Where Employment Litigation Is Headed and How to Cut it Off

By Kristin Casler, featuring Ari Weisbrot of Fox Rothschild LLP and Todd Girshon of Jackson Lewis P.C.

In the last five years, there has been a tremendous uptick in employment class actions, collective actions and systemic discrimination cases. And the stakes are higher than ever, as the government and plaintiff counsel push the envelope on legal theories. From interns to EEOC systemic actions, employers must understand and anticipate the possibilities to stay out of hot water.

In the 1970s and 1980s, workers generally did not sue their employers. If they did, they were lucky to get back pay, and only then if awarded by a judge, because there were nearly no jury trials for employment claims. Then, in the early 1990s, according to Todd Girshon of Jackson Lewis, the Civil Rights Act of 1991 amended Title VII of the Civil Rights Act of 1964, allowing for jury trials and emotional distress and punitive damages, and Congress passed other employee-friendly laws such as the Americans with Disabilities Act (ADA) and the Family & Medical Leave Act (FMLA), which opened more doors. Today, wage and hour claims under the Fair Labor Standards Act claims constitute over 90 percent of all employment-related state and federal class actions filed in the United States, according to Ari Weisbrot of Fox Rothschild. Why? They’re easy to file, and more employers get tripped up on the paperwork than they do on the actual substance of the law.

Similarly, FMLA claims are skyrocketing. So are Fair Credit Reporting Act (FCRA) claims. These are the three major types of class and collective actions seen today, Weisbrot said.

The FLSA

One of the hotter areas of FLSA claims involves automatic deductions. “This is a device created by some employers, who automatically deduct anywhere between a half hour and an hour of their employee’s time for meals, regardless of whether they took the time off ” Weisbrot said. “It results in reduced hours.”

Interestingly, the courts have said it’s not necessarily unlawful. However, the restrictions are so onerous, and the standards are so difficult to achieve, that employers just shouldn’t do it, Weisbrot said. You can restrict where employees take their lunch. You can say the employees can’t take lunch at their work station; and if they do work during lunch, they’re not going to be paid for it. But it is just too easy to get tripped up by the law, Weisbrot said.

Many larger companies have time and attendance systems, many of which have a preloaded deduction for lunch breaks. Companies must train and educate the workers who are subject to overtime so they understand that they must record all time worked.

There’s also a fairly significant increase in FLSA claims over pooling or sharing of tips. At least one major company has been at the forefront of these disputes. The company deemed its supervisor/shift managers as management and didn’t allow them to partake in the tips, Weisbrot said. The courts have ruled that it doesn’t really matter how you define your employees, the issue turns on the roles and responsibilities of the employee.  This is key, Weisbrot said. If the shift supervisors are doing the same work as everybody else, then they’re going to be considered non-exempt employees who are entitled to share in the tip pool. At least one company tried to define tips as “service charges.” A court, however, said that failure to notify customers that they were service charges or to delineate the purpose of the charges meant they were still tips in the eyes of the law and they had to be shared. The law also requires companies to pay a reduced minimum wage when employees earn tips, yet many employers still think they owe tipped workers no wages.

Donning and doffing claims are also on the rise. These claims relate to activities that are peripheral to the job—they are necessary, but typically employers wouldn’t pay for them. They include logging out of your computer, getting into required specialized protective gear or travelling to work. Very often, travel to work comes up in construction companies, where they require their employees to gather at the home base, and then they transport them to the work sites. The U.S. Department of Labor says companies have to pay for activities that are an integral and indispensable part of the principle job activities. “Generally, if there is a causal link between the activity and the work performed, companies have to pay,” Weisbrot said.

Logging onto computers has not often been found to be paid time. What if you have a security check in order to gain access to the workplace? That wouldn’t be considered compensable. Putting on gear absolutely must be paid if it’s required for the work, and group travel has been found in most cases to be required pay for employees. “The way around that is to not make it mandatory,” Weisbrot said. “Just make it so convenient for the employees that they can’t really turn it down.” But as long as it’s not mandatory, you usually wouldn’t have to pay for it.

Dealing With Interns

Weisbrot said the most-often-asked questions recently involve interns. Many employers hire interns and assign them menial work that their employees should be doing. They don’t pay them, because they believe interns are not employees under the FLSA.  A growing number of lawsuits alleging that the exemption was being abused spurred the courts and the Department of Labor to implement new requirements.  Essentially, if interns are there for the benefit of the company, they’ll be classified as employees and must be paid at least minimum wage. If they’re there for themselves, their own education, growth and mentoring, then they may be considered actual interns and may not have to be paid.

In the recent Wang v. Hearst Corp. intern case, the Southern District of New York sided with the employer, finding that one must consider all of the factors for determining whether interns are employees. That case, along with Glatt v. Fox Searchlight Pictures, another Southern District of New York case, which was decided in favor of the interns, are both currently on appeal before the Second Circuit U.S. Court of Appeals, and employers are waiting for the Appellate Court to define the appropriate standard.

Weisbrot said he once counseled a professional sports team that tried to classify its cheerleaders as interns.  Essentially, arguing both the seasonal exemption and the intern exemption, the team took the position that the benefit was at least as strong for the employee as the employer. “It was actually a pretty creative argument, but it didn’t work and they settled.”

Be Proactive

Girshon said he’s seen a real wave of litigation in New York over interns. “It’s a trend that you should look out for and get out in front of,” Girshon said.

If employers want to stay ahead of wage issues, Girshon suggests being proactive. “Audit the programs that you have and, in general, make sure you take care of the basics—pay people at least the minimum wage, retain records and pay time and a half, if people are working overtime.”

“It all comes back to literal compliance with the law,” Girshon said.  As a result, companies may be inclined to use fewer unpaid interns, change their intern programs so that they better comply with the Department of Labor guidelines or eliminate the use of interns altogether.  “I think more companies are creating categories of part-time, temporary or seasonal employees that may work during the summer, get paid at least a minimum wage and have their time recorded in order to put themselves in a more defensible position,” according to Girshon.

The bottom line, Weisbrot said, like everything else, is to classify workers honestly. “If you feel like maybe you’re going to be able to figure out a creative way to use interns and avoid paying them, I can guarantee you we’ll be talking about you next year.”  The best strategy is to consult with counsel, in advance.  Whatever it costs, it will be a fraction of the cost of an uninformed approach.  

Also, keep clear and accurate records, Weisbrot counseled.  It will often be the difference between a defense’s verdict and a plaintiff’s verdict.

Connecting and Disconnecting

Gone are the days when workers worked 9 to 5 and went home. With smartphones, employees are checking and sending email and making phone calls long after their shift. When this happens to an hourly employee, you have to pay them. There is, however, a de minimis exception. “If you send an email in the middle of the night or you make a phone call after dinner and that’s all it is, then you’re probably not required to be compensated for it,” Weisbrot said. “But if it’s a phone call here or an email there, and it starts to add up, then you could present that to your employer and ultimately to the courts, as an aggregated claim for pay.”

There’s not really a court-interpreted standard. To deal with this practice, you can just restrict hourly employees completely. Do not give them access. You also could have predetermined timing, paying for a certain amount of off-hours work, as long as the employee keeps records. “That’s usually a fair compromise, because it doesn’t add up to a lot of money, and it gives the employer the opportunity to keep tabs on what’s going on,” Weisbrot said.

Of course, all of this may be irrelevant for hourly employees who are misclassified, as over half of employees are, Weisbrot said. If they should be exempt workers, they’re not eligible for overtime anyway.

As an employer, you need to make a thoughtful analysis in advance, Girshon said. If you classify workers, you’ve at least gone into it with your eyes open, compared to blindly paying people and hoping for the best.

FMLA

FMLA claims are hot at the moment, Weisbrot said, particularly because of rising abuse by employees. They are aware of the law and their rights and take full advantage, taking leave for medical conditions that are not even serious. Weisbrot recently tried a case in which a retail employee took off five months for a blister on his leg. His advice?  Employers need to implement a sensible policy that reduces the risk of abuse, while ensuring strict compliance with the FMLA.

Questions abound on medical marijuana use by employees. If an employee fails a drug test, can you fire him? What it comes down to, Weisbrot said, is what is he taking the marijuana for? If it is for a FMLA-protected condition, then you probably will be sued successfully for an FMLA violation, even though he failed your drug policy.

FCRA Claims

An employer that conducts background screenings on prospective employees using a third-party vendor falls under the Fair Credit Reporting Act. While this is nothing new, plaintiffs’ lawyers have seized on very technical requirements under the law and filed class actions throughout the country, based on employers’ alleged failure to satisfy the very stringent FCRA requirements, Girshon said.

EEOC Investigations

The government is employing equally technical assaults. The U.S. Equal Employment Opportunity Commission (EEOC) is focused on pursuing systemic claims, Girshon said.  In fact, the EEOC’s litigation case load at the end of 2014 was 25 percent systemic cases, which is the highest that it has been since those statistics began being tracked in 2006.  The EEOC is targeting emerging issues and continues to push the envelope on what’s covered under Title VII of the Civil Rights Act, the ADEA, and the Equal Pay Act, he said.

EEOC investigators go after all kinds of information and documentation when a charge is pending, including documentation not related to the charge, so employers need to be more circumspect as to what they turn over. The EEOC has gone after release agreements, employee handbooks, confidential settlements, etc., and filed reasonable cause charges that have absolutely nothing to do with the initial case.

What is next on the horizon? Odds are that social media will play a role in emerging issues. What can employers do to beat the odds? Regularly look at every process and the forms that you’re using, and consider whether, in light of recent trends and developments, you’re in compliance. If you’re not, you must rapidly make the necessary changes to protect your organization.

This article is based on a panel discussion moderated by Todd Girshon, a Shareholder at Jackson Lewis P.C., at HB Litigation Conferences’ Northeast Corporate Counsel Forum in Atlantic City.