Employment Law

Brian Turoff Joins Manatt’s Employment Practice in New York

Manatt is pleased to welcome Brian Turoff as a partner and the head of our New York employment and labor practice. Brian is experienced in handling matters across the full spectrum of employment law and traditional labor law. On the employment front, Brian advises and litigates on behalf of clients in connection with wage and hour and employee compensation matters; government audits and investigations; discrimination and harassment issues; regulatory compliance issues; lawful hiring, disciplinary and termination practices; and employment-related agreements. Brian also guides employers on matters pertaining to noncompete and nonsolicitation agreements and other types of restrictive covenants, in addition to proactively and strategically partnering with clients to devise their labor and employment compliance practices, policies and procedures. In the traditional labor sector, Brian has guided clients through a wide range of issues, including collective bargaining, union and management relations, grievance arbitrations, and matters under the National Labor Relations Act. He represents employers in a wide range of industries and of all sizes, and he is experienced in handling matters before state and federal courts, in arbitration, and before government agencies, including the Department of Labor, the National Labor Relations Board and the Equal Opportunity Employment Commission.

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New York AG Hits Employer With $120K Fine for Violations

Why it matters

The New York attorney general settled with an international retailer for violations of both the state and city “ban the box” laws for $120,000 in penalties and costs. According to Attorney General Barbara D. Underwood, Aldo Group Inc. distributed employment applications inquiring about the criminal history of prospective applicants in its New York City stores, in violation of the New York City Fair Chance Act and the state’s ban the box law, which require employers to individually assess an applicant’s criminal record and determine its relevance before rejecting an applicant. On a statewide basis, the company also lacked consistent policies or procedures specifying whether and how managerial employees should evaluate the criminal records of applicants and employees, the attorney general alleged. Lacking training or guidance, store-level managerial employees used their own discretion, according to the attorney general, and some disseminated information that indicated any applicant with a felony conviction was prohibited from working for the company. In addition to paying the fine, Aldo promised to create new policies, provide training to employees and otherwise comply with the laws.

Detailed discussion

Both New York State and New York City have ban the box laws in place. Pursuant to state law, employers must individually assess an applicant’s criminal record and determine its relevance before declining to hire a candidate. New York City has its own Fair Chance Act that requires employers to wait to ask an applicant about criminal history until after a conditional offer of employment has been extended.

International shoe and accessories retailer Aldo ran afoul of both laws, according to Attorney General Barbara Underwood. The company distributed employment applications that inquired about the criminal history of prospective applicants in its 30 New York City stores, a violation of the city’s Fair Chance Act, the attorney general alleged.

In addition, Aldo lacked policies or procedures for managers at any of its stores in the state on how to evaluate the criminal records of applicants and employees. Without training, store-level managerial employees believed they had wide discretion in the matter. The attorney general’s investigation revealed that several managers disseminated information about Aldo’s hiring policies that indicated any applicant with a felony conviction would be barred from employment.

To settle the charges, the employer agreed to make sure that applications will no longer inquire about criminal history. New policies will be established and training put in place to ensure compliance with state law to individually assess an applicant’s criminal history, with copies of the policies and training provided to the attorney general’s office.

Aldo will also pay $120,000 in penalties and costs.

“Everyone deserves a fair chance when being considered for employment,” Underwood said in a statement. “Ban the box helps protect New Yorkers from discrimination and ensure that a job applicant’s qualifications are the focus during the hiring process. My office will continue to enforce the law as we work to ensure all New Yorkers get the fair shot they deserve.”

Underwood noted that the action against Aldo is part of a “long-standing initiative in the Attorney General’s Civil Rights Bureau” that includes similar efforts involving major national retailers including Big Lots, Marshalls and Party City.

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Failure to Exhaust Administrative Remedies Not a Jurisdictional Bar

Why it matters

Raise it or waive it, the U.S. Court of Appeals for the Fifth Circuit told an employer that attempted to use a plaintiff’s failure to exhaust administrative remedies as a jurisdictional bar. Lois Davis filed a formal complaint with human resources alleging that the IT director had sexually assaulted and harassed her. The director resigned, but one of his close friends then allegedly retaliated against Davis by terminating her for attending a church service. Davis sued, and a district court granted summary judgment for the employer. On the case’s first visit to the federal appellate panel, the Fifth Circuit reversed, finding genuine issues of fact remained as to the religious discrimination claim. On remand, the employer based its second summary judgment motion on Davis’ failure to exhaust her administrative remedies. For a second time, the district court granted the motion, and for a second time, the Fifth Circuit reversed. The administrative exhaustion requirement is not a jurisdictional bar to suit, the court said, joining the First, Second, Sixth, Seventh, Eighth, Ninth and D.C. Circuits. The employer didn’t raise the issue for five years, the panel added, making it “abundantly clear” it forfeited its opportunity to assert the defense.

Detailed discussion

An information technology supervisor for Fort Bend County, Lois Davis filed a complaint with the human resources department alleging that the information technology director had sexually harassed and assaulted her. An investigation led to the director’s resignation. But according to Davis, her supervisor—who was friends with the former director—began retaliating against her.

When Davis informed her supervisor that she could not work on a specific Sunday because of a “previous religious commitment” to attend a special church service, her supervisor refused to approve the absence. Davis attended the service anyway, and Fort Bend terminated her employment.

Davis then filed a charge with the Texas Workforce Commission alleging sexual harassment and retaliation. She later amended her intake questionnaire to include religious discrimination but did not amend her charge. After receiving her right-to-sue letter, Davis filed her lawsuit in district court alleging both retaliation and religious discrimination.

A district court granted summary judgment in favor of the employer on all claims, but the Fifth Circuit reversed on the religious discrimination claim, finding genuine disputes of material facts. Fort Bend filed a writ of certiorari with the Supreme Court, but the justices denied it.

On remand, the employer filed a second motion for summary judgment, this time arguing that Davis failed to exhaust her administrative remedies on her religious discrimination claim. Holding that administrative exhaustion is a jurisdictional prerequisite in Title VII cases, the district court granted the motion.

Davis appealed again, contending that administrative exhaustion is a prudential prerequisite for suit and that Fort Bend had waived the argument. Reversing for the second time, the Fifth Circuit agreed with the plaintiff.

Noting that the term “jurisdiction” is “a word of many, too many, meanings,” the federal appellate panel recognized that its case law has gone in both directions. One line of cases characterizes Title VII’s administrative exhaustion requirement as jurisdictional, while another has treated the exhaustion requirement “as merely a prerequisite to suit.” A third line of cases acknowledges the intra-circuit split but takes no side in the dispute.

Settling the question by citing the rule of orderliness, the Fifth Circuit declared that “a Title VII plaintiff’s failure to exhaust her administrative remedies is not a jurisdictional bar but rather a prudential prerequisite to suit.”

“Congress did not suggest -much less clearly state-that Title VII’s administrative exhaustion requirement is jurisdictional, and so we must treat this requirement as nonjurisdictional in character,” the panel wrote. “The statute says nothing about a connection between the EEOC enforcement process and the power of a court to hear a Title VII case. In other statutes, by contrast, ‘Congress has exercised its prerogative to restrict the subject-matter jurisdiction of federal district courts based on a wide variety of factors.’”

This conclusion aligned the Fifth Circuit with the First, Second, Sixth, Seventh, Eighth, Ninth and D.C. Circuits, the court added.

Turning to the case at hand, the panel had little difficulty concluding that Fort Bend had forfeited its opportunity to raise Davis’ alleged failure to exhaust. The employer did not plead the failure to exhaust as an affirmative defense and did not originally raise the issue before the district court, the court noted.

“In its original motion for summary judgment, Fort Bend did not argue that Davis failed to exhaust her administrative remedies,” the panel wrote. “Then, when Davis appealed for the first time, Fort Bend did not argue to us, in its briefing or during oral argument, that Davis failed to exhaust her administrative remedies. Nor did it raise the issue in its petition for rehearing en banc or in its petition for certiorari to the Supreme Court.

“Simply put, Fort Bend waited five years and an entire round of appeals all the way to the Supreme Court before it argued that Davis failed to exhaust. On these facts, it is abundantly clear that Fort Bend has forfeited its opportunity to assert this claim. Accordingly, the district court erred in dismissing this case based on Davis’s alleged failure to exhaust.”

To read the opinion in Davis v. Fort Bend County, click here.

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Court Rounds Out Victory for Employer Over Payment System

Why it matters

In a victory for the employer, a California appellate court ruled a hospital legally rounded the hours worked by its employees, ordering the trial court to enter judgment in its favor. A pair of employees brought a putative class action against AHMC Healthcare for a host of Labor Code violations, including the failure to pay proper wages. Workers at the hospital facilities were required to swipe their ID badges at the beginning and end of their shifts. They argued that because the employer rounded their hours up or down to the nearest quarter hour before calculating wages and issuing paychecks—rather than using exact check-in and checkout times—AHMC violated the Labor Code. A trial court denied cross motions for summary judgment in the case, but the appellate panel sided with the employer. An expert analysis of the data over a four-year period at one of the hospital facilities found the rounding procedure left 1.2 percent of the workforce unaffected while 49.3 percent saw added time and 49.5 percent lost time, on average 2.04 minutes per shift. Finding the payment system neutral on its face and as applied, the court said the employer’s payment system was lawful.

Detailed discussion

Acting on behalf of themselves and other similarly situated employees, a pair of workers at AHMC Healthcare Inc. filed suit against their employer for various Labor Code violations. Employees in hourly positions at the hospital were required to clock in and out by swiping their ID badges at the beginning and end of their shifts.

The plaintiffs claimed that because the hospital rounded employees’ hours up or down to the nearest quarter hour prior to calculating wages and issuing checks (rather than using the exact check-in and checkout times), AHMC violated state law.

For example, if an employee clocked in between 6:53 and 7:07, she is paid as if she clocked in at 7:00, while an employee who clocks in between 7:23 and 7:37 will be treated as if he clocked in at 7:30. Meal breaks that last between 23 and 37 minutes are rounded to 30 minutes.

The parties stipulated to an examination of the time records for a four year period for AHMC’s two locations (in San Gabriel and Anaheim) by an economic and statistics expert. The review found that at San Gabriel, 49.3 percent of the workforce received added time, 49.5 percent of employees lost time and 1.2 percent were completely unaffected. Overall, the number of minutes added to employee time by the rounding policy exceeded the number of minutes subtracted, adding 1,378 hours to the employees’ total compensable time.

Similar results were found at the Anaheim location. There, 47.1 percent of the employees saw an increase in time, 52.1 percent of the workforce lost time and 0.8 percent were not affected. Overall, the rounding policy again added time—3,875 hours—to the employees’ total compensable time.

Both parties moved for summary judgment. The trial court denied both motions and the employer appealed, arguing that the rounding procedure was facially neutral, was applied fairly and provided a net benefit to employees considered as a whole, making it lawful.

The appellate panel agreed with the employer, rejecting the plaintiffs’ position that a rounding policy that resulted in any loss to any employee—no matter how minimal—violated California employment law.

Beginning with federal law, the court said Sec. 785.48 of Title 29 of the Code of Federal Regulations allows employers to compute employee work time by rounding “to the nearest 5 minutes, or to the nearest one-tenth or quarter of an hour,” provided that the rounding system adopted by the employer “is used in such a manner that it will not result, over a period of time, in failure to compensate the employees properly for all the time they have actually worked.”

Federal district courts interpreting the provision have “almost universally” concluded that a rounding system is valid if it “average[s] out sufficiently,” the panel added.

California’s wage laws are patterned on federal statutes, so state courts may look to federal authorities for guidance in interpreting state labor provisions when determining employee wage claims, the court explained.

“Here, the rounding system is neutral on its face,” the panel wrote. “It ‘rounds all employee time punches to the nearest quarter-hour without an eye towards whether the employer or the employee is benefitting from the rounding.’ It also proved neutral in practice.”

Because the employer presented undisputed evidence that the rounding system was neutral on its face and that employees as a whole were significantly overcompensated, the evidence established that AHMC’s rounding system did not systematically undercompensate employees over time, the court said.

“The fact that a bare majority at one hospital lost minor sums during a discrete period did not create an issue of fact as to the validity of the system,” the court said. “[T]he regulation does not require that every employee gain or break even over every pay period or set of pay periods analyzed; fluctuations from pay period to pay period are to be expected under a neutral system.”

A system “is fair and neutral and does not systematically undercompensate employees where it results in a net surplus of compensated hours and a net economic benefit to employees viewed as a whole,” the court added.

The plaintiffs presented no evidence of bias in the system or that the policy was applied differently to different employees. “[W]here the system is neutral on its face and overcompensates employees overall by a significant amount to the detriment of the employer, the plaintiff must do more to establish systematic undercompensation than show that a bare majority of employees lost minor amounts of time over a particular period,” the panel wrote. “Because [AHMC’s] employees benefited overall from the rounding policy, the fact that a bare majority lost a minimal amount of time was not sufficient to create a triable issue of fact.”

Remanding the case, the appellate court ordered the trial court to issue a new order granting summary adjudication in favor of the employer.

To read the opinion in AHMC Healthcare, Inc. v. Superior Court, click here.

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Driver Not an Employee, New York Court Rules

Why it matters

In a decision with implications for the gig economy, a New York appellate court found that a driver for an app-based food delivery service is an independent contractor and not an employee. Luis Vega, a former delivery courier for Postmates, a food delivery service in Brooklyn, Manhattan and Queens, applied for unemployment insurance benefits after he was terminated. An administrative law judge denied the request, but the Unemployment Insurance Appeal Board reversed, determining that an employer/employee relationship existed between Postmates and Vega. The state court appellate panel reversed again, pointing to several factors that led to the conclusion he was an independent contractor. To work for the company, Vega only had to download the app and provide certain information, the court said, with no application or interview required. Nor did he report to a supervisor. Vega had “unfettered discretion” as to whether he even had to work, with total control over his schedule. “While proof was submitted with respect to Postmates’ incidental control over the couriers, the fact that Postmates determines the fee to be charged, determines the rate to be paid, tracks the subject deliveries in real time and handles consumer complaints…does not constitute substantial evidence of an employer/employee relationship,” the court said.

Detailed discussion

Postmates Inc. operates a web-based platform that allows customers to request on-demand pickup and delivery service from local restaurants or stores. In order to work for the company, individuals download Postmates’ app and provide a name, telephone number, Social Security number and driver’s license number. No application and no interview are required.

The company obtains a criminal background check from a third-party provider and offers an orientation session on how to utilize the app, but drivers are not required to report to a supervisor, and they have the discretion as to whether to ever log on to the app and work. When drivers do log on, they are free to work as much or as little as they want and may even decline or ignore a delivery request without penalty.

Drivers are also allowed to choose the mode of transportation they wish to use for deliveries, provide and maintain their own transportation, and choose the route they wish to take for the delivery. Uniforms are not required, drivers are not provided with any identification card or logo, and they may work for competitors.

Luis Vega worked as a courier for Postmates. After the company terminated him based on alleged negative consumer feedback and/or fraudulent activity, he applied for unemployment insurance benefits. An administrative law judge denied the benefits, but the Unemployment Insurance Appeal Board reversed, finding that an employer/employee relationship existed between Vega and Postmates.

A panel of the New York Appellate Division disagreed.

“While proof was submitted with respect to Postmates’ incidental control over the couriers, including, among other things, the fact that Postmates determines the fee to be charged, determines the rate to be paid, tracks the subject deliveries in real time and handles customer complaints, in our view, such proof does not constitute substantial evidence of an employer/employee relationship to the extent that it fails to provide sufficient indicia of Postmates’ control over the means by which these couriers perform their work,” the court wrote.

“Thus, on the record before us, we find that the Board’s decision is not supported by substantial evidence as the relationship between claimant and Postmates lacks the requisite indicia of supervision, direction and control necessary to establish an employer/employee relationship.”

Two members of the panel dissented. Referencing the criminal background checks, the reloadable credit card provided to couriers in the event a customer requests an additional purchase, and the fact that Postmates sets the fees, handles customer complaints and acknowledged that the business would not operate without the couriers, the dissent found substantial evidence in support of the board’s decision.

To read the memorandum and order in In re Vega, click here.

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