Walmart reportedly agreed to pay $65 million to settle a case brought on behalf of nearly 100,000 current and former California cashiers who claimed the company violated their rights under a state law dating back to 1911 when it failed to provide them with seating. The workers claimed Walmart, which denied any wrongdoing, breached its duty to make seating available “when the nature of the work reasonably permits.”
Walmart claimed that the nature of the cashier job did not reasonably permit seating, because placing stools or chairs at the store’s cash registers would pose a safety risk and hinder productivity. However, Walmart had a policy of offering stools to cashiers with medical conditions or disabilities, and store managers had the discretion to provide stools to cashiers on a case-by-case basis.
In a court filing, Walmart and counsel for the cashiers said the settlement, if approved, would be the largest ever under California’s unique Private Attorney General Act, which allows workers to sue their employers on behalf of the state and keep a portion of any award.
Curiously, other major retailers in California faced similar lawsuits, but Walmart did not act proactively to address this issue. Even putting aside the anticipated benefit of improved employee relations resulting from voluntary compliance, with the benefit of hindsight, one has to wonder if the cost of compliance, even if it were to result in reduced productivity, would have been less than the cost to settle.
Savvy employer takeaways: Employers need to look carefully at their duty to offer reasonable accommodations to employees and to engage in an interactive process to make sure that the employer can justify any denied accommodation.
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On March 18, 2019, New Jersey Governor Phil Murphy signed a new law, which, among other things, bars employers from requiring employees to sign or enforcing employment contracts that require employees to agree to waive certain rights or remedies and bars agreements that conceal details relating to discrimination claims.
Here’s what employers need to know:
- Any provision in an employment contract that waives or limits any substantive or procedural right or remedy relating to a claim of discrimination, retaliation, or harassment will now be deemed against public policy and unenforceable;
- No right or remedy under New Jersey’s “Law Against Discrimination,” or “any other statute or case law” shall be prospectively waived;
- A provision in any employment contract or agreement that has the purpose or effect of concealing the details relating to a claim of discrimination, retaliation, or harassment shall be deemed against public policy and unenforceable;
- For unionized work forces, this law does not restrict agreements to waive rights contained in collective bargaining agreements, but it does extend its prohibition to clauses designed to conceal details of a discrimination claim from unionized employees;
- Attempting to enforce an agreement that is unenforceable under this law will give employees a private right of action to sue in court and the right to recover their attorney’s fees and costs of suit if they prevail;
- The law protects employees from retaliation for refusing to enter into an agreement that violates their rights under this new law;
- The law does not restrict an employer’s right to impose and enforce restrictions on the use of the employer’s confidential and proprietary information other than with respect to the details of discrimination claims;
- The law does not expressly prohibit confidentiality provisions in settlement agreements meant to prevent disclosure of the amount of a settlement;
- The law does not require disclosure; rather it leaves the choice in the hands of the individuals involved; and
- The law took effect immediately and applies to all new contracts and agreements and existing contracts that are renewed, modified, or amended going forward.
Although the law is aimed primarily at prospective waivers of rights and clauses concealing the details of discrimination claims, the full scope of this law’s applicability will become clear only after it has been interpreted by the courts. For example, one of the most significant open questions is whether New Jersey courts will deem mandatory arbitration provisions in employment agreements unenforceable as to discrimination claims and, if they do, whether the Federal Arbitration Act will, in turn, be deemed to preempt such a limitation on the enforcement of arbitration clauses. Another important question is whether courts will construe this law to bar confidentiality provisions in settlement agreements that restrict employees from disclosing the terms of the settlement.
As we wait for the courts to resolve these and other open questions, employers should proceed thoughtfully when seeking confidentiality in connection with a claim of discrimination. A precisely drafted confidentiality agreement or policy might be desirable in some situations, such as to preserve the integrity of an ongoing investigation, but employers need to be mindful of this law and understand the limitations and potential consequences of requiring confidentiality and/or taking disciplinary action when confidentiality is breached. Employers relying on mandatory arbitration provisions should also consider the impact of this law and consult their counsel in evaluating whether to exclude discrimination claims from arbitration.
If you have any questions about this legal alert or if you run across a related issue in your workplace, please feel free to contact Adam Gersh or any other member of Flaster Greenberg’s Labor & Employment Department.
As long-time readers of this blog may recall, since 2015, the U.S. Department of Labor has been trying to update its Fair Labor Standards Act regulations to qualify more employees for overtime pay. For basic exemptions, meaning those that are not industry-dependent such as the administrative, executive and professional exemptions, employers may generally classify as exempt from overtime pay only employees who meet both a duties test and a salary test. Since 2004, federal law allowed employers to designate salaried workers who earn at least $455/week (the equivalent of $23,660/year) and meet certain “white collar exemption” duties-test requirements as exempt from overtime. This month, the DOL issued a proposed rule to increase that salary exemption to $679/week (equivalent to $35,308/year). If adopted, salaried employees who meet an applicable duties test and earn more than $455/week but less than $679/week will no longer be exempt from overtime under the basic exemptions. Importantly, the DOL proposed rule will allow employers to use nondiscretionary bonuses (for example incentive bonuses tied to productivity or profitability) and incentive payments (including commissions) that are paid at least annually to satisfy up to 10 percent of the salary test. The DOL is also proposing to increase the exemption that applies to highly compensated employees. Currently, salaried employees who earn at least $100,000/year in salary are exempt from overtime regardless of whether they satisfy the applicable duties test. Under the proposed rule, the highly compensated employee salary threshold will increase to $147,414/year, meaning employees paid less than that threshold amount will be subject to a duties test or other exemption. The proposed rule does not seek a change to any of the duties tests for the basic exemptions.
Savvy employer takeaways: Employers need to evaluate their payroll to identify salaried employees who meet the applicable duties test but may no longer be exempt and assess whether increasing the employee’s salary or making the employee overtime eligible makes more sense. Employers also need to consider applicable state law, which may be more restrictive than the exemptions permitted under the FLSA.
Questions? Let me know.
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.
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.