Employment Law

The Need to Correctly Classify Employees

Why it matters: Providing a $1.25 million lesson in the importance of correctly classifying employees, the Oakland Raiders settled a lawsuit brought by the team’s cheerleading squad, the Raiderettes. The cheerleaders filed suit in January, alleging the team failed to pay them for all the hours they worked, did not provide overtime, failed to provide meal and rest breaks, did not reimburse them for business expenses, and took unlawful deductions from their wages. The highly publicized suit launched a trend, with similar cases filed against other National Football League (NFL) teams, including the Cincinnati Bengals, the Buffalo Bills, the New York Jets, and the Tampa Bay Buccaneers. After negotiating a new contract with the current Raiderettes in July that reportedly tripled their pay, the team agreed to settle the class action and pay a class of about 90 plaintiffs $1.25 million. Employers other than professional football teams should take note of the size of the settlement and ensure that workers are properly classified to avoid a lawsuit.

Detailed Discussion

A member of the Oakland Raiders’ cheer squad, Lacy T., worked as a Raiderette for the 2013-2014 NFL season. Like all Raiderettes, she signed a written employment contract that she would be paid a flat fee of $125 per home game, or $1,250 per season.

The contract set forth several requirements for the Raiderettes, including attendance at all home games, rehearsals, fittings, photo sessions, meetings, and workouts, with an average of an additional 10 compulsory events (such as charitable appearances) during the season. Raiderettes were also responsible for additional expenses such as travel and false eyelashes and could have their pay docked for tardiness or absence.

According to the complaint, the flat rate paid by the Raiders resulted in less than $5 per hour for game appearances – which didn’t even take into account the time spent rehearsing, performing at charity events, and participating in the annual swimsuit photo shoot.

After some motion wrangling, the parties attended mediation and entered settlement negotiations, reaching a deal totaling $1.25 million. Class members – estimated at 90 current and former Raiderettes – will receive between $2,459.63 and $6,832.30 per season.

The deal requires the team to foot payroll taxes separately from the settlement fund, which does include $400,000 for attorneys’ fees and two $10,000 incentive awards for the named plaintiffs. Also part of the settlement: $10,000 allotted for payment of Private Attorney General Act (PAGA) penalties, 25 percent of which will be distributed to the class, with the remainder paid to the California Labor and Workforce Development Agency.

The $792,000 of the total settlement fund set for the class (approximately 63 percent of the total amount) will be allocated based on factors such as the amount paid by the team to the cheerleaders in a given season, the amount of travel expenses, and the number of seasons worked.

“Class counsel has calculated that for each season in which a class member worked as a Raiderette, the class member will receive full pay for all hours worked at the minimum wage rate of $8 per hour for all hours worked, between $800 and $1,100 for unreimbursed expenses, interest on unpaid wages and unreimbursed expenses calculated at a rate of 10 percent per annum,” according to the parties’ joint motion in support of preliminary approval of the deal.

Given that the total payments to the class members will range from $2,459.63 to $20,633.54, the parties told the court that the settlement provided a “significant amount for part-time employees at minimum wage.” Calling the settlement “fair, adequate and reasonable,” the parties requested that the court preliminarily approve the deal.

To read the joint motion in support of preliminary approval of the settlement in Lacy T. v. The Oakland Raiders, click here.

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The Need to Have Correct Job Descriptions for Employees

Why it matters: A new decision from the Third U.S. Circuit Court of Appeals demonstrates the importance of establishing a written job description for employees and ensuring a healthcare provider has a copy when considering an employee’s return to work after leave. An injured employee returned to her job with a note from her treating physician that she had “no restrictions.” The employer disagreed, particularly as the employee herself acknowledged that her typing was not as fast as normal. The employer sent her back on leave until she could work full duty. After she exhausted her Family and Medical Leave Act (FMLA) time and remained on leave, the employer filled her position with another employee. A federal district court judge granted summary judgment for the employer in the employee’s subsequent FMLA suit, but the federal appellate panel reversed. By failing to provide the employee’s treating physician with a job description for the employee, the doctor’s fitness-for-duty certification was properly based on the employee’s description of the position, the court said, and the employer did not have the right to overrule his judgment that the employee could work with “no restrictions.” The three-judge panel’s decision should serve as a warning to employers to review and draft a job description for employees and be ready to provide a written list of the job’s essential functions when FMLA leave is triggered – or face the consequences if an employee writes it him- or herself.

Detailed Discussion

In an incident unrelated to her job, Vanessa Budhun broke her fifth metacarpal. A credentialing assistant for Reading Hospital and Medical Center, Budhun’s job required preparing and mailing credentialing packs, processing and verifying credentialing information, and performing data entry. Budhun estimated that 60 percent of her job involved typing.

Budhun arrived at work with a splint on her right hand and a few hours later was provided with FMLA forms and went to see an orthopedic specialist. Roughly one week later, she returned to the same doctor, who taped the pinky, ring, and middle fingers on her right hand together and completed her FMLA leave certification form.

Budhun told the doctor that her job required typing and that she felt she could get the job done with her left hand and her thumb and index finger on her right. He signed a note that stated, “No restrictions in splint.” Budhun returned to work the next week. When questioned about her ability to work by her supervisor, she replied that she could “type slowly and write a little bit, but not as fast as I used to.” In an e-mail, her supervisor said that because Budhun was unable to perform at full duty, she needed to stay out of work until she was able to do so.

She then remained out of work for the remainder of her FMLA leave, although she remained in communication with her supervisor via e-mail and provided updates from her doctor. When Budhun did not return to work on the date her leave ended, the hospital offered her job to another employee.

In her subsequent complaint alleging interference with and retaliation based upon her FMLA leave, Budhun argued that when her supervisor told her she needed full use of all ten fingers before she could be reinstated, this action interfered with her right to be restored to her position. A federal district court disagreed and granted summary judgment to the hospital.

But on appeal, the Third Circuit reversed. The three-judge panel was quick to recognize that an employer may request that an employee provide a fitness for duty certification with a healthcare provider signing off that the employee is ready to return to work. The employer’s mistake in this case was that it failed to provide a list of essential functions for Budhun’s position so that the doctor could make an accurate assessment of her ability to do her job.

“An employer may require that … certification address the employee’s ability to perform the essential functions of her job, but only if the employer provides a list of essential functions to the employee at the time that the employer notices the employee that she is eligible for FMLA leave,” the panel explained. “It is undisputed that Reading did not provide Budhun a list of essential functions for her to present to [her doctor]. Because Reading did not provide Budhun with such a list, [the doctor’s] fitness for duty certification was based only on the description of the job that Budhun would have supplied him.”

Instead of following the regulations – which also permit an employer to seek clarification of the certification – the hospital “seemingly overruled” the doctor’s conclusion by telling Budhun that if she was truly ready to return to work she would be able to use all her digits. “The record is sufficient to allow a reasonable jury to conclude that Budhun attempted to invoke her right to return to work, and that Reading interfered with it when it told Budhun that she could not,” the court wrote.

“Reading was free to provide Budhun with a list of the specific functions that were essential to her job so that [the doctor] could determine if Budhun could perform them, but it did not,” the panel said. “Instead, [her supervisor] unilaterally determined, over email, that Budhun could not perform an essential function because she had use of only seven fingers.”

Budhun’s admission that she could not type as quickly “does not mean that she could not perform this essential function,” the court added, in light of evidence she provided that no minimum words per minute requirement existed and other employees used the “hunt and peck” typing method. “Combined with [the doctor’s] note, Budhun has adduced enough evidence to allow a reasonable jury to conclude that she could, in fact, perform this essential function,” the court said.

The panel reversed summary judgment for the hospital and remanded the case to the district court.

To read the opinion in Budhun v. Reading Hospital and Medical Center, click here.

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New California Law Mandates Antibullying Training

Why it matters: The California Legislature continues to keep employers in the state on their toes. In September, Governor Jerry Brown signed into law a bill that mandates the inclusion of “abusive conduct” prevention in employment training. Intended to be preventative in nature, the antibullying training must be held in conjunction with mandated sexual harassment training for supervisors. Employers should begin the process of implementing the new training now as the law takes effect January 1, 2015. In other employment-related news, Governor Brown vetoed a bill that would have added unemployment status as a protected category under state law. The measure, passed by the state Assembly and Senate, banned employers from asking an applicant’s employment status before the employer determined that the applicant met minimum qualifications for the position. But expressing concern that the bill would complicate efforts to connect unemployed individuals with employers, the Governor refused to sign it.

Detailed Discussion

Bullying in the workplace has been a hot topic for employers, although neither courts nor state legislatures have established liability – yet. A new law in California does not create a cause of action, but it does mandate that employers train their employees about the issue, dubbed “abusive conduct.”

Existing law requires employers with at least 50 employees to provide two hours of classroom or other effective interactive training regarding sexual harassment prevention to California supervisory employees at least once every two years; new supervisors have a six-month window to fulfill their first training.

Beginning January 1, 2015, covered employers must add training on “abusive conduct” to their sexual harassment supervisory training. The amendment to the state’s Fair Employment and Housing Act defines “abusive conduct” as “conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to legitimate business interests.”

Examples of abusive conduct include “repeated infliction of verbal abuse, such as the use of derogatory remarks, insults, and epithets, verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating, or the gratuitous sabotage or undermining of a person’s work performance.”

The law notes that – unless it is “especially severe or egregious” – a single act shall not constitute abusive conduct. While the new law did not add “abusive conduct” as a protected category of individuals under the Fair Employment and Housing Act, simply adding the training requirement, employers can be penalized by the Department of Fair Employment and Housing for failure to comply with the training mandate.

In other employment legislation news, employers dodged additional hiring restrictions when Governor Jerry Brown vetoed a bill that would have prevented employers from inquiring about an applicant’s employment status.

The state Assembly passed AB 2271 by a 51-to-23 margin in May and the Senate followed suit in a 55-to-21 vote in August. But while Governor Brown indicated support for the intent behind the bill, he declined to sign it into law.

The proposed law “could impede the state’s efforts to connect unemployed workers to prospective employers as currently drafted,” Governor Brown said in his veto order. “There is no doubt these Californians want to get back to work and I want to help them get there – unfortunately this bill does not provide the proper path to address this problem.”

As passed by the State Legislature, the bill prohibited employers from asking applicants to disclose their employment status prior to a determination that the applicant met the minimum qualifications for the position. In addition, the bill banned employers or employment agencies from advertising jobs with a provision that current employment was a requirement. Violations of the proposal would have been subject to civil penalties.

Assemblymember Ian C. Calderon, who sponsored the bill, said he was “deeply disappointed” in Governor Brown’s veto and intended to try again, citing research about the difficulties facing long-term unemployed individuals.

To read the new law, click here.

To read the vetoed legislation, click here.

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California Whistleblower Protections Cover Secondary Reporting

Why it matters: California’s whistleblower protections are not limited to the first employee who reports the alleged misconduct, an appellate court recently determined. The case involved a Los Angeles County deputy sheriff who sued after he was terminated alleging that he was fired for statements he made about information revealed during the course of an investigation connecting a fellow sheriff to a murder and drug ring. The County argued that the plaintiff did not qualify for whistleblower protection because the information he reported was already known to the sheriff’s department. A jury found in his favor and the County appealed. Affirming the verdict, the panel ruled that secondary reports are covered by the statute’s protections, as a “report does not necessarily reveal something hidden or unknown.” The court also cited public policy concerns, noting that limiting protections to first reports would discourage whistleblowing in contradiction of the statute’s intent.

Detailed Discussion

A deputy sheriff with the Los Angeles County Sheriff’s Department, Darren Hager was appointed as a liaison to a federal Drug Enforcement Agency (DEA) task force investigating a large methamphetamine organization.

The investigation was launched by an informant’s tip to Hager; the same informant also suggested that the drug ring was involved in the disappearance and murder of Jonathan Aujay, a deputy sheriff who had disappeared near a purported meth lab. The informant also said a third deputy sheriff, Richard Engels, may have been involved in the murder of Aujay.

A homicide detective investigating Aujay’s disappearance had heard similar rumors. Hager briefed him and superior officers about what his informant had said. Hager was specifically instructed by a superior officer not to investigate Aujay’s disappearance or wrongdoing by Engels, but if he learned any information during the DEA investigation, he was to report it to the Internal Criminal Investigations Bureau.

Hager was later investigated and brought up on charges for disobeying this direct order as well as making false statements for allegedly misrepresenting statements and information provided by informants. He was terminated in 2003 and filed suit against the County.

The County violated California Labor Code Section 1102.5(b), Hager claimed, because he reported alleged misconduct about a fellow sheriff and was terminated as a result. A jury agreed and awarded him $4.5 million in damages.

On appeal, the County told the court that Hager did not “disclose information” as required by Section 1102.5(b) because the department already had information that Engels might have been involved in Aujay’s disappearance before Hager reported his suspicions.

But no such “first report” limitation can be found in the statute or in case law, the appellate panel said. “The plain language of Section 1102.5(b) does not limit whistleblower protection only to an employee who discloses unlawful conduct that had not been previously disclosed by another employee,” the court wrote.

Further, the “first report” rule proposed by the County runs contrary to the legislative intent in enacting Section 1102.5(b), the panel said. “Protection only to the first employee to disclose unlawful acts would defeat the legislative purpose of protecting workplace whistleblowers, as employees would not come forward to report unlawful conduct for fear that someone else had already done so. The ‘first report’ rule would discourage whistleblowing. Thus, the County’s interpretation is a disincentive to report unlawful conduct. We see no such reason to interpret the statute in a manner that would contradict the purpose of the statute.”

The panel distinguished federal cases limiting whistleblower protections based on “publicly known” or “already known” information as “distinct from a rule in which only the first employee to report or disclose unlawful conduct is entitled to protection from whistleblower retaliation,” adding that Section 1102.5(b) “should be given a broad construction commensurate with its broad purpose.”

While the court upheld the jury’s liability finding against the County, it vacated the award of damages for loss of future earnings, reducing the total award to just over $2 million.

To read the opinion in Hager v. County of Los Angeles, click here.

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Court Refuses to Certify Wage and Hour Class Because of Size, Differences in Pay Rates, Schedules, Managers and Nature of Claims for Lost Wages

Why it matters: In a victory for employers facing Fair Labor Standards Act (FLSA) litigation, a Michigan federal court refused to certify a class of McDonald’s employees the court said would be too difficult to manage as a collective action. The workers – who claimed their numbers to be around 1,000, although the defendants estimated it was closer to 3,000 – sought to conditionally certify a group from two franchises that allegedly committed wage violations. Despite acknowledging that the standard for granting conditional certification was relaxed, the court found two obstacles for the plaintiffs. Not only was the size of the proposed class unwieldy, but also the proposed class members were not similarly situated, the court found – with different pay rates, different schedules, different managers, and “extremely inconsistent” claims regarding wage loss.

Detailed Discussion

Workers at two different McDonald’s restaurants in Michigan filed suit against their employers alleging multiple violations of the FLSA. Specifically, they claimed that they were required to wait off the clock, either at the beginning of a scheduled shift or during an extended break, and had the cost of their uniforms deducted from the paychecks.

As a result of these actions, the plaintiffs said they were compensated less than the minimum wages required by the federal statute. The plaintiffs sought conditional certification of their suits as a collective action to notify what they estimated to be about 1,000 similarly situated workers who currently work or have worked at the two restaurants at issue over the last three years. (The defendants told the court the actual number was closer to 3,000 employees.)

U.S. District Court Judge John Corbett O’Meara first noted the “lenient standard” courts apply when considering conditional certification. But he said the plaintiffs failed to meet even that light burden.

“Although the case law is clear that standard for granting conditional certification is lenient, this would be [a] very large class to notify,” he wrote. “These 1,000 to 3,000 putative class members had varying pay rates, hours worked and deduction methodologies applied to their pay. They worked for different managers at different restaurants; and the wait times are extremely inconsistent, both in terms of duration and frequency.”

As for the uniform deduction, some of the potential class members were under the age of 20 with a lawful minimum wage $3 per hour less than the older plaintiffs. “Depending upon the hours worked per week, the deduction for uniforms may or may not have dropped their average hourly pay to such an extent that it would violate the FLSA,” the court said, adding that the defendants promised at oral argument to reimburse the employees whose clothing deductions dropped their average hourly pay to an amount violating the FLSA.

Therefore, the court denied the motion to conditionally certify the class.

To read the order in Pullen v. McDonald’s Corp., click here.

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