The Department of Labor Goes to Church – Tips for Employers with Charitable Components

Adam Gersh Provides Tips for Employers with Charitable ComponentsThe U.S. Court of Appeals for the Sixth Circuit sided with a church operating the Lord’s Buffet and against the Department of Labor (“DOL”) in a case testing the reach of the Fair Labor Standards Act (“FLSA”). In Acosta v. Cathedral Buffet, Inc., the appellate court reversed a trial court ruling and held that volunteers who staffed a church-operated buffet are not employees and the Grace Cathedral Church did not run afoul of the FLSA by failing to pay the volunteers minimum wage.  The DOL claimed the church and its televangelist pastor illegally used unpaid labor by staffing its buffet with volunteers from the congregation.  In this case, the church operated the buffet restaurant for a religious purpose: to allow church members to proselytize to patrons.  Its operations relied heavily on church volunteers who worked alongside paid employees performing the same work. While the work performed was comparable to that of an employee, the Sixth Circuit held the DOL overstepped the bounds of the FLSA by applying it to the volunteer workforce.  In part, the Court’s decision relied on a determination that the volunteers had no expectation of payment and were not economically reliant on the work of the church.  

Savvy employer takeaways: Employers with charitable missions and those who support charities must be careful to delineate work from volunteer activities to avoid claims that the volunteers should have been paid for their activities.

Questions? Let me know.

 

Not-So Silent Partner May Have Individual Liability Under the FLSA

restaurant employees.jpgIn Malee v. Anthony & Frank Ditomaso, Inc., the Court served a surprise to a shareholder of a corporation that owned a restaurant, who sought to be dismissed from a FLSA case brought by employees of the restaurant.  The shareholder alleged he did not participate in the business on a day-to-day basis and, therefore, was not an “employer” within the meaning of the FLSA.  The Court refused to dismiss the claims, finding that the shareholder’s attendance at staff meetings, and advice on operating the business created a triable issue of fact as to whether the shareholder was, in fact, an employer within the meaning of the FLSA.

Savvy employer takeaways: The FLSA and overlapping state wage and hour laws often impose individual liability on officers, owners, and others involved in decisions to deprive employees of wages owed.

Questions? Let me know.

Severance Agreement Requirements for Older Workers

During a layoff or non-voluntary reduction in force, the topic of how much time employers need to give employees to consider severance packages and what disclosures must be made creates considerable confusion in the media, with much being made of employers’ supposed failure to make required disclosures (see example). Here is the deal: if employers are subject to the Age Discrimination in Employment Act (“ADEA”) (generally, private employers with 20 or more employees), and ask employees who are 40 years of age or older to release ADEA claims in exchange for a severance package that is part of a termination, then they must abide by specific regulations. Those regulations are meant as safeguards for employees protected under the Older Worker Benefit Protection Act (“OWBPA”) which amended the ADEA. That means covered employers may need to give employees up to 21 days to consider the severance offer, or 45 days in the case of a layoff of more than one employee, and a seven-day period after signing to revoke the release of the ADEA/OWBPA claims. Also, employers have a duty to disclose the age and title of the workers who are chosen for layoff and the selection criteria. The OWBPA has additional requirements and there are other best practices an employer’s counsel can and should use when drafting a release to help guard against challenges, so it is always best to consult an attorney familiar with these types of matters so that the employer gets the broad release they are seeking in exchange for severance. Employers who are not covered by the ADEA and employers who are conducting a layoff of employees who are not protected by the ADEA do not have to rigidly adhere to these requirements. In the case of a separation that is not part of a reduction in force, (for instance, a termination for cause) the employer may not need to abide by these rules either. Even if the ADEA/OWBPA rules do not apply, employers are wise to give employees a reasonable period of time to consider a severance package to help protect against arguments that the waiver of claims should be unenforceable because of coercion or other reasons.

Savvy employer takeaways: Employers should know what is and what is not required to make their separation agreements and releases enforceable and should use reasonable means to give employees enough time to thoughtfully consider them.

Questions? Let me know.

Quitters Sometimes Win? New Jersey Court Deems Former Employee Eligible for Benefits

In a ruling that challenges the adage that quitters never win, the New Jersey Appellate Division determined that an employee who resigned her job was eligible for benefits reversing a decision of the Unemployment Appeals Tribunal.  In re Cottman, the applicant was denied unemployment benefits on the basis that she voluntarily resigned her employment.  Cottman did not dispute that she resigned her employment when her babysitter cancelled and she had no child care available for her child. When Cottman tried to call out of work, her former employer did not dispute that Cottman was told by her supervisor she may be terminated if she did not appear for work or find a replacement to cover for her shift.  While the Appellate Division acknowledged that leaving work for personal reasons, no matter how compelling, ordinarily disqualifies an applicant from receiving benefits, the Court held Cottman was not disqualified because she only resigned under the threat of being terminated.  The Court found her violation of her employer’s policy would have led to termination based on its past practice even though her supervisor used the word “may.”  Since the Court found Cottman would have been qualified for benefits if she were terminated and she only resigned under the threat of termination, it reversed the Appeals Tribunal’s decision denying benefits.

Savvy employer takeaways: Employers should not threaten employees with termination unless they really mean it, and they should understand that employees who react to such threats by resigning may, under the right circumstances, be eligible to collect unemployment.

Questions? Let me know.

Tip Strip? Exotic Dancers Prevail in Lawsuit Against Strip Club for Employment Misclassification

In Philadelphia, a federal court judge entered a nearly $4.6 million judgment in favor of a group of exotic dancers and against a strip club, the Penthouse Club. In the class action, the dancers argued they had been mischaracterized as independent contractors instead of as employees and, as a result, the dancers were deprived of minimum wages and tips they earned. The club argued it was not an employer and merely rented space to the exotic dancers, whom the club treated as independent contractors, but the jury rejected that argument and found the club was an employer. In this case, the club was deemed an employer because, among other things, it had the power to ban dancers (or fire them if they were employees) for violating club rules.  The club required dancers to pay “tip outs” to other club employees such as fees to management, the DJ, the “house moms,” the emcee, security workers, and valets.  As a result, the dancers argued their wages and tips, which they were entitled to keep as employees, were diverted.  This fact pattern is increasingly common because dancers from across the country assert similar claims, but it also extends to other businesses that use similar pay models, such as exercise studios.

Savvy employer takeaways: Proceed with the utmost caution when using the independent contractor designation for service providers, ensure tipped employees are paid in accordance with applicable federal and state laws, and impose limits on tip-pooling and other tip-sharing rules.

Questions? Let me know.

Gone Phishing? Employees Sue Worldwide Manufacturer for Invasion of Privacy, Among Other Tort Claims

Talk about adding insult to injury! After Schletter Group, a worldwide manufacturer with headquarters in North Carolina, fell for a phishing scam when it sent its employees’ W-2 information in response to a phony email, it was sued by its employees for invasion of privacy and other tort claims.  The employees claimed the company ignored the risks identified in a 2015 FBI warning and a 2016 news article about the scam and did not take appropriate steps to protect its employees’ private data.  While the company initially offered credit monitoring services, the employees sought additional remedies, including monetary damages.  Although the company sought to dismiss the employees’ claims on the basis that the employer had no intent to make the disclosure, the company’s motion failed.  The court ruled, at least at the early stages, that the company’s arguments that it did not intentionally disclose its employees’ data were not enough to toss the suit out of court.  The court accepted the employees’ argument that this was a disclosure and not a breach and therefore, the element of intent was satisfied at the pleading stage.

Savvy employer takeaways: Encrypt employee data, place strict limits on who has the ability to disclose it, train employees on the risks of cyber scams, and pay attention to FBI and news media warnings.

For more information, including news, updates and links to important information pertaining to legal developments that affect businesses ranging from cyber security liability arising from electronically-stored information to evolving issues with employees, subscribe to my blog, or follow me on Twitter @AdamGersh.

Mass. Court Turns Over A New Leaf: Rules Employer May Be Liable for Failing to Accommodate Employee’s Medical Marijuana Use

Even though 29 states now allow medical marijuana, employee use of medical marijuana is unprotected in many workplaces because marijuana use of any kind remains illegal under federal law.   Favoring employee’s right to be free from discrimination for using medical treatments that are legal under state law over the federal ban, a recent decision from Massachusetts’s highest court means employers may need to reevaluate and revise their policies to keep up with this rapidly evolving area of employment law.

On July 17, 2017, the Massachusetts Supreme Judicial Court ruled a trial court erred when it dismissed an employee’s claim that she was subjected to disability discrimination when her employer terminated after she tested positive for marijuana in pre-hire drug screening.  The case, Barbuto v. Advantage Sales and Marketing LLC, is noteworthy because, in many states, employers have been able to terminate workers for failing drug tests due to medical marijuana use.

Where are we?

By way of background, employers have broad discretion to terminate employees for medical marijuana use in many states on the basis that use of marijuana, even if lawful under state law, remains a federal crime.  This is well illustrated by the case of Coats v. Dish Networks, LLC, decided by the Colorado Supreme Court in 2015.  In that case, an employee was terminated for testing positive for marijuana.  It was undisputed that the employee had a valid prescription to use medical marijuana, which was legal in Colorado, and that he did not use marijuana at work or in a way that impaired his work performance.  When he tested positive for marijuana, he was terminated and brought an action against his former employer for violation of Colorado’s Lawful Off-Duty Activities statute, which generally prohibits employers from discharging an employee based on his/her engagement in “lawful activities” off the premises of the employer during nonworking hours. The Colorado Supreme Court upheld the dismissal of the employee’s claims and found the employer had a right to terminate him for off-duty activities that violated federal law, even if they were lawful under Colorado law.  Similarly, the NFL prohibits players from using medical marijuana even in states where it is legal under state law.

Closer to home, under New Jersey law currently, employers have no strict obligation to accommodate medical marijuana users and employers may terminate an employee who fails a drug test, even if the employee can lawfully use medical marijuana under state law and was not impaired at work.  Pennsylvania’s recently adopted medical marijuana law broadly prohibits discrimination against an employee or job candidate because he or she has a medical marijuana prescription (i.e., is a cardholder), but it is silent on whether an employer can rely upon a positive drug test as a reason for an adverse employment action in itself.  Both Pennsylvania and New Jersey permit an employer to terminate an employee who is impaired in the workplace.

What Happened in Massachusetts?

That brings us back to Barbuto.  In Barbuto, before she was hired, the employee disclosed that she used medical marijuana to treat an underlying condition, but did not use it during working hours.  When the results of her drug screening were positive for marijuana, she was terminated after completing her first day.  Barbuto alleged the termination was discriminatory and the employer violated her rights by failing to make a reasonable accommodation.  In many states, Barbuto’s claim would have been dismissed, but in Massachusetts the Court took a novel approach.  The Court found the employer had a duty to make a reasonable accommodation for medical marijuana usage outside of working hours, despite the employer’s drug policy, explaining, “the fact that the employee’s possession of medical marijuana is in violation of federal law does not make it per se unreasonable as an accommodation.”  This outcome is surprising because it limits an employer’s discretion to discipline employees who use medical marijuana, in violation of federal law, by relying on the state’s anti-discrimination laws.  Most states have similar anti-discrimination protections.

Where we are going?

Although the Barbuto decision only applies in one of the 29 states where medical marijuana is currently legal, it is worth noting because of the potential for its reasoning to be applied in other states where medical marijuana is lawful.  If it is followed in other states, it creates a new risk when an employer has a zero-tolerance drug testing policy that leads to discipline for employees who lawfully use medical marijuana and are not impaired at the workplace.  In states where this issue has not been resolved, employers should expect to face claims similar to those raised in Barbuto.  For example, in Barrett v. Robert Half Corporation, a New Jersey employee tried to make a similar argument, but his case was dismissed on the basis that he never requested an accommodation, meaning the court never reached the issue of whether allowing off-duty use of medical marijuana is a reasonable accommodation.

Even if state courts do not follow Barbuto, legislatures are also revisiting the issue.  For instance, in New Jersey two bills offering express workplace protections for medical marijuana users are working their way through the legislature.

What should employers do?

In light of this ever-changing landscape, employers should carefully evaluate whether they need to screen for marijuana when conducting tests that are not related to suspicion of drug use in the workplace.  Today, in states where there is no clear precedent, disciplining an employee for a positive test when the employee has disclosed a need for medical marijuana usage and there is no evidence of workplace use is an increasingly risky decision and may soon give rise to a legislatively-sanctioned claim.  Of course, employers need not tolerate employees who are impaired in the workplace.  Additionally, some employers, especially those with safety-related positions and certain government contractors, may be required to screen for any marijuana use and enforce a zero-tolerance policy.  For everyone else, it is a good idea to think carefully before imposing discipline for medical marijuana use outside of the workplace.

Questions? Let me know.

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