In September of 2015, two delivery drivers filed a class action lawsuit in the United States District Court for the Middle District of Pennsylvania. The employees alleged that their former employer violated the Fair Labor Standards Act by failing to pay them overtime between 2012 and 2015. The class subsequently ballooned to 474 members (and an additional 588 former and current delivery drivers remain eligible to opt into the class). The members asserted that over that three year period, the employer denied them overtime for five to ten hours per workweek, totaling over $10 million in allegedly unpaid wages.

The employer initially argued that the employees were exempt from overtime requirements. It claimed that in addition to making deliveries, as “Route Sales Professionals,” the drivers could make additional sales, fill orders, and upsell when making deliveries. Therefore, according to the employer, the drivers fell within the FLSA’s “outside sales person” exemption. The drivers maintained that sales were not part of their job duties; they were simply delivery drivers who did not fit within the outside sales exemption.

After two years of discovery, in April of this year, the parties notified the court that they had reached a settlement agreement. They asked the court to approve agreement, as is required with both FLSA claims and class actions lawsuits.

The amount: $2.5 million.

This month, the court approved the FLSA settlement. It also preliminarily granted approval of the class action settlement, subject only to a fairness hearing scheduled for September.

For our blog subscribers that have delivery drivers who also engage in incidental sales, now is the time to reevaluate how you classify those employees. In addition, this case serves as an important reminder for all employers that FLSA classifications turn on the actual job duties of the position, not the job title. In fact, a written job description will not even be controlling, unless it is an accurate reflection of the employee’s job duties.

Employers often shy away from discharging employees for disciplinary reasons when those employees are receiving workers’ compensation benefits, such as in instances where the employee is working a modified duty assignment.  However, such employees can and should be held to the same standards as other employees, including compliance with applicable policies and procedures.  Additionally, so long as the discharge is found to be related to the disciplinary violation, any subsequent loss of earnings will be deemed to be unrelated to the work injury, thus rendering the discharged employee ineligible for reinstatement of workers’ compensation wage loss benefits.

In a recent unreported Commonwealth court case, (Waugh v. WCAB, No. 702 C.D. 2016), the Claimant was employed as a certified nursing assistant (CNA) at a medical center.  She had sustained an accepted work injury to her right arm, when a patient grabbed and twisted her arm in the course and scope of her employment.  She underwent two surgeries and eventually returned to work in a modified duty capacity.

While working modified duty, Claimant was reprimanded for acting outside the scope of her employment for administering medication to a patient.  Several months later, there was a similar incident, in which Claimant applied a tourniquet to a patient while assisting a phlebotomist, who was attempting to draw blood.  Employer’s policy in the event a phlebotomist cannot locate a vein, is to call a specialized IV team to insert the needle and draw blood.  Claimant was terminated for this second instance of acting outside the scope of her employment.  Despite her protests that she was “only trying to help,” the termination was held to be proper, as was the workers’ compensation determination denying reinstatement of benefits.

The Court reaffirmed the longstanding rule that a lack of “good faith” on the part of the claimant, is sufficient to deny reinstatement of workers’ compensation wage loss benefits.  This is so, even where unemployment benefits are awarded, on the basis that the employer had not established a case of willful misconduct under the Pennsylvania Unemployment Compensation Act.

The determination of good faith or bad faith is obviously “fact sensitive,” but in situations where the employer would discharge the employee absent a workers’ compensation backdrop, this factor alone should not discourage the employer from taking the appropriate disciplinary action, including discharge.

For further information, on this subject, please feel free to contact Denise Elliott, Micah Saul or Paul Clouser, in our Lancaster office.

Workplace rights for LGBT individuals has been a rapidly developing area of the law.  A little over two years ago, former President Obama signed an executive order prohibiting federal contractors from discriminating against employees on the basis of their sexual orientation or gender identity.  The Office of Federal Contract Compliance Programs followed suit by issuing regulations protecting the rights of LGBT workers employed by federal contractors and subcontractors.  Then, the Equal Employment Opportunity Commission published guidance suggesting that the Agency considers sexual orientation and gender identity to be protected by Title VII of the Civil Rights Act of 1964.  Despite these developments, no federal appellate court had ever ruled that Title VII protects workers from discrimination on the basis of sexual orientation.  That changed earlier this week.

In a groundbreaking 8-3 decision, the U.S. Court of Appeals for the Seventh Circuit (having jurisdiction in Illinois, Indiana, and Wisconsin), ruled that sexual orientation is a protected trait under Title VII and that employers may not discriminate against employees on that basis.  The case, Hively v. Ivy Tech Community College of Indiana, involved an openly lesbian professor who had worked for the college as an adjunct staff member for over fourteen years.  She applied for six different full-time jobs during her tenure and was rejected for each of them.  Then, the college failed to renew her adjunct contract in 2014.  She filed a Charge of Discrimination with the EEOC alleging that she was discriminated against on the basis of her sexual orientation.

The district court dismissed her case on the basis that sexual orientation was not recognized as a protected trait under Title VII.  On appeal, the Seventh Circuit reversed.  It held that sexual orientation was a protected characteristic because, in essence, actions taken on the basis of sexual orientation are a “subset of actions taken on the basis of sex,” which is protected by Title VII.  The Court reasoned that sexual orientation discrimination claims are “no different from the claims brought by women who were rejected for jobs in traditionally male workplaces, such as fire departments, construction, and policing. The employers in those cases were setting the boundaries of what jobs or behaviors they found acceptable for a woman (or in some cases, for a man).”

The Seventh Circuit’s ruling is not binding precedent on Pennsylvania employers.  However, as we reported last year, at least one federal district court in the Commonwealth considers sexual orientation to be a protected trait under Title VII.

The Seventh Circuit’s ruling may ultimately prove to have a much broader impact.  The Hively decision now means that circuit courts are officially split on the issue of whether Title VII protections include sexual orientation (last month, the Eleventh Circuit held that sexual orientation and gender identity are not protected under the statute).  When federal circuit courts provide conflicting rulings on the same legal question, the Supreme Court of the United States is more likely to issue its own ruling on the subject in order to ensure consistent application of the law.

We will continue to monitor any future developments on the subject.  As always, we’ll report any updates right here.

As a general rule, an employee who is injured while commuting to or from work is not entitled to workers’ compensation benefits, as the injuries are not deemed to be “in the course and scope of employment” by virtue of the longstanding “going and coming rule.”  There are exceptions to the rule, including: (1) situations where there is no fixed place of employment and the employee is therefore deemed to be a “traveling,” as opposed to “stationary” employee; (2) the employee is on a special assignment for the employer; (3) the employment contract includes transportation to and from work; or (4) special circumstances exist, such that the employee was furthering the interests of the employer when injured.

In an interesting recent case, the Commonwealth Court awarded compensation under the special circumstances exception, despite the fact that Claimant was commuting to work at the time of his motor vehicle accident.

The employee, Miller, was a salaried director of maintenance services, exempt from the overtime requirements of the Fair Labor Standards Act. His regular work hours were from 7:00 a.m. to 3:30 p.m., Monday through Friday.  The employer maintained a four building campus as a facility for senior residents.  The campus had a system of security cameras, whose maintenance was an important priority for the employer.

Miller testified that in addition to his regular hours, he would be called in while off-site two to three times monthly.  In such instances, he received “comp time,” in lieu of additional pay.  The comp time accrued from the time he answered the phone, until he arrived back at home.  On the morning in question, Miller was “feeling very poor and weak.”  He stayed home past his usual 7:00 a.m. start time, with the intention of taking a sick day.  However, the employer called and requested that he stop in to reset the security cameras, after which he could return home for the rest of the day.  En route to the facility, Miller became nauseous and veered off the road, hitting a telephone pole.  He sustained multiple injuries, including a broken eye socket, broken pelvis, ruptured bladder and multiple scars and disfigurements.

The key issue before the WC Judge was whether Miller was commuting to a fixed place of employment, such that the “going and coming rule” barred his claim, or whether special circumstances existed, such that an exception to the rule applied.

Since “but for” the security camera emergency, Miller would not have made the trip to work, the Judge, and subsequently the Commonwealth Court, concluded that this factor brought the case within the “special circumstances” exception to the going and coming rule, and awarded benefits.

The key takeaway is that commuting cases are often fact sensitive and need to be analyzed carefully, to determine whether workers’ compensation benefits are appropriate.  For example, construction workers who might at first glance appear to be “traveling” as opposed to “stationary” employees, are frequently deemed to be “stationary,” if they are working at only one job site at a time.  As such, the “going and coming” rule might preclude compensation in such cases, absent special circumstances.

Please contact Paul Clouser, Denise Elliott or Micah Saul, if you have questions about situations in which your employees may or may not be deemed to be “in the course and scope” of their employment, pursuant to the Pennsylvania Workers’ Compensation Act.

The use of temporary employees provided by agencies that supply laborers, secretaries, nurses or other skilled or unskilled workers to the public and private sector is increasing. Employers who use these temporary agency workers’ must be wary of the relationships created by the use of the temporary agency workers. Are the temporary workers “employed” by the agency, the borrowing employer, or both, for purposes of the Pennsylvania Workers’ Compensation Act (the “Act”)?  The answer will determine which entity or entities may claim immunity from a common law action, under the exclusive remedy provisions of the Act.

The critical test for determining whether a worker furnished by one entity to another is “employed” by the latter, is whether the worker is under the latter’s right of control with respect to both the work performed and the manner in which the work is performed.  For example, suppose a municipal township needs a temporary worker to ride on the back of a municipal trash truck.  After receiving only minimal instruction, the worker falls from the moving truck on his first day of work and dies ten (10) months later.  Suppose the agency, Labor Ready, pays $770,000 in workers’ compensation benefits.  A civil suit is then initiated by the decedent’s estate against both Labor Ready and the Township.  Does the decedent’s estate have a viable civil claim against either entity? Under this fact pattern, the trial judge dismissed, on summary judgment, both Labor Ready and Rye Township, finding that both entities were “employers” entitled to protection under the immunity provisions of the Act.  The ruling was affirmed by the Commonwealth Court on appeal.  Nagle v. Labor Ready and Rye Township (Pa. Cmwlth. 2016).  Similar results have been reached in volunteer fire fighter liability cases, where both the volunteer fire company and the sponsoring township enjoy immunity.  Indeed the “borrowed employee” doctrine provides broad immunity in both the public and private sectors, at least where the borrowing employer exerts the requisite degree of control over the borrowed employee, (See, e.g., Hendershot v. Emmeci Northampton County 2016). A temporary agency supplied a machine operator to its manufacturing client and the agency employee sustained serious injuries while cleaning the machine.

Nevertheless, despite broad interpretation on the “borrowed employee” doctrine, employers have been found to be liable for damages beyond workers’ compensation, in circumstances where: (a) the requisite degree of control does not exist (i.e. a company leases a piece of equipment with an operator and the operator is then injured on the company’s premises) or (b) the borrowing employer forfeits its immunity by filing an Answer to the workers’ compensation claim petition denying that it is the employer, and alleging that the temporary agency is solely responsible.  Black v. Labor Ready (Pa. Super. 2010).

Employers should be sensitive to the range of potential outcomes when staffing positions with “borrowed employees,” and should review any temporary agency agreements to insure the broadest possible immunity from suit, along with proper indemnification language, with respect to agency employees who are hired into temporary positions or assignments.

Please contact a member of our Labor and Employment Group for specific legal analysis of temporary employment arrangements at your facility.

In 2015, we discussed the new joint-employer standard that was articulated by the National Labor Relations Board in Browning-Ferris Industries of California, Inc.  As a reminder, the NLRB held that a joint-employer relationship may be found if two or more entities “are both employers within the meaning of common law, and if they share or co-determine those matters governing the essential terms and conditions of employment,” such as wages, hours, work assignments, and control over the number of workers and scheduling.  The Board further found that a joint employer is not required to exercise its authority to control terms and conditions of employment, and recognized that control may be “reserved, direct and indirect.”

The effect of this new, employee-friendly standard was a broadening of the Board’s criteria used to consider whether a joint-employer relationship exists.  In other words, it became much more likely that companies that use contract or contingent labor could face liability as the joint employer of those workers.  The story doesn’t end there, however.

The Browning-Ferris decision was appealed, and the appeal is currently pending before the United States Court of Appeals for the D.C. Circuit.  If the court’s remarks during oral arguments that were recently held are any indication of the fate of the new joint employer standard, employers have reason for cautious optimism.

The D.C. Circuit’s panel of judges described the Board’s new test as “unworkable,” with one jurist remarking that the NLRB had “dropped the ball” in its 2015 decision.  She openly questioned whether the Board was capable of policing the line between genuine joint employment and contractor relationships.  Other members of the panel criticized the new test as “unclear.”

While there is no guarantee that the D.C. Circuit will overturn the NLRB’s decision in Browning-Ferris, early signs certainly seem to indicate that such an outcome is quite possible.  We will continue to monitor the status of this case and will report any further developments right here on our blog.  In the meantime, the NLRB’s decision still stands and employers should continue to operate accordingly.

In the Third Circuit, an employer’s honest belief that an employee committed misconduct can now serve as a defense to a retaliation claim under the FMLA.  With the recent decision in Capps v. Mondelez Global, LLC (found here) the Third Circuit joins the Seventh, Eighth and Tenth Circuits in providing such a defense.

In the Capps case, Mondelez (the employer) fired Fredrick Capps (a longtime employee) for what Mondelez believed to be dishonest use of intermittent FMLA leave.  During the time of his employment, Capps suffered from a medical condition that required him to undergo bilateral hip replacement in 2003.  Thereafter, he experienced flare-ups that caused him severe pain, which sometimes lasted for days or weeks at a time. As a result of his condition, Capps requested intermittent FMLA leave to cover his periodic time off work.  Because of his ongoing condition, Capps was recertified for intermittent FMLA leave every six months from 2003 to the end of his employment.

On February 14, 2013, Capps reported that he would not be in to work because he was experiencing pain caused by a flare-up of his condition.  Later that same day, Capps drove to a local pub, where he got something to eat and also had a few beers and shots of alcohol with his friends.  About three hours later, Capps attempted to drive home, but was arrested for Driving Under the Influence of Alcohol (“DUI”) and spent the night in jail.  After being released from jail the next morning, Capps again called off work using intermittent FMLA leave because he said he was experiencing leg pain from his condition.

When Capps returned to work, he did not report his DUI arrest.  However, over the next several months he called off work numerous times and requested intermittent FMLA leave for his condition.  Interestingly enough, during this same time period, Capps was required to attend court hearings and other appointments related to his DUI charge.

On August 7, 2013, Capps pled guilty to the DUI charge and immediately served 72 hours in jail.  When the employer became aware of Capps’ conviction early in 2014, an investigation commenced looking into Capps’ attendance from the time of his DUI arrest to his guilty plea.  This investigation uncovered that Capps’ arrest date and several subsequent court dates corresponded with days that Capps had also used intermittent FMLA leave.  After further investigation, including discussions with Capps himself, it became clear that the documentation Capps submitted did not support his need for FMLA leave on the days that he also appeared in court.

Subsequently, Capps was discharged based on his violation of the company’s Dishonest Acts Policy and misuse of FMLA leave. The termination letter sent to Capps stated: “You claimed to be out due to [ ] FMLA related issues on multiple dates. The documentation you produced does not support your claim of [ ] FMLA related absences.”  After his termination, Capps filed suit claiming, among other things, that the employer retaliated against him for exercising his rights under the FMLA.

After having his FMLA retaliation claim dismissed on summary judgment, Capps’ argued on appeal that the District Court improperly dismissed his claim because the employer was mistaken in its belief that Capps misused his FMLA leave or was otherwise dishonest. However, the Third Circuit affirmed the dismissal of Capp’s FMLA retaliation claim emphasizing that an FMLA retaliation claim requires proof of an employer’s retaliatory intent.  In other words, Capps could not show that the employer’s reasonable belief that he was dishonest and misused his FMLA leave was a pretext for retaliation.

While employers should always proceed with caution before terminating an employee around the time he or she requests, takes, or returns from FMLA leave; the Third Circuit’s adoption of the honest belief defense provides a significant means for employers to defend against FMLA retaliation claims. More specifically, employers that discharge an employee based upon an honest belief that the employee is abusing FMLA leave may now be more likely to prevail on a motion for summary judgement.

To be clear, this case is not a get out of jail free card for employers.  Before the decision is made to terminate, employers must be sure that there is supporting evidence of the employer’s honest belief. In the Capps case, this took the form of a thorough investigation of the employee’s absences along with an opportunity for the employee to explain and support his actions.  Yet, when an employer has supporting evidence and reasonably believes that an employee abused FMLA leave or was otherwise dishonest about the need for such leave, this honest belief will serve as the employer’s defense to a FMLA retaliation claim.

In 2010, two employees filed a claim against their former employer, Robert Half International, Inc., alleging that it violated the Fair Labor Standards Act (“FLSA”). In addition to individual claims, the plaintiffs brought a collective action on behalf of all other similarly situated employees. The plaintiffs, however, had signed employment agreements containing arbitration clauses, which generally required that any dispute arising out of their employment be submitted to arbitration. It was silent as to class-wide claims.

The employer filed a motion to compel the employees to resolve their claims through arbitration on an individualized basis. The court ordered the employees to submit their claims to arbitration but left for the arbitrator to decide whether the claims could proceed on a class basis. The arbitrator subsequently ruled that class arbitration was permitted under the agreements. The employer appealed and argued that the question of whether the employees could submit claims to arbitration on a class-wide basis is one to be decided by the courts, not an arbitrator.

The First Shoe

The Third Circuit agreed. The court first explained that it is generally the province of the courts to resolve “questions of arbitrability.” That is, courts have narrow authority to decide whether or not an arbitration clause applies to particular claims and/or particular parties. On the other hand, arbitrators decide all issues they have been authorized by the parties to resolve. This includes procedural questions, and in traditional litigation, questions of class are procedural in nature. So, in this case, the court was presented with the following question: when an arbitration clause is silent as to arbitration on a class basis, is the permissibility of class arbitration a “question of arbitrability” to be decided by the court, or is it a procedural question to be decided by an arbitrator?

In a precedential opinion issued in 2014, the Third Circuit held that it was a question of arbitrability reserved for the court, because it was an issue of whether the clause applies to particular claims and/or parties. With this ruling, the Third Circuit then remanded the case to the district court to determine whether the employment agreements authorized class arbitration. On remand, finding no explicit language in the arbitration clauses, and finding no other evidence to the contrary, the district court found that class arbitration was not permitted under the agreement. The employees appealed.

The Other Shoe (sort of)

In a non-binding decision issued at the end of January, the Third Circuit agreed that class arbitration was not permitted. First, the court recognized that “a party may only be compelled to submit to class arbitration if there is a contractual basis for concluding that the party agreed to do so.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l, Inc., 559 U.S. 662, 684 (2010). To determine whether the parties agreed to class arbitration in this case, the court first looked for explicit language of authorization, noting that under Third Circuit precedent, “silence regarding class arbitrability generally indicates a prohibition.” Quillion v. Tenet HealthSystems Phila., Inc., 673 F.3d 221, 228 (3d Cir. 2012). It found no explicit language. Despite this finding and its precedent concerning the silence of class arbitration, the court did not stop there. It went on to look for implicit authorization elsewhere in the employment agreement. It again found nothing and affirmed that the agreement did not authorize class-wide arbitration.

While this ruling resolves this case and gives guidance moving forward, it does not definitively answer whether the absence of explicit language precludes class arbitration. To the contrary, the court’s analysis suggests that class arbitration could be inferred from other language in the employment agreement. So, going forward, to avoid a court making such an inference – one contrary to your true intent – inclusion of explicit language prohibiting class arbitration remains the best policy. However, you must be aware that the National Labor Relations Board takes the position that explicit prohibitions of class arbitration violate the National Labor Relations Act. Three courts of appeals, among other courts, have disagreed and overturned the Board’s position. Stay tuned, as the Supreme Court of the United States is set to resolve this question later this year.

A few weeks ago, a jury in New Jersey federal court found that Lockheed Martin discriminated against a former employee. The employee claimed that Lockheed violated federal and state laws by discriminating against him on the basis of age, including by paying him less than his younger co-workers. The jury’s award: $51.5 million ($1.5 million in compensatory damages and $50 million in punitive damages).  Although the claim was only partially based on unequal pay, and although the punitive damages award is constitutionally suspect (U.S. Supreme Court precedent holds that punitive damages should generally not be more than ten times the amount of compensatory damages), the award is indicative of an ever-emerging emphasis on pay equity.

Since January of 2016, several states have enacted equal pay statutes, and several others have pending legislation. California, New York, Maryland, and Massachusetts all have statues that prohibit pay discrimination on the basis of sex (Maryland’s also includes gender identity). Each of these statutes makes it easier for employees to establish pay discrimination claims, including requiring no proof of intent. One state, however, allows employers to establish an affirmative defense. Under Massachusetts’ statute, which is set to go into effect in July 2018, an employer has an affirmative defense if it completed a self-evaluation of its pay practices within three years of the claim, and it made reasonable progress toward eliminating pay differences revealed by the self-evaluation.

It is not just states that have turned their focus toward compensation. Our federal contractor subscribers – recognizing that Lockheed Martin is a federal contractor (the biggest, actually) – may find themselves wondering how aggressive the Office of Federal Contract Compliance Programs (OFCCP) has become with respect to compensation. If its lawsuit against Google is any indication, OFCCP has become quite aggressive. Typically, during a compliance audit OFCCP will require employers to provide compensation data for all current employees to ensure no disparity across races and genders. With Google, it went further. It demanded wage histories, changes in compensation, and employee contact information. When Google refused, OFCCP filed a lawsuit seeking an injunction and threatened to cancel all of Google’s federal contracts.

Finally, even if you are not in a state that has current or pending pay equity statutes, and even if you are not a federal contractor, employers may need to report compensation in the future. For employers with 100 employees or more, the Equal Employment Opportunity Commission has proposed to collect compensation data by sex, race, and ethnicity for each job category. Thus, starting in March 2018 – assuming no changes occur under the new Trump administration – those employers will be required to include compensation information in their EEO-1 report. According to the EEOC, this “will provide a much needed tool to identify discriminatory pay practices where they exist in order to ensure that fair pay practices are put in place.”

Considering all this momentum toward ensuring pay equity, compensation has possibly become one of employers’ greatest vulnerabilities.  Now may be the time to conduct an internal analysis – preferably one shielded by attorney-client privilege – to determine whether disparities exist within your compensation structure. Stay tuned for future podcasts, webinars, and seminars that will address this issue in part.

The Philadelphia City Council recently passed Bill No. 160840, a wage equity ordinance (the “Ordinance”), that will amend Philadelphia’s Fair Practices Ordinance to prohibit employers or employment agencies from inquiring about the wage history of potential employees.  Among other things, the Ordinance also includes an anti-retaliation provision, which prohibits any form of retaliation against a prospective employee for failing to comply with a wage history inquiry.

More specifically, the Ordinance provides that it is an unlawful employment practice for a covered employer to:

  1. inquire about a prospective employee’s wage history;
  2. require disclosure of wage history;
  3. condition employment or consideration for an interview on disclosure of wage history; or
  4. retaliate against a prospective employee for failing to comply with any wage history inquiry.

Furthermore, the ordinance also makes it an unlawful employment practice for an employer to “rely on the wage history of a prospective employee from any current or former employer when determining the wages for such individual at any stage in the employment process,” which includes the negotiation or drafting of any employment agreement.  However, the Ordinance does provide an exception that permits an employer to rely on any wage information that is knowingly and willingly disclosed by an applicant.

It is important to note that this Philadelphia Ordinance will take effect 120 days after it is signed into law by Mayor Jim Kenney, who has expressed his support.  Accordingly, if the Ordinance is signed this month, employers in Philadelphia can expect to see the Ordinance take effect in May of this year.

In anticipation of the enactment of this Ordinance, Philadelphia employers can prepare by:

  1. removing any questions on employment applications that may in any way seek information about salary or wage history;
  2. train hiring managers and interviewers to avoid asking questions about an applicant’s wage history;
  3. refrain from relying on an individual’s wage history (if known) when deciding the appropriate wages/salary to pay a prospective employee; and
  4. review existing policies and practices to ensure compliance with the Ordinance.

This Philadelphia Ordinance is recent example of a growing trend to prohibit employers from requesting and relying on an applicant’s wage history.  This trend has emerged in an effort to address what many call the “gender pay gap.”  In light of these recent actions by state and local governments, employers across Pennsylvania and beyond should stay informed about further developments in this area, as similar laws may soon be proposed and enacted in other locations.