This post was contributed by Brett E. Younkin, Esq., an Associate and a member of McNees Wallace & Nurick LLC’s Labor and Employment Practice Group in Columbus, Ohio. On May 17, 2011, Brett reported that the United States Supreme Court was considering an important decision regarding class action suits.

UPDATE:

You may have heard the cheers emanating from Bentonville, Arkansas (the location of Wal-Mart’s corporate headquarters), and the corporate headquarters of other large employers following the United States Supreme Court’s announcement of its decision in Wal-Mart, Inc. v. Dukes, __U.S. ___ (2011) (PDF). On June 20, 2011, the Court decertified the class-action status of the 1.6 million current and former female employees in their decade-old suit against the world’s largest private employer. Betty Dukes and her two co-plaintiffs had alleged a nationwide pattern of discriminatory pay and promotion practices by the company, despite its published policy of non-discrimination. However, the Court unanimously disagreed and overruled the Ninth Circuit Court of Appeals, which had allowed the case to proceed as a class action. The decision created what may be viewed as a higher burden of proof for establishing class action status.

While the Court was unanimous in deciding that this particular class should be decertified, only five of the justices joined in the entire ruling. In the majority opinion authored by Justice Scalia, the Court found that commonality was the key to certifying a class under Federal Rule of Civil Procedure 23 – “claims must depend on a common contention . . . which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.” To attempt to resolve “literally millions of employment decisions at once” would not result in a unified answer for why a particular employee was disfavored. “Without some glue holding together the alleged reason for those [discriminatory] decisions, it will be impossible to say that examination of all the class members’ claims will produce a common answer to the crucial discrimination question.” The Court noted that the dissent from the lower court was correct in that the plaintiffs had “little in common but their sex and this lawsuit.”

Additionally, the opinion strongly rejected the plaintiffs’ expert witness testimony because, among other things, a litany of the expert’s peers had denounced his approach, analysis, and conclusions. The Court also concluded that while anecdotal evidence may be relevant, a hundred stories out of millions of employment decisions throughout 3,400 stores did not prove a pattern of discrimination.

What does this decision mean for employers? It certainly will have an impact in the litigation context if an employer finds itself in the unfortunate position of facing a class action lawsuit. In addition, the Court’s decision affirmed the use of anecdotes as evidence of discrimination and, therefore, inappropriate comments made by corporate leaders may be used as evidence of a corporate-wide discriminatory practice. As a result, employers are well advised to include corporate executives in refresher training regarding discrimination and harassment.
Continue Reading UPDATE: Supreme Court Decertifies Class In Dukes v. Wal-Mart

A few months back, we reported that the National Labor Relations Board (Board) had issued a complaint against a company for disciplining an employee because she posted insulting remarks about her supervisor on her Facebook page. We subsequently reported that the complaint was settled. Since that time, the Board has remained very active in the the social media area, and has demonstrated an apparent desire to actively police that space.  The Board has issued several complaints, which send a strong message that the Board is interested in protecting the social media space for employees.

Before we move forward to discuss the Board’s activity, lets first take a step back and remember that the rules of the game have not changed too much. The only difference is, the game is being played in a new arena. Since the enactment of the National Labor Relations Act (Act), employees have had the right to engage in concerted activity and to discuss the terms and conditions of employment without retribution from their employers. The right to discuss the terms and conditions of employment, includes the right to discuss wages, benefits, working hours and working conditions, and under the Board’s precedent, also includes the right to complain about supervisors and managers in some cases. The Act prohibits covered employers from disciplining employees who exercise these rights.

While these employee rights have not changed, they are now being exercised in a new forum. Employees, and unions, have flocked to social media. Unions are using social media to help organizing campaigns, and employees are using social media for just about everything. As a result, conversations that used to occur in the break room and bar room now take place on Facebook or via Twitter. In the past, employers were probably not even aware that employees were discussing the terms and conditions of employment, but now these conversations on posted on the Internet, and in some cases, have a very wide audience.

When these discussions are offensive or disparaging, employers often want to take action. Understandably, employers may wish to discipline employees whose comments demonstrate a lack of professionalism or violate employer policies. However, the Board has been quick to step in and issue a complaint if, in the opinion of the Board, the employer’s action has violated the Act.

The Board has issued complaints involving Facebook and Twitter, complaints involving negative comments about individual supervisors and the employer as a whole, and complaints against both union and non-union employers. As the Board’s first widely publicized social media complaint demonstrates, it does not matter what the forum is, employers cannot discipline an employee for discussing the terms and conditions of employment, and social media policies cannot prohibit employees from exercising their rights under the Act. The Board seems intent on protecting employee use of social media. Importantly, however, the Board’s authority ends at the outer limits of the Act. Recently, the Board dismissed a complaint involving an employee termination because the employee’s inappropriate tweets did not involve the terms and conditions of employment and therefore, were not "protected activity" under the Act.

The Board’s activity highlights some key points. 

Continue Reading An Update on Social Media and Employee Discipline

Recently, Michael L. Hund, Esq. and Salvatore J. Bauccio, Esq. from McNees Wallace & Nurick LLC’s Business Counseling Group developed a White Paper entitled: Equity Incentive Plans: Compensating Key Employees with Equity, Options and Equity Appreciation Awards (PDF). The White Paper provides an excellent summary of different methods that organizations can use to compensate and reward key employees. To view the White Paper click here.

This post was contributed by Charles T. Young, Jr., Esq., Of Counsel and a member of the Litigation and Insurance Litigation and Counseling Practice Groups

The continuing rise in the cost of health care is increasing the level of scrutiny and risk associated with employer health plans. The financial stresses associated with skyrocketing costs have manifested themselves in a number of different ways. For instance, employers with "insured plans" may find that their insurers are now more likely to perform "coverage audits" to ensure that only eligible employees and dependents are participating in the plan. 

Common audit issues involve former employees and employees on extended leaves of absence who have been permitted to retain coverage beyond their last day of active employment. Employers are well-advised to consult with their carriers to ensure that there is no disagreement as to whether coverage may be extended in these situations, and for how long.

Another common audit issue involves the eligibility of dependents. Does the carrier’s definition of the term "spouse" comport with the definition that the employer uses during open enrollment? Audits also commonly find dependent children who are inadvertently permitted to remain on a plan after surpassing the maximum age limit. Under the Patient Protection and Affordable Care Act ("PPACA"), otherwise known as healthcare reform, most dependents are now entitled to coverage until age 26. This recent statutory expansion of coverage will likely generate a surge in dependent-related coverage audit issues.

Self-insured employers may similarly find that major claims are subject to much greater scrutiny from reinsurers, or stop loss carriers. Common questions raised during claims reviews include: Was the employee properly covered under the plan at the time the claim was incurred? Do all covered spouses and dependents qualify for coverage under the definitions in the plan? Does the employer’s Summary Plan Description accurately reflect all conditions or exclusions required? Has the employer or the employer’s third party administrator failed to apply a plan exclusion to the claim? Self-insured employers should be mindful of these issues during day-to-day administration of their plans; otherwise, a reinsurer may decline coverage when it is needed most by a plan participant.

Disputes often arise when an employer extends coverage to an employee in an effort to avoid liability under employment laws. For example, employers covered by the Family and Medical Leave Act ("FMLA") must provide eligible employees with 12 weeks of leave per year (26 weeks in cases involving certain military exigencies). During this leave, benefits must be provided if the employee continues to pay his or her share of the premium. Once FMLA leave is exhausted, an employer may decide to provide additional leave, with benefits, as a reasonable accommodation under the Americans with Disabilities Act ("ADA"). An insurer or stop loss insurer, in contrast, may take the position that coverage should be terminated upon completion of the required FMLA leave and that any additional "supplemental" coverage should be treated as COBRA continuation coverage. This is yet another area where employers should have a clear understanding of their carrier’s position. 

When an employer outsources its plan administration, another set of issues can arise. Many self-insured employers outsource the administration of their employee benefit plans to third party administrators ("TPA"). A TPA handles the paperwork associated with the plan, and administers the claims process, paying claims with company funds. As in any other industry, the performance and quality of TPAs varies. Some TPAs are excellent, and they timely communicate the information an employer needs to intelligently manage its claims. Unfortunately, some TPAs fail to communicate essential information to their client employers. They may fail to make wise decisions with respect to paying claims, fail to apply benefit exclusions or fail to comply with the sometimes burdensome requirements imposed by stop loss carriers providing coverage for catastrophic losses. With the rising costs of healthcare, a stop loss carrier may increasingly deny claims for reimbursement based on the conduct of an employer’s TPA. At the same time, the employer may be increasingly reliant on the TPA because it lacks the personnel and/or commitment to actively monitor the claims made by its employees. 

Coverage disputes are expensive to defend and can quickly sour a relationship between an employer and employee. Under PPACA, claims appeals processes will be subject to external review and are likely to be more claimant-friendly. Limited proactive involvement by an employer in its benefit plan can go a long way toward preventing these costly and disruptive disputes. Employers are encouraged to conduct self-audits to identify potential issues and resolve them through discussion with their TPAs, insurers and reinsurers on a proactive basis. Plan documents should be reviewed by counsel to ensure clarity and compliance. In the realm of plan administration, the old adage "an ounce of prevention is worth a pound of cure" clearly applies.

This post was contributed by Tony D. Dick Esq., an Associate and a member of McNees Wallace & Nurick LLC’s Labor and Employment Practice Group in Columbus, Ohio.

In a 6-2 decision, the United States Supreme Court recently ruled in Kasten v. Saint-Gobain Performance Plastics Corp., ___ U.S. ___, No. 09-834 (2011) (pdf), that an employee’s verbal complaint about alleged wage and hour violations can be sufficient to trigger the anti-retaliation protections under the Fair Labor Standards Act (“FLSA”).

At issue was the provision in the statute that makes it illegal “to discharge . . . any employee because such employee has filed any complaint” alleging a violation of the Act. 29 U.S.C. § 215(a)(3). Plaintiff Kevin Kasten, a former employee of Saint-Gobain, alleged he was terminated in retaliation for making oral complaints to his supervisors and human resources personnel regarding the location of the company’s time clocks, which Kasten alleged prevented employees from recording time spent “donning and doffing” protective equipment. The question before the Court was whether the phrase “filed any complaint” in the statutory text of the FLSA included both verbal and written complaints. The District Court granted Saint-Gobain’s motion for summary judgment, concluding the FLSA’s anti-retaliation provision did not cover verbal complaints. The Seventh Circuit affirmed the lower court’s decision.

In reversing the Seventh Circuit’s decision, the Supreme Court first analyzed the actual text of the statute but, finding the text to be open to multiple interpretations, ultimately relied on an examination of congressional intent and the Department of Labor’s and the Equal Employment Opportunity Commission’s interpretation of the phrase. With respect to Congress’s intended purpose in enacting the anti-retaliation provision of the FLSA, the Court stated specifically:

Several functional considerations indicate that Congress intended the anti-retaliation provision to cover oral, as well as written, “complaint[s].” First, an interpretation that limited the provision’s coverage to written complaints would undermine the Act’s basic objectives. The Act seeks to prohibit “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers.” 29 U.S.C. § 202(a). It does so in part by setting forth substantive wage, hour, and overtime standards. It relies for enforcement of these standards, not upon “continuing detailed federal supervision or inspection of payrolls,” but upon “information and complaints received from employees seeking to vindicate rights claimed to have been denied.” And its anti-retaliation provision makes this enforcement scheme effective by preventing “fear of economic retaliation” from inducing workers “quietly to accept substandard conditions.”

Slip op. at 7.

The Court articulated a test to determine whether a complaint is “filed” for FLSA purposes. Under the test, if a reasonable and objective person would have “fair notice” that the employee is asserting statutory rights, the employee is protected under the FLSA. “Fair notice” is achieved where a “complaint [is] sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights.”

What does the Court’s decision mean for employers? It should be clear that the case expands the bounds of potential employer liability under the FLSA. The Court’s decision may also have farther reaching implications beyond the FLSA as several other federal statutes, including Occupational Safety and Health Act and the Clean Air Act, contain similar anti-retaliation provisions. A cautious employer will treat a verbal complaint the same as a written complaint. In disciplinary investigations, employers should ask supervisors whether the particular employee has made any oral complaints to determine whether the employee may make an argument in the future that any disciplinary action was in retaliation for making the complaint. As always, employers should document the specific reasons for employee terminations and disciplinary actions and follow established company policies to limit later arguments by a terminated employee that he or she was terminated because of a retaliatory motive on the part of the employer.

This post was contributed by Brett E. Younkin, Esq., an Associate and a member of McNees Wallace & Nurick LLC’s Labor and Employment Practice Group in Columbus, Ohio.

The receipt of a federal lawsuit is generally viewed as a bad day for any employer; seeing that a plaintiff is seeking class action status on behalf of hundreds or thousands of current and past employees is enough to turn a bad day into an unenviable nightmare. Such was the situation when Wal-Mart, one of the country’s largest employers, was notified that a female manager, Betty Dukes, was suing the company on behalf of all female managers alleging a pattern and practice of discriminatory pay and promotion practices. Ms. Dukes alleged that despite the company’s non-discrimination policy, the Arkansas-based employer paid their female managers at lower rates than their male counterparts on a nationwide scale and women were promoted less often than men.

Recently, the issue of certifying the class of female employees became the focal point of what many view to have been one of the liveliest oral arguments before the United States Supreme Court in years. During each side’s hour-long presentation, it seems that the Justices spoke almost as much as the attorneys, often-times overlapping each other’s questions and even interrupting a colleague’s question in an attempt to make their own point. However, the result of the heated debate is far from clear. Will Wal-Mart be faced with a multi-million dollar class action for discriminatory practices or will it be just another single-litigant against one of the world’s largest retail empires?

Class certification is governed by Rule 23 of the Federal Rules of Civil Procedure and generally requires (1) that there to be too many potential members to identify and join each of them; (2) a common question of law or fact; (3) a commonality of claims or defenses; and (4) that the representative parties will adequately protect the interests of the entire class. It’s generally agreed that the potential plaintiffs here would meet most of these requirements. However, the focus of the discussion before the Court was whether the proposed class of female managers truly shared common legal and factual issues. One key question from Justice Kennedy has led many to speculate that Ms. Dukes and her potential class members have a fatal flaw in their argument.

During the plaintiffs’ presentation, Justice Kennedy asked the rather straight-forward question: “What is the unlawful policy that Wal-Mart has adopted?” The response was that the store managers have “unchecked discretion” in the decision-making process and have used that power to create a culture of discrimination throughout the corporation. The problem with this response is that it contradicts the position that Wal-Mart’s headquarters enforces a consistent, nationwide policy, which is a key aspect of the plaintiffs’ case and may be necessary to establish corporate-wide liability.

The plaintiffs’ attorney tried to argue both sides of an opposing view – that there is a top-down corporate culture to discriminate against females, and that the actual decision-makers in the individual stores themselves have too much power and discretion. It was on this point where Justice Scalia accused the plaintiffs’ counsel of trying to “whipsaw” the Court stating that the power given to store managers is too subjective while there is a corporate culture to guide those same managers to discriminate against women. While the commonality issue appeared to weigh in Wal-Mart’s favor, how the court will decide the case is unclear at this time. A decision is expected sometime this summer, and we will be sure to provide an update when it is issued.
 

This post was contributed by Eric N. Athey, Esq., a Member in McNees Wallace & Nurick LLC’s Labor and Employment Law Practice Group.

Over the past several years, federal courts across the United States have experienced a surge in class action lawsuits alleging wage and hour violations by employers. In many of these cases, the primary allegation is that employees were not paid for all of their activities that are considered "compensable work" under federal regulations. An employer’s failure to pay employees for short breaks and for work from home are often cited violations. In an apparent attempt to provide support for such claims, the U.S. Department of Labor (DOL) has announced the launch of its first application, or "app," for smartphones. The iPhone-compatible app is an electronic timesheet that is intended "to help employees independently track the hours they work and determine the wages they are owed."

The DOL announcement notes that this new technology is significant because, "instead of relying on their employers’ records, workers now can keep their own records," which can "prove invaluable during [a DOL]…investigation when an employer has failed to maintain accurate employment records." The DOL further indicated that future apps may be launched to assist employees with compliance issues relating to payment of tips, commissions, bonuses, holiday pay, weekend pay, shift differential and pay for regular days of rest, as well as for impermissible pay deductions.

The introduction of the new DOL app serves to highlight the importance of carefully drafted employer wage policies and practices. Such policies include procedures for proper timekeeping, a requirement that overtime be authorized in advance, a procedure for reporting and correcting payroll errors (overpayments and underpayments) and a sound understanding by managers of what activities must be treated as paid work.

If you have any questions regarding this article or suggested wage policies, please contact any member of our Labor and Employment Law Group.
 

In a recent precedent-setting opinion, the Third Circuit Court of Appeals significantly restricted the ability of police departments to suspend police officers pending investigation in Pennsylvania. The decision in Schmidt v. Creedon, __ F.3d __ (3rd Cir. 2011) (pdf) makes clear that absent extraordinary circumstances, prior to suspending a police officer for any reason, a police department must provide the officer with notice and a hearing.

In Schmidt, the plaintiff, a police officer, was suspended and ultimately terminated after he entered criminal charges against his superior officers into a criminal record data base. According to the employer, following a dispute, the officer left his duty area, entered information that there was probable cause to arrest some of his superiors officers, and failed to report these allegations through his chain of command. After the department conducted a brief investigation into the incident, the plaintiff was suspended pending further investigation. The officer was suspended three days after the incident occurred, and was not questioned or interviewed before he was suspended. The officer was eventually terminated, but reinstated by an arbitrator with no back pay.

The plaintiff filed suit against the department and some of his superior officers, alleging that they violated the 14th Amendment of the United States Constitution by suspending him without providing him with notice of the charges against him or a hearing. Under the 14th Amendment, a government actor cannot deprive an individual of life, liberty or property without due process. In the employment context, the courts have held that if another statute, such as a civil service statute, provides employees with protection from suspension or termination, then such employees have a property interest that cannot be taken away without due process. Interestingly, the court relied on a provision in the Borough Code to find that the plaintiff had a property interest in his job because the Borough Code provides that police officers may not be suspended or terminated without just cause.

The court concluded that the plaintiff was deprived of his rights under the 14th Amendment because he was not afforded due process before he was suspended pending investigation. The court held that, except for extraordinary circumstances, under Pennsylvania law, notice of the charges and a brief and informal pre-suspension hearing is necessary, even if the officer has access to a collectively bargained grievance procedure or other appeal process.

Only a brief and informal hearing is necessary in this context, and it appears that departments can satisfy these requirements by stating, verbally or in writing, the nature of the investigation, the nature of evidence currently available, and by allowing the officer to provide a statement. In addition to interviewing the officer before suspending him or her pending investigation, which has always been a good practice, departments should be sure to issue a written suspension notification.

The court made clear that there is an exception to the pre-suspension hearing requirement for "extraordinary circumstances," and further defined that term to include those situations in which some valid government interest is at stake that justifies postponing the hearing until after the suspension. However, the court did not determine whether such circumstances existed in this case, and provided no further explanation or guidance as to what may constitute extraordinary circumstances. Importantly, waiting a few days to suspend an officer while additional information is gathered may undermine a claim that an important interest existed that required immediate suspension without a hearing. The court also noted that the United States Supreme Court has held, in Gilbert v. Homar, 520 U.S. 924 (1997), that if a third party has determined probable cause existed to believe that a serious crime occurred, such as when an officer has been arrested and charged with a crime, a department may suspend an officer without a hearing.

The court appeared to go to great lengths to limit its decision in this case, and to provide departments with as much guidance as possible. For example, the court noted that if an officer is suspended with pay, the analysis would have very likely been different. However, while the court’s decision appears to be limited to police officers, the due process requirements would apply to any public employee who is protected by statute from being suspended or terminated without good cause, unless the statute provides an exception or one of the exceptions noted above applies. Therefore, in addition to police departments, all public sector employers in Pennsylvania should be sure to review their suspension procedures to ensure compliance with this decision.

This decision will require some police departments to change their practices regarding suspensions pending investigation, and may hamper a department’s ability to take immediate action in certain cases.
 

This week, Philadelphia Mayor Michael Nutter signed the Fair Criminal Record Screening Standards Ordinance (the "Ordinance").  This “ban the box” legislation is designed to limit Philadelphia employers’ ability to request applicants’ criminal history information in the initial steps of the hiring process. 

  • Who is Covered?  The Ordinance covers any person, corporation, company, labor organization or association that employs 10 or more persons within the City of Philadelphia.        
     
  • What Inquiries Are Prohibited?  Employers cannot inquire (directly or indirectly) about an applicant’s criminal convictions at any time during the application process, before the first interview, or during the first interview.  Notably, an employer that does not conduct an interview is prohibited from making any inquiries or gathering any information regarding the applicant’s criminal convictions. 
     
  • What Inquiries Are Allowed?  The Ordinance does not prohibit employers from making hiring decisions based upon criminal conviction history; however, such inquiries must be delayed until a second interview (or as part of a post-conditional offer criminal history check).  Additionally, if an applicant voluntarily discloses his or her own criminal history during the application process or the first interview, the employer then is permitted to discuss the disclosed information. 
     
  • What is the Penalty for Violations?  Violations of the Ordinance can result in the assessment of a maximum civil penalty of $2,000 per violation.  

The Ordinance becomes effective on July 17, 2011.  If you are an employer with 10 or more employees within the City of Philadelphia, now is the time to review your application and interview materials to ensure compliance with the new Ordinance.  In addition, employers should remain aware of their obligations under Pennsylvania’s Criminal History Record Information Act, which permits consideration of felony and misdemeanor convictions only to the extent that they impact an individual’s suitability for the position in question.  The Act also requires employers to give a rejected applicant written notice that the criminal conviction was used in whole or in part as the basis for the employment decision.

On March 24, 2011, the Equal Employment Opportunity Commission (EEOC) issued the final version of the regulations (pdf) implementing the Americans with Disabilities Act Amendments Act (ADAAA).  The final regulations were modified as compared to the EEOC’s initial proposed regulations, and the changes to the regulations made will likely be welcomed by employers.  For more information from the EEOC on the ADAAA please click here.

Even with the changes, the regulations make clear that the ADAAA broadened the definition of disability under the Americans with Disabilities Act (ADA).  Under the ADAAA that far more impairments will now meet the definition of disability.  Importantly however, the regulations state that whether or not an individual has a disability will still be determined on a case-by-case basis. 

The ADAAA and the regulations attempt to shift the focus in ADA claims from whether or not an individual has a disability to whether or not prohibited discrimination has occurred.  As a practical matter for employers, this approach will shift the focus to the interactive process and the information exchanged during that process.