In This Issue

From the Hill: FMLA Amendment and Anti-Arbitration Legislation

Lawmakers on the Hill are considering two employment-related bills that would make changes to the Family and Medical Leave Act and invalidate pre-dispute arbitration agreements.

Currently, the Family and Medical Leave Act allows employees to take up to 12 weeks of unpaid leave from work to care for a new baby or provide care for a spouse, child under the age of 18, or parent with a serious health condition. Introduced in both the House and the Senate, the Family and Medical Leave Inclusion Act would expand coverage of the FMLA to allow workers to take time off to care for a same-sex spouse, domestic partner, parent-in-law, grandparent, grandchild, sibling, adult child, and children of a domestic partner with a serious health condition. The proposal would also amend federal civil service law to apply the same leave allowances to federal employees.

“Regardless of the make-up of one’s family, all employees should be given the same rights to care for a sick loved one in a time of need,” Sen. Dick Durbin (D-Ill.), the Senate sponsor of the legislation, said in a statement. “For 20 years, we have had a law that provides unpaid leave for families in crisis. As families change, so should the laws designed to help them.”

The Family and Medical Leave Inclusion Act is currently before the Senate Committee on Health, Education, Labor, and Pensions; in the House it is being considered by the Committees on Education and the Workforce, House Administration, and Oversight and Government Reform.

In a second employment-related bill, Sen. Al Franken (D-Minn.) proposed the Arbitration Fairness Act of 2013 which would amend the Federal Arbitration Act to invalidate a pre-dispute arbitration agreement in a number of areas, including employment disputes.

The legislation would overrule a 2011 decision from the U.S. Supreme Court in AT&T Mobility v. Concepcion, where the justices ruled that the FAA preempted a state law ensuring the availability of classwide consumer arbitration.

Or, as the findings section of the bill states, a “series of decisions by the Supreme Court of the United States have interpreted the [FAA] so that it now extends to consumer disputes and employment disputes, contrary to the intent of Congress. … Most . . . employees have little or no meaningful choice whether to submit their claims to arbitration. Often . . . employees are not even aware that they have given up their rights. . . . Mandatory arbitration undermines the development of public law because there is inadequate transparence and inadequate judicial review of arbitrators’ decisions.”

After being read twice, the bill was referred to the Committee on the Judiciary.

Sen. Franken previously introduced the measure in the 2011 congressional session and prior versions have been proposed since 2007; all have stalled in Committee and failed to even get to a vote.

To read the Family and Medical Leave Inclusion Act, click here.

To read the Arbitration Fairness Act, click here.

Why it matters: Although the bill to amend the FMLA has garnered support from several employee rights organizations (including the National Association of Working Women, the Human Rights Campaign, and the Gay and Lesbian Advocates and Defenders) and enjoys the sponsorship of eight lawmakers in the Senate and 17 in the House, the odds of passage seem low. Similar legislation seeking to include additional family members to FMLA coverage has been introduced in each session of Congress since 1999 but the law has yet to be amended since its enactment in 1993. Sen. Franken’s anti-arbitration proposal faces comparable problems. Despite support from groups such as the National Employment Lawyers Association, the ACLU, and the AFL-CIO, prior incarnations of the bill went nowhere, in part due to staunch opposition from the U.S. Chamber of Commerce and other business groups.

7th Circuit Reverses Itself – and a $3.5 Million Punitive Damages Award

Reversing a $3.5 million punitive damages award for an employee subjected to a hostile work environment, the 7th U.S. Circuit Court of Appeals held that while Chrysler’s attempts to abate the harassment were not perfect, the company did not act with reckless disregard.

More than 50 times in a three-year span, Cuban-American and Jewish plaintiff Otto May was the target of racist, xenophobic, homophobic, and anti-Semitic graffiti that appeared at the Chrysler assembly plant where he worked as a pipefitter. In addition to the graphic graffiti – some of which threatened his life – May had his bike and car tires punctured, sugar was poured in the gas tanks of two of his cars, and a dead bird wrapped in toilet paper to look like a Ku Klux Klansman was placed in a vise at his work station.

At trial on May’s claims of a hostile work environment in violation of Title VII, a jury awarded him $709,000 in compensatory damages and an additional $3.5 million in punitive damages for Chrysler’s reckless disregard of his rights. The trial court reduced the compensatory award to $300,000 and vacated the punitive award.

In an opinion published last August, the 7th Circuit reversed, reinstating the $3.5 million verdict, finding that Chrysler’s “response was shockingly thin as measured against the gravity of May’s harassment.” Although the punitive damages award exceeded the single-digit ratio between compensatory and punitive damages, the panel said Chrysler’s conduct was sufficiently reprehensible to support it.

But nine months later, after rehearing the case, the same three-judge panel reversed itself, affirming the district court’s grant of Chrysler’s motion for judgment as a matter of law on punitive damages.

“While Chrysler could have done more and undertaken different measures, its actions did not evince a reckless disregard for May’s federally protected rights,” the court said in a per curiam opinion. The company utilized several strategies to stop and prevent the harassment, such as allowing May to park in a different parking lot monitored (albeit incompletely) by cameras and holding a pair of meetings with the skilled trades in the paint department about Chrysler’s harassment policy. In addition, all supervisors met with their employees to review the harassment policy and the security team increased its presence in area walk-throughs.

The panel noted Chrysler’s investigative efforts to determine who was engaging in the harassing behavior, including analysis of time records and gate-ring records to narrow down which employees were in the building when various incidents occurred.

Importantly, Chrysler stepped up its efforts over time as the incidents did not stop, the court said. When graffiti appeared in a remote locker room that was difficult to monitor, the company moved the lockers to an open area more easily monitored. Additional diversity training was held and Chrysler retained a handwriting expert to evaluate samples of the graffiti.

“The evidence showed that while far from perfect, Chrysler’s actions did have a positive effect on the harassment: the harassment’s frequency gradually decreased from one year to the next, and eventually ceased in December 2005,” the court said. “The record supports the district judge’s determination that Chrysler’s failure to comply with Title VII by preventing the harassment against May was not malicious or reckless.”

Further supporting Chrysler’s good faith efforts, the court said: roughly 20 people were involved in the company’s attempts to halt the harassment and a written antiharassment policy was in place.

“To be sure, Chrysler could have done more to stop the harassment. But given the situation that it faced – an anonymous harasser, an assembly plant covering four million square feet, and a three-shift-a-day operation, Chrysler’s response was enough as a matter of law to avoid punitive damages liability,” the court concluded.

To read the decision in May v. Chrysler Group, click here

Why it matters: The 7th Circuit’s about-face serves as a lesson in perspective to employers: punitive damages are only available to a successful plaintiff in a Title VII case where the employer acted with “malice or with reckless indifference to [the employee’s] federally protected rights.” Despite the dozens and dozens of incidents involved in May’s case – some of which involved death threats to the plaintiff and his family members – the panel concluded that Chrysler engaged in good faith efforts to comply with Title VII and was therefore not liable for punitive damages.

Colorado, Washington Enact Laws Limiting Employer Access to Employee Social Media Accounts

Continuing a nationwide trend, both Colorado and Washington recently enacted legislation restricting employers from requesting access to the social media accounts of applicants and employees.

Under the new law in Colorado, employers may not “suggest, request, or require” or cause employees or applicants to disclose access information to an account or change their privacy settings to allow access. Employees cannot be compelled to “friend” the employer or the employer’s agent or otherwise connect on a social media site.

Retaliation based on the refusal to disclose access information or friend an employer in the form of discharge, discipline or the threat of negative employment action is also prohibited.

The law carves out exceptions for employer investigations to ensure compliance with applicable securities or financial regulations if the company receives information that the employee has used a personal account for business purposes, or if the employer receives a tip that the employee has made unauthorized downloads of proprietary information.

Employees or applicants that suspect a violation of the law can file a complaint with the state’s Department of Labor and Employment; a private right of action is unavailable under the law. Fines for violation of the law can be imposed by the state of up to $1,000 for a first offense and up to $5,000 for subsequent offenses. The new law took effect May 11.

Washington Gov. Jay Inslee signed a similar bill into law on May 21 after it passed both houses of the state legislature unanimously. Nearly identical to the Colorado bill, the Washington law similarly prohibits retaliatory actions by the employer and provides exemptions for specific employer investigative purposes.

One major difference: Washington allows for a private right of action by an aggrieved employee or applicant, who can receive injunctive or other equitable relief, actual damages, a penalty in the amount of $500, and reasonable attorneys’ fees and costs if successful.

And in New Jersey – which previously enacted a bill with protections for job applicants and university students – the legislature has already passed an amended law adding employees to the list of protected parties. In addition, the changes would prohibit retaliation based on protected activity and establish civil penalties for violations of the law (up to $1,000 for the first violation and $2,500 for each subsequent violation).

The proposed amendment unanimously passed the state’s General Assembly and now heads to Gov. Chris Christie for a likely signature. Gov. Christie vetoed an earlier version of the law which included a private right of action. In response, lawmakers switched out that provision in lieu of civil penalties.

To read the new Colorado law, click here.

To read Washington’s new law, click here.

To read New Jersey’s legislation, click here.

Why it matters: With the addition of Colorado and Washington to the list, a total of nine states have now enacted legislation protecting applicant and/or employee social networking accounts, including Arkansas, California, Illinois, Maryland, Michigan, New Mexico and New Jersey. The trend is likely to continue, as other states are currently considering similar laws. Even the feds have gotten involved, with a bipartisan group of more than 30 cosponsors introducing the Password Protection Act of 2013 in the House of Representatives. Employers should review their hiring practices as well as any monitoring of employees on social media to ensure compliance with applicable state law.

What is a “Salary” Under California Law?

An employee paid the same amount based on an hourly rate did not receive a “salary” under the state’s labor code and was therefore not an exempt employee, according to the California Court of Appeal.

Mark Negri worked as an insurance claims adjustor for Koning & Associates for over one year. During that time period, he was paid $29 per hour with no minimum guarantee. If he worked more than 40 hours per week, he still received $29 per hour.

Seeking unpaid overtime pay, Negri sued Koning alleging violations of the California Labor Code. The company denied Negri was owed overtime because he was classified as an exempt employee and was essentially paid on a salaried basis. A trial court agreed, dismissing the suit.

Focusing on the compensation prong of the exemptions set forth in Industrial Welfare Commission Wage Order 4, the court said no question existed that the amount Negri was paid exceeded the minimum amount required for exemption (a monthly salary equivalent to no less than two times the state minimum wage for full-time employment).

Instead, the court asked whether the manner in which Negri was paid qualified as a “salary” with the meaning of Wage Order 4. The panel turned to the Fair Labor Standards Act to define the term, noting that an “employee is paid on a ‘salary basis’ if the employee ‘regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee’s compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed.’”

Because he was not paid a guaranteed salary, if Negri had worked only a handful of hours in a given week, his compensation may have fallen below the requirement that it be more than double the minimum wage, he argued. That hypothetical was irrelevant, Koning contended, because Negri was always paid for at least 40 hours each week and therefore, no “actual reduction” occurred based on the quantity worked.

But Negri’s pay varied according to the amount of time he put in, the court said – he was not paid a predetermined amount. “He was not paid a salary,” the court concluded.

“We recognize that, in practice, defendant always paid plaintiff the equivalent $29 per hour for 40 hours per week so that he, in effect, received an unvarying minimum amount of pay,” the court said. “We also recognize that, as a general matter, an exempt employee may be paid extra for extra work without losing the exemption. The problem here is that defendant stipulated to the fact that it ‘never paid [plaintiff] a guaranteed salary’; if he worked fewer claims ‘he made less money than if he worked more claims.’ That is the same thing as saying that plaintiff was not paid ‘a predetermined amount’ that ‘was not subject to reduction based upon the quantity of work performed.’”

To read the decision in Negri v. Koning & Associates, click here.

Why it matters: The decision provides a cautionary tale for employers: to establish that an employee is exempt, he or she must be paid a predetermined amount that is equivalent to no less than twice the California minimum wage (currently $8.00 per hour). Absent a predetermined amount, an employer may be liable for unpaid overtime which could quickly add up. In the Negri case, the plaintiff claimed he worked an average of 20 hours per week of overtime over a 19-month period, which could lead to more than $60,000 in unpaid overtime.

Topics:  Arbitration, DaimlerChrysler, FMLA, Harassment, Hiring & Firing, Hostile Environment, Job Applicants, Medical Leave, Passwords, Proposed Amendments, Punitive Damages, Social Media, Wages

Published In: Alternative Dispute Resolution (ADR) Updates, Civil Procedure Updates, Civil Remedies Updates, General Business Updates, Labor & Employment Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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