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New NLRB Test for Joint-Employer Status in Labor Contracts May Leave You On the Hook

August 27, 2015

By Michael J. Wietrzychowski

Today, in a split decision, the National Labor Relations Board promulgated a new test that will make it easier for employees to establish joint-employer status in labor contracting arrangements.   Under the “restated” legal standard for joint-employer status, the Board “may find that two or more entities are joint em­ployers of a single work force if they are both employers within the meaning of the common law, and if they share or codetermine those matters governing the essential terms and conditions of employment.”  The Board went on to say that “in evaluating the allocation and exercise of control in the workplace, we will consider the various ways in which joint employers may “share” control over terms and conditions of em­ployment or “codetermine” them, as the Board and the courts have done in the past.”

Under the Board’s more liberal test, joint employer status will be found where the employers share or codetermine “those matters governing the essential terms and conditions of employment.”  Such essential terms and conditions include hiring, firing, discipline, supervision, direction of work and hours, and the determination of wages.

The likely impact of this decision will be that companies believing they were insulated from union organizing campaigns and/or unfair labor practice charges aimed at their labor contractors could now be jointly on the hook.

The Decision Browning-Ferris Industries of California, Inc., d/b/a BFI Newby Island Recyclery, and FPR-II, LLC, d/b/a Leadpoint Business Services, and Sanitary Truck Drivers and Helpers Local 350, Interna­tional Brotherhood of Teamsters, Petitioner. Case 32–RC 109684 can be found at http://apps.nlrb.gov/link/document.aspx/09031d4581d99106

For more information regarding this or other labor and employment issues, please contact Michael J. Wietrzychowski, Co-Chair of Schnader’s Labor and Employment Practices Group.   

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Pennsylvania Court Allows Class Action Against Employer Who Used Only Payroll Cards; Holds Payroll Cards Are NOT “lawful money of the United States”

August 17, 2015

By Karen Baillie

In September 2013, SchnaderWorks published “Employers should Proceed With Caution in Using Payroll Cards.” At that time, author Scott Wenner advised that employers should follow the conditions prescribed in the federal Electronic Funds Transfer Act, Regulation E and should be aware that the United States Consumer Financial Protection Bureau (CFPB) takes the position that, “Regulation E prohibits employers from mandating that employees receive wages only on a payroll card of the employer’s choosing.”  In addition, Scott cautioned employers of the need to comply with state payroll laws.

Recently, a Luzerne County, Pennsylvania judge weighed in on the issue.  This decision reiterates Scott’s earlier advice.  In the case of Siciliano v. Mueller, C.A.  No. 2013-07010 (Luzerne County Court of Common Pleas May 29, 2015) employees of a McDonald’s franchise claimed that their employer violated the Pennsylvania Wage Payment and Collection Law  (WPCL) (23 P.S. § 260.3) by mandating that employees receive wages only via a JP Morgan Chase Payroll Card.

The employee-plaintiffs object to the payroll cards because there may be fees incurred in activating and using the cards and because managerial employees are permitted to be paid via direct deposit.  In denying the defendant’s Motion for Summary Judgment, the court noted that the WPCL requires that, “wages shall be paid in lawful money of the United States or check.” The court reasoned that the Pennsylvania legislature did not contemplate payroll cards when the language was adopted in 1961. Further, the legislature did not just use the word “money” but instead used the words, “lawful money of the United States,” which the court found to mean the “bills and coins” approved as legal tender. The court further found that paycards do not meet the legal definition of “check” because they are not “unconditional written orders.”

Although at least half of the states across the country now allow wages to be paid on payroll cards (either by statutory amendment or regulations promulgated pursuant to statutory authority), such laws typically permit the use of payroll cards only if employees are offered other wage payment options and give advance written consent to payment by payroll card. In its decision, the Luzerne County court pointed out that the (currently dormant) proposed legislation in Pennsylvania (Pa. H.B. 2274, 198th General Assembly, 2014 Session (Pa. 2014) (referred to Committee on Labor and Industry May 28, 2014) likewise would allow for payment of wages via payroll cards, only with employee advance authorization.  Interestingly, the court did not mention the CFPB’s guidance on the use of payroll cards and the requirements of Regulation E.  Instead, the court urged the state to provide guidance, “Pennsylvania employers and wage-earners could benefit from the Department of Labor and Industry expressing a formal position on the matter.”

In sum, Pennsylvania employers (especially those in Luzerne County) considering a payroll card system should continue to seek employee advance written authorization to be paid via payroll card (or direct deposit) and should continue to be cognizant of the requirements of EFTA, Regulation E, and of the CFPB’s guidance on the use of payroll cards.

For more information regarding this or other labor and employment issues, please contact Karen Baillie, a member of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

U.S. Department of Labor Announces Proposed Revision to Rule on Overtime Exemptions; Exempt Salary Threshold to More than Double; No Immediate Action Needed

July 1, 2015

By Scott J. Wenner

The U.S. Department of Labor posted an announcement on its website this morning that its much anticipated proposed rule to curtail existing overtime exemptions had been approved for publication in the Federal Register as a Notice of Proposed Rulemaking (NPRM), and would be published soon. In the interim, the DOL website posted a link to the approved version of the rule, available here.

According to the DOL’s announcement, the centerpiece of the proposed rule, which is intended to increase the number of employees who are eligible for overtime compensation, will be an increase of the minimum salary required to qualify as exempt to around $50,440 per year. If the rule becomes final, the increase will more than double the present threshold of $23,660. Computed on a weekly basis, the minimum weekly salary for exemption will increase from $455 per week to about $970 per week.

The DOL maintains that this dramatic increase is necessary if the exempt classifications under the FLSA are to be defined as originally intended: to exempt “highly compensated executive, administrative, and professional employees” from eligibility for overtime compensation. According to the NPRM, the weekly salary threshold it proposes is at the 90th percentile of average weekly wages of full-time salaried employees according to the Bureau of Labor Statistics. Further, to keep the minimum salary from lagging behind in the future, the NPRM proposes to update the minimum annually, either by indexing it to the CPI-U or by maintaining it at the 90th percentile of average weekly wages of full time salaried employees.

The NPRM also announced that the DOL would like to receive comments during the comment period on whether nondiscretionary bonuses should count toward the minimum salary requirement – an issue that inevitably arises in view of the steep increase in the salary threshold.

To be exempt as an executive, administrative or professional employee, of course, the employee must satisfy both the “salary basis test” (which includes receipt of the specified minimum amount) and the “primary duty test” (which examines the character of the primary duties of the employee’s position).   After President Obama directed the Secretary of Labor in early 2014 to update the existing regulations governing the so-called “white collar exemptions,” a substantial increase to the minimum salary was widely expected, but many also anticipated a tightening of the duties test to further restrict qualification for exempt status.

The unofficial version of the NPRM posted today makes no change to the duties test. However, it announces that “the Department is considering whether revisions to the duties tests are necessary in order to ensure that these tests fully reflect the purpose of the exemption.” The DOL may envision proposing a separate rule to limit the availability of exempt status to a smaller group of higher paid employees and a revision to the primary duty test might be proposed after the doubling of the minimum salary threshold becomes final. The effective date of this increase remains uncertain. The NPRM to be published in the Federal Register will announce a comment period that must precede publication of a final rule by the agency. Further, the DOL must consider the comments it receives before publishing a final rule. The NPRM’s wording suggests that it is aiming to publish a final rule in 2016.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Obamacare Survives Second Supreme Court Challenge

June 25, 2015

By Scott J. Wenner

The Affordable Care Act has survived another serious challenge – again through an opinion authored by Chief Justice Roberts. Today’s 6 to 3 Supreme Court decision in King v. Burwell held that the Administration’s interpretation, via an IRS rule, of an ambiguous, “ancillary” provision of the law was a permissible one, especially as “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”

Specifically at issue was whether the Administration could continue to subsidize health insurance purchased by those with low incomes in states that had refused or failed to establish their own exchanges. The challengers had argued that the literal language of law made insurance subsidies available only where the coverage was purchased on an insurance exchange “established by the state.” In a nutshell, the majority disposed of this argument by (i) declaring the language of the quoted section ambiguous; (ii) observing that insurance subsidies were crucial and necessary nationwide, regardless of whether a state exchange is available in a particular state, in order for the law to work; and (iii) concluding that an interpretation that would prompt the destruction of healthcare markets would hardly fulfill the purpose of Congress in passing the Affordable Care Act.

Justice Scalia authored a scathing dissenting opinion. In it he accused the Chief Justice of failing to apply traditional rules of statutory construction in order to preserve the healthcare law.  In the peroration of his dissent, Justice Scalia, mindful that this was Justice Roberts’s second rescue of Obamacare, and having accused the Chief Justice of tortured reasoning in both instances, observed: “We should start calling this law SCOTUScare.”  Indeed.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation.

Countdown to July 3 for San Francisco Retailers to Modify Flexible Scheduling Practices

June 15, 2015

By Scott J. Wenner

We have written before of the growing movement to suppress the flexible scheduling practices commonly employed in the retail industry.  Retailers have long used factors such as projections of sales traffic, conversion rates, weather conditions and the like, to create and adjust staffing schedules.  Like all businesses, retailers seek to enhance profits by controlling costs, including labor costs. To control wage costs, they have used these projections to create work schedules that minimize overtime and unnecessary coverage, while ensuring the presence of adequate staff to maintain optimal levels of customer service, security, product availability and appearance.

As a result, many retailers have utilized a largely part-time workforce which, given the shopping patterns and preferences of modern Americans, must be able to work evenings, Saturdays, Sundays, and holidays. As our earlier post noted, software now exists to measure and analyze many of the same factors that retailers have long considered to schedule workers.  Proponents of measures to restrain flexible staffing have seized upon the use of software to analyze staffing needs as an example of bloodless corporate profit mongering at the expense of people and their families.

In keeping with its cutting edge reputation and penchant for social tinkering, especially on workplace matters, San Francisco was the first jurisdiction to impose controls on retail scheduling practices. Many retailers in San Francisco’s lucrative market should be in their last stages of preparing to comply with the Retail Workers Bill of Rights – that city’s first-in-the-nation law that controls the scheduling and hiring practices of what it calls “formula retail establishments” – or, what most people call chain stores.

The elements of the  “formula” are: (1) satisfaction of two of the following six characteristics: (i) a standardized array of merchandise, (ii) a standard façade, (iii) a standardized decor and color scheme, (iv) uniform apparel, (v) standardized signage, and  (vi) ownership of a trademark or service mark; (2) 20 or more employees in San Francisco; and (3) ownership of at least 20 such formula retail establishments anywhere in the world. An amendment is pending approval by the San Francisco Board of Supervisors to increase from 20 to 40 the number of establishments necessary for the retail store to be covered by the ordinance.

Retailers Nationwide are Paying Attention

Those San Francisco retail employers subject to the ordinance will find their ability to manage their labor costs significantly restrained beginning on the July 3 effective date – just in time for the Fourth of July holiday weekend. However, retail chains nationwide should have their eyes on how retail operations in San Francisco fare under the new staffing regime, as a version could be in store for them elsewhere if the Retail Action Project and its allies gain traction.  As our post linked above noted, New York’s pro-labor Attorney General launched an investigation in April of purported use of “on-call shifts” by a group of retailers that would fit the San Francisco formula, suggesting that he believed that flexible scheduling devices are unlawful.

Outline of Requirements of San Francisco Ordinance

The highlights of the San Francisco Retail Workers Bill of Rights ordinance are:

  • Equal treatment of part time and full time workers. Part-time workers must be treated the same as full timers in the same job classification with respect to (i) starting hourly wage, (ii) eligibility for paid time off and unpaid time off, and (iii) eligibility for promotions.
  • Scheduling
    • Before starting employment new employees must be given a written estimate of the minimum number of scheduled shifts per month he/she can anticipate, and the days and hours of those shifts (excluding on-call shifts).
    • Employee requests for modifications must be considered, but employer discretion prevails.
    • Employers must provide employees with work schedules two weeks in advance, at the workplace via posting or electronically.
    • Advance notice of schedule changes must be given by phone, text or other reasonable means.
    • Schedules must be retained for three years, and failure to do so will result in a presumption of non-compliance
  • Penalties for Schedule Changes – “predictability pay”
    • Schedule change between 7 days and 24 hours of the shift entitles employee to one (1) hour of additional pay.
    • Schedule change within 24 hours of start of the shift entitles employee to two (2) hours of additional pay, but four (4) hours pay must be given if the shift was four hours or more.
    • An On-Call employee notified not to come to work is entitled to same penalties as above: 2 or 4 hours depending on length of the shift.
    • Exceptions to the penalty exist for events outside employer’s control, including failure of other employee to report to work or need to send other employee home.
  • Limitations imposed on making new hires. If a covered retailer has any employees working fewer than 35 hours per week, before hiring any newpart- orfull time employees, temporary employees or contractors, it must offer the work in writing to the existing part-time employees if
    • one or more existing part-timers is qualified to perform the work, and
    • the work is the same or similar to the part-timer’s current work.

Written offers must be retained for three years.

  • Change in Ownership/Successor Obligations. If a retail establishment is sold, all employees having six months seniority or more must be retained for at least 90 days with the same terms and conditions of employment, with the following exceptions:
    • terminations for cause
    • reductions by seniority where the successor determines it needs fewer employees
  • Posting Requirement. A notice must be posted at each workplace informing employees of their rights under the ordinance (which is not available as of this writing).
  • The San Francisco Office of Labor Standards Enforcement has responsibility for enforcement and can order compliance, impose administrative fines, and require employers to pay lost wages and penalties to employees and reimburse the City’s enforcement costs, as well as bring civil actions against employers.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

U.S. Supreme Court Unanimously Rules that Courts Have a Narrow Scope to Review Whether the EEOC Complied with Its Statutory Duty to Conciliate Before Filing Suit

April 29, 2015

By Scott J. Wenner

The United States Supreme Court has announced its decision in the closely watched Mach Mining LLC v. Equal Employment Opportunity Commission case – and it was unanimous. In an opinion authored by Justice Elena Kagen that resolved a circuit court split, the Court rejected the EEOC’s position that it had carte blanche to determine whether the agency satisfied its statutory duty to attempt conciliation of employment discrimination claims before launching a lawsuit.   The Court also rejected the position asserted by the employer, Mach Mining, which the Court described as requiring the district courts to “do a deep dive into the conciliation process.” Instead, Justice Kagan’s opinion recognized a limited right of judicial review of the EEOC’s pre-lawsuit conciliation efforts, stating:

We hold that a court may review whether the EEOC satisfied its statutory obligation to attempt conciliation before filing suit. But we find that the scope of that review is narrow, thus recognizing the EEOC’s extensive discretion to determine the kind and amount of communication with an employer appropriate in any given case.

The Court soundly rejected both (1) the EEOC’s position that the broad discretion Congress gave it to fulfill its conciliation obligation under Title VII allowed for no meaningful standards by which courts could measure compliance, and (2) Mach Mining’s position, which the Court found required far too much of the agency, created further procedural requirements, and “flout[ed] Title VII’s protection of the confidentiality of conciliation ef­forts” found in §2000e–5(b) of the statute. The Court adopted a compromise standard that requires the EEOC to submit an affidavit confirming that it performed the following obligations but that its efforts failed:

[T]he EEOC must inform the employer about the specific allegation, as the Commission typically does in a letter announcing its determination of “reasonable cause.”. . . Such notice properly describes both what the employer has done and which employees (or what class of employees) have suffered as a result. And the EEOC must try to engage the employer in some form of discussion (whether written or oral), so as to give the employer an opportunity to remedy the allegedly discriminatory practice. Judicial review of those requirements (and nothing else) ensures that the Commission complies with the statute. . . . [and] allows the EEOC to exercise all the expansive discretion Title VII gives it to decide how to conduct conciliation efforts and when to end them. And such review can occur consistent with the statute’s non-disclosure provision, because a court looks only to whether the EEOC attempted to confer about a charge, and not to what happened (i.e., statements made or positions taken during those discussions.)

While the Court’s decision will be disappointing to most employers given the manner in which the EEOC has been exercising its discretion, at least the agency cannot be the sole judge of whether it has ignored its statutory duty to conciliate.

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

New York City Council Votes to Limit Credit Checks by Employers

April 21, 2015

By Scott J. Wenner

On April 16, the New York City Council passed Intro 261A, which bans the use of credit checks to screen applicants for employment except in enumerated circumstances. The legislation, which was supported by Mayor Bill de Blasio and was sponsored by 40 of the 51 members of the Council, is expected to be signed and become law promptly.  It purports to prohibit “discrimination based on consumer credit history” – a practice that is said to adversely affect black and Hispanic workers disproportionately.

When the Mayor signs the credit check ban into law, New York City will join 10 states and several other municipalities that have curtailed this pre-employment practice.  While New York City is not the first jurisdiction to limit the use of consumer credit reports to screen applicants, its chief sponsor, Councilman Brad Lander of Brooklyn, claims that his bill is “the strongest of its type in the country”  – a characterization that might be correct.

Consumer Credit History Broadly Defined.  As passed by the City Council, the bill deems it an unlawful discriminatory practice for an employer to use individuals’ consumer credit histories in making employment decisions. In addition to consumer credit reports and credit scores, the bill defines “consumer credit history” to also include information obtained directly from the applicant or employee about prior bankruptcies, judgments, and liens, as well as “details about credit accounts.” This latter category of information includes “the individual’s number of credit accounts, late or missed payments, charged-off debts, items in collections, credit limit [and] prior credit report inquiries.” The bill also defines “consumer credit report” to include “any written or other communication of any information by a consumer reporting agency that bears on a consumer’s creditworthiness, credit standing, credit capacity, or credit history. “

Exceptions.  The bill reportedly contains more exceptions than Councilman Lander had proposed initially as a result of discussions that included the Partnership for New York City – a group representing business interests – as well as labor union representatives. However, it does not contain the kind of broad, top-to-bottom exemption for financial institutions that most existing credit check laws contain. The exceptions to the credit check ban in the forthcoming New York City law will include (i) hiring for police or peace officer jobs, (ii) positions subject to NYC Department of Investigation background checks, (iii) jobs that require the employee to be bonded or demand a government security clearance, (iv) positions  (other than clerical jobs) that require regular access to trade secrets or national security information, (v) workers who operate digital security systems, (vi) employees having signatory authority over third party funds or assets valued at $10,000 or more, or fiduciary responsibility and authority to enter into contracts valued at $10,000 or more for their employer, and (vii) where the employer is required by state or federal law or regulations or by a self-regulatory organization to use an individual’s consumer credit history for employment purposes.

The law will become effective 120 days after it is signed by Mayor de Blasio

For more information regarding this or other labor and employment issues, please contact Scott J. Wenner, past chair of Schnader’s Labor and Employment Practices Group. 

The materials posted on Schnader.com and SchnaderWorks.com are prepared for informational purposes only and should not be considered as providing legal advice or creating an attorney-client relationship. Please see our disclaimer page for a full explanation

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