuing services? Workers who perform work for you for significant periods of time or at recurring intervals are more likely employees. Someone brought onboard for a particular project is more likely to be an independent contractor.

Where is the work performed? Workers who work at your premises or at a place you designate are more likely employees. In contrast, independent contractors usually have their own place of business where they can do their work for you.

Is the worker paid by the hour or by the job? Although there are exceptions, most independent contractors are paid by the job, not by the hour.

Who pays for expenses? Workers whose business and travel expenses are paid by the company are more likely employees. In contrast, independent contractors are usually expected to cover their own overhead expenses, as they factor it into their total charge as a cost of doing business.

Are you providing the tools and equipment? Workers whose tools, materials, and other equipment you furnish are more likely employees. Independent contractors, by contrast, usually have their own tools and equipment.

Does the worker have an investment in his or her business and the opportunity for profit or loss? The greater the worker’s investment in the facilities and equipment they use in performing their services, the more likely it is that they’re independent contractors. Similarly, the greater the risk the worker takes of either making a profit of suffering a loss in rendering their services, the more likely it is that they’re independent contractors.

Do they work for more than one client? The more businesses for which your workers perform services at the same time, the more likely it is that they’re independent contractors. Workers who hold their services out to the general public (for example, through business cards, advertisements, and promotional items) are more likely independent contractors. By contrast, an individual who works exclusively for your company is more likely an employee.

Are there restrictions on your right to fire the worker, or the worker’s right to quit? Workers whom you can fire at any time are more likely employees. In contrast, your right to terminate an independent contractor is generally limited by specific contract terms. Likewise, an independent contractor who has signed a contract to perform a specific project for your company will be in breach of contract if they abandon the project. An employee, however, is generally free to resign at any time.

Remember, no single one of these factors is determinative. The DOL and the IRS look at the combination of factors to determine whether the relationship is an employment relationship or an independent contractor relationship. How these factors are weighed can also vary based upon the specific type of business or industry.

EMPLOYER ALERT – FLORIDA MINIMUM WAGE INCREASES JANUARY 1

Effective January 1, 2012, Florida’s minimum wage for non-tipped employees will increase to $7.67 an hour, a 4.9 percent increase from the $7.31 an hour minimum for 2011, according to an announcement by the Florida Department of Economic Opportunity. Wages for tipped employees will increase to $4.65 an hour.

This increase is based on the increase of the federal Consumer Price Index for urban wage workers in the southeastern United States.

In accordance with a 2004 constitutional amendment, Florida automatically raises the minimum wage rates based on the CPI. The federal minimum wage (currently $7.25 an hour) cannot be raised except by an act of Congress.

Florida employers must pay the higher, Florida minimum wage rate.

EMPLOYER ALERT – FACEBOOK FIRINGS COULD PROMPT LEGAL ACTION

Companies who fire employees for making negative comments about their jobs on a social media site could end up in hot water with the NLRB – even if the company’s employees are not unionized.

The National Labor Relations Board (“NLRB”) enforces the National Labor Relations Act, a federal law pertaining primarily to union activity, which has been around since the 1930s. In the past, courts have held that, to a limited extent, this law also protects non-union employees, in areas such as the right to have another employee present during an employee disciplinary meeting (these are called “Weingarten Rights”), and the protection of “concerted activity” – i.e. the right of employees to meet and discuss issues such as wages, benefits and workplace safety, and to approach management to discuss those issues.

Recently, the term “concerted activity” has been applied to social network postings by employees, and civil complaints have been filed and are pending before the NLRB against companies that fired employees for positing certain comments. Not all comments are protected – they have to fall within traditional definitions of concerted activity, qualifying as a discussion between employees regarding protected activities. A recent article appearing in the Chicago Tribune provides details and insights into this evolving issue. See: http://www.chicagotribune.com/business/breaking/chi-workers-fired-over-facebook-twitter-posts-turn-to-1935-labor-law-20111202,0,6526315.story

The best approach is to review your current HR policies to ensure that they do not prohibit protected “concerted activity” by employees, and obtain legal advice on this issue before you terminate an employee based on their use of social media to air complaints about a supervisor or other workplace issues.

EMPLOYER ALERT – CHANGES IN UNEMPLOYMENT LAW

Florida’s Unemployment Compensation Law now has a broader definition of misconduct which will result in more employees being held ineligible for benefits based on the reason for their termination. As an employer, you need to be familiar with this change so that you can adjust your HR policies accordingly, and make an informed decision whether to contest a former employee’s application for benefits.

In general, an individual is entitled to benefits if they are laid off, terminated without cause, fired for poor performance, or resign with “good cause attributable to the employer” (i.e. if conditions at work are so bad that any reasonable person would feel they had no alternative but to resign). Individuals are ineligible for benefits if they are terminated for misconduct. Conduct which results in termination “for cause” under a company’s internal policies, however, does not always equate to conduct that is considered “misconduct” under the unemployment compensation law. That definition has now been expanded to include conduct that would not previously have resulted in a denial of benefits.

Under the new law, misconduct is defined as any action that demonstrates conscious disregard of an employer’s interests and is found to be a deliberate disregard or violation of reasonable standards of behavior, and may include activities that did not occur at the workplace or during working hours. This change broadens misconduct and makes it easier for an employer to deny benefits. Misconduct now includes violation of an employer’s policy that affects behavior outside the workplace (such as a rule prohibiting employees from making negative statements about the company on an employee’s personal facebook page).

The best practice is to review your current policies, and make sure you are providing written warnings for violations that would qualify as misconduct if repeated.

Other changes in the law, which primarily affect the procedures for claimants seeking benefits, include the following:

  • Benefit Payments: New claims must be paid by either the Florida Unemployment Compensation Debit Card or by direct deposit to the Claimant’s bank account (i.e. paper checks will no longer be used to pay benefits).
  • Online Filing and Certification of Weeks: All claims must now be filed electronically, and continuing claims must be updated electronically. The unemployment hotline is still available to answer questions about filings.
  • Work Search: Claimants are required on a weekly basis to contact five potential employers and provide this information via the Internet during their bi-weekly certification for benefits. You can use the Employ Florida Marketplace website (employflorida.com) to search thousands of postings and apply for jobs. If you are unable to make at least five employment contacts in a week, meeting with a representative at a local One-Stop Career Center for reemployment services can satisfy the requirement for that week.
  • Skills Review: Claimants must now complete an initial skills review over the Internet. The result of the review will be used by local One-Stop Career Centers to assist claimants with job searches.
  • Severance Pay: If a claimant’s severance pay per week is equal to or greater than the claimant’s weekly benefit amount, the claimant is not entitled to benefits for that week. Severance pay does not impact the total amount of benefits that can be paid on the claim.
  • Duration of Benefits: Effective January 1, 2012, The duration of benefits adjusts from the current maximum of 26 weeks to a range from 12 to 23 weeks, based upon the average unemployment rate in Florida for the third calendar quarter of the previous year. For example, the maximum number of weeks for 2012 will be based on the average unemployment rate in Florida for July, August and September 2011. When the average unemployment rate is 5 percent or less, the maximum duration of benefits will be 12 weeks. For each half-percent increase in the average unemployment, an additional week will be added to the calculation of the benefit duration beginning January 1 of the following calendar year. Should the average unemployment rate reach 10.5 percent or higher, a maximum of 23 weeks would be payable on a claim established during the following calendar year.

EMPLOYER ALERT – BEFORE YOU HIT SEND

Technology means you can be on top of business activities 24/7, and so can your employees. But stop and think before you send that after hours email or text. Unless your employee is properly classified as exempt from overtime pay under the Fair Labor Standards Act, the time that employee spends reading and responding to your email or text is compensable work time. And if they are already putting in a 40-hour week, then it’s overtime.

There has been a recent growth in wage and hour claims arising from off-premises work done by employees. Similar problems arise when employees are able to log into their work computer remotely – you as the employer are responsible for keeping a record of all hours worked by nonexempt employees. The FLSA has strict guidelines regarding which employees may be classified as exempt; you can’t solve this problem simply by giving an employee a title and paying them a salary.

Other concerns: If the employee checks email on their smart phone or even responds to text messages in the morning before leaving for the office, when does their compensable work day actually begin?

The best practice is to have clear policies on when it is – and isn’t – acceptable for employees to work outside of normal business hours. And be sure to enforce them.