Company and CEO Held Jointly Liable for Minimum Wage Violations

A federal district court in Pennsylvania has held American Future Systems, Inc., and its CEO jointly liable for Fair Labor Standards Act (“FLSA”) violations arising from the company’s break policy. That policy required employees to log off of their computers and forgo compensation for all breaks, even short ones lasting fewer than 20 minutes. The CEO, as a 98% owner of American Future Systems and the “final authority” for compensation and break policies, was found to be a joint employer and therefore personally on the hook for these FLSA violations.

The company’s written compensation policy, which had been in place since 2009, required employees to log off of their computers during all breaks, including short personal breaks to use the restroom or get a cup of coffee. Because the company only compensated employees for the time they spent logged into their computers, all breaks were rendered unpaid. Such a policy clearly contradicts the FLSA, which states that short breaks between 5 and 20 minutes are considered compensable work hours. As a result of failing to pay employees for their short personal breaks, American Future Systems allowed employee compensation to dip below minimum wage over the course of each pay period, prompting the lawsuit, which was brought by the U.S. Department of Labor.

While a company facing liability for violating FLSA minimum wage and recordkeeping requirements is nothing new, the fact that the CEO was held personally on the hook as a joint employer is an interesting wrinkle that business leaders should take note of. In this case, American Future Systems’s CEO was a principal owner of the company, had hiring and firing authority, controlled compensation and break policies, and was ultimately responsible for company strategy and the activities of its employees. By having that level of control over the day-to-day operations of American Future Systems, the CEO was liable, along with the company itself, as a joint employer. Complying with the FLSA is always imperative, but for owners who exercise a high degree of control over their businesses, this decision provides a new sense of urgency in the form of potential personal liability. It also highlights the importance of having employee handbooks and workplace policies reviewed from time to time, as seemingly innocuous policies such as “always log off from your computer before going on break” could result in significant consequences for the company as well as its owners.

Frank Gulino is an attorney with Berenzweig Leonard, LLP. He can be reached at FGulino@BerenzweigLaw.com.

"Don't Ask, Don't Tell:" New Virginia Law Limits Access to Employee’s Social Media Accounts

The use of social media has become pervasive in today's workplace. As a result, employers have a strong interest in making sure employees are following company policies and preserving the confidentiality of company information while online, and in maintaining a positive public image on social media−while being careful not to interfere with employees’ rights under Section 7 of the National Labor Relations Act. In addition, employers have a responsibility to investigate social media behavior if they become aware of alleged misconduct and to exercise due diligence to protect other employees. In a press release last year, the EEOC noted that employers’ oversight responsibilities to monitor and remedy workplace harassment could extend to social media. For example, if an employee uses a company laptop to post harassing or discriminatory comments about a co-worker, the employer may not escape liability under Title VII merely because the harassment happened online.

Concerned with their employees’ potentially detrimental social media activities and also in order to screen potential job candidates, many employers require access to their applicants’ and employees’ social media accounts. However, Virginia is now the nineteenth state to impose limits on employer access to such accounts. The new law, Va. Code 40.1-28.7:5, which took effect July 1, 2015, prohibits employers in Virginia from requiring current or prospective employees to disclose the usernames and passwords for their social media accounts. The law also prevents employers from requiring employees and applicants to permit managers and supervisors to "follow" them on social media. The law’s definition of “social media account” is broad and includes any personal account where users can create, share or view: videos, photographs, blogs, podcasts, messages, emails or website profiles or locations.

However, the law does carve out employer activities associated with compliance with federal, state, or local laws and employer investigations of certain misconduct. Therefore, an employer’s right to request username and password information is not affected where such information "is reasonably believed to be relevant to a formal investigation or related proceeding by the employer of allegations of an employee's violation of federal, state, or local laws or regulations or of the employer's written policies." Yet, if an employer exercises its rights under this investigatory exception, the employer is prohibited from using the employee's information for any other purpose.

If an employer inadvertently receives an employee's username and password to the employee's social media account through the use of an electronic device provided to the employee by the employer, the employer will not be liable for having the information.  However, the employer is required to refrain from using the information to gain access to an employee's social media account.

Employers should review their social media policies and hiring procedures to confirm they are in compliance with this new law. Employers should not ask for, or seek access to, employee and/or applicant social media accounts unless there is a solid business justification that fits squarely within the exceptions provided. Employers should also remember that just because an action may not violate this new law, it does not insulate the employer from liability under the NLRA or other employment laws.  Facebook, Twitter, and other social media comments can be protected concerted activity or union activity under the NLRA.

Sara Dajani is an associate attorney with the business law firm, Berenzweig Leonard, LLP. Sara can be reached at sdajani@berenzweiglaw.com. 

Employee Can Sue More Than One Employer For Discrimination

For the first time, the U.S. Court of Appeals for the Fourth Circuit has expressly adopted the joint employment doctrine for Title VII cases.  Now, an employee can potentially go after more than just the company that pays her when bringing a claim for unlawful discrimination or harassment.  The Fourth Circuit joins the Second, Sixth, Seventh, Ninth, Tenth, and Eleventh Circuits in holding that more than one company can be held liable for an employee’s claim under Title VII.

Brenda Butler was hired by ResourceMFG, a temporary staffing agency, to work at the Drive Automotive Industries (“Drive Automotive”) factory in South Carolina.  During her time at the Drive Automotive factory, Ms. Butler wore a ResourceMFG uniform, her paycheck came from ResourceMFG, she parked her car in a special ResourceMFG lot, and ResourceMFG had the power to discipline and fire her.  But Drive Automotive set Ms. Butler’s work schedule and arranged portions of her training, and Drive Automotive employees supervised Ms. Butler when she was on the factory floor.

Ms. Butler claimed that one of her Drive Automotive supervisors verbally and physically harassed her on the job.  She said that the supervisor commented on many occasions about her physical features, particularly her rear end, even giving her the nickname “big booty Judy.”  According to Ms. Butler, the supervisor also rubbed up against her in a sexually suggestive way.  She complained about the sexual harassment to management at ResourceMFG, but she says they did nothing.  After further complaints from Ms. Butler, Drive Automotive made a request to Resource MFG that she be terminated.  Shortly thereafter, Ms. Butler received a call from ResourceMFG terminating her employment at Drive Automotive.

In response, Ms. Butler brought Title VII claims against not only her official employer, ResourceMFG, but also against Drive Automotive, since it was a Drive Automotive supervisor who she claimed sexually harassed her.  A South Carolina district court dismissed Ms. Butler’s claims against Drive Automotive, after determining that ResourceMFG was her sole employer for purposes of liability under Title VII.  But on appeal, the Fourth Circuit reversed this dismissal of Ms. Butler’s Title VII case against Drive Automotive, after finding that Drive Automotive could be liable under the joint employer doctrine.

This decision is the first time that the Fourth Circuit has expressly adopted the joint employer doctrine for Title VII cases, joining several other federal appellate jurisdictions across the country.  The Court reasoned that, given the remedial purpose of Title VII in stamping out discrimination in the workplace, the joint employer doctrine prevents a company from evading liability by hiding behind another employer such as a staffing agency.

In order to determine whether a company is a joint employer for purposes of liability under Title VII, the Fourth Circuit adopted what it called the “hybrid test,” which is comprised of nine enumerated factors, to consider the level of control a company has over a particular worker.  The Court said that of those nine factors, the most important are the following three: 1) whether the entity has the power to hire and fire; 2) whether the entity has supervisory power over the employee; and 3) whether the entity controls the place and way in which the employee performs the work.  The Court made it clear that the degree of control that an entity exercises over a worker remains the principal guidepost for determining joint employment under Title VII.

While the impact of this case for staffing companies is obvious, this case could reverberate far beyond the staffing industry.  In the government contracting arena, it is common for prime contractors to use subcontractors whose employees are closely controlled by the prime.  Similarly, in the construction industry, the employees of prime contractors and subcontractors are often closely intertwined.  These types of companies will need to be extra careful not to exercise too much control over non-employees, or they may find themselves on the receiving end of a Title VII suit.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com. 

Employee Who Could Not Get Along With Co-Workers Was Not Protected By Federal Disabilities Law

Marissa Walz was a long-time employee of financial planning giant Ameriprise, and for most of her time there she received positive reviews.  But more recently, Walz began to engage in erratic and disruptive behavior due to a bipolar condition, which she did not disclose to Ameriprise.  She interrupted meetings, disturbed her co-workers, and disrespected her supervisor.  During one company meeting, Walz told a co-worker to “stop interrupting me, you don’t know what you are talking about.”  When the supervisor confronted her about her inappropriate conduct, Walz rudely responded that “no one thinks your position is necessary” and “there is no sense of direction since you came on board.”

After further complaints, Walz was issued a formal behavioral warning.  In response, Walz applied for and was granted a leave of absence under the Family and Medical Leave Act (FMLA).  Because Ameriprise’s FMLA policy was administered by a third party vendor, the company never learned the mental health basis for why Walz went out on leave.  When Walz returned, she presented a note from her doctor simply saying that she “has been stabilizing on her medicine” and could work full-time.  But a few months after her return from FMLA leave, Walz began to engage in the same disruptive behavior as before, and Ameriprise fired her.

Watz sued Ameriprise, claiming that her firing was due to her mental disability in violation of the Americans with Disabilities Act (ADA).

But a federal appeals court recently ruled that because Walz could not get along with her co-workers, she could not perform an essential part of her job and therefore was not protected under the ADA.  The court rejected Walz’ argument that Ameriprise should have known about her mental disorder due to her taking FMLA leave and the note from the doctor.  The court acknowledged that Walz’ supervisor had testified in his deposition that he assumed she was being treated for her mental health, but still found that the company was not placed on notice of any limitations that Walz had in the workplace.  Interestingly, Walz argued that Ameriprise should have forced her back on FMLA leave when she began acting erratically again, but the court said there is no duty for an employer to force an employee out on leave.

Declan Leonard is a managing partner at the Washington, DC business law firm, Berenzweig Leonard, LLP. Declan can be reached at DLeonard@BerenzweigLaw.com.

Lawyer not liable when his independent contractor process server was killed serving divorce papers

A Virginia lawyer hired a process server as an independent contractor to personally serve legal papers on a husband in a tense divorce case.  The lawyer knew that the husband owned a gun and had expressed concern that the husband could potentially become violent, but he did not relay this information to the process server.  The process server tried a number of times to personally serve the husband without success.  The lawyer got wind that the husband might try to leave the country, so he told the process server to do what he had to do to serve the husband quickly.  During his final attempt at service, the process server was shot and killed by the husband, and his body was found by police three days later in the trunk of his own car in Harrisonburg, Virginia.

The process server’s widow sued the lawyer for wrongful death, on the ground that he should have warned the process server that the husband was potentially dangerous and carried a gun.  The lawyer countered that because the process server was an independent contractor and not an employee, the lawyer had no legal duty to relay what he knew about the husband to the process server.

Last week, the Supreme Court of Virginia ruled that the lawyer had no legal duty to warn the process server about the potentially dangerous situation, and therefore that the lawyer was not liable under a negligence theory for the process server’s death.  As the court noted, in most situations a person does not have a legal duty to warn or protect another person from the criminal acts of a third person.  It is only when a special relationship exists that a person may have a duty to warn or protect another from danger.  Some of the special relationships that Virginia has recognized as creating such a duty are: employer/employee, hospital/patient, innkeeper/guest, and common carrier/passenger.  In this case, the widow was asking the court to expand this duty to the employer/independent contractor relationship, but the court declined to do so in this particular case.  The court noted that the process server was experienced in his job, and that, while he took some direction from the lawyer, for the most part he retained control over how he did his work.

This case would likely have been decided in the widow’s favor if the process server had been an actual employee of the law firm and performed his services specifically at its direction.  Therefore, employers must be aware that they do have a special relationship with their employees, and should take reasonable precautions to make sure their employees operate in a safe work environment and are warned of any unique risks they may face on the job.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com. 

Cantankerous Employee With ADHD Not Considered Disabled

A police officer in Oregon who had trouble getting along with his fellow officers was described in his performance reviews as “abrasive,” “intimidating,” and “overly aggressive.”  After a subordinate officer filed a grievance against him for poor treatment, the police officer was suspended.  During the ensuing investigation, the police officer provided a diagnosis from a clinical psychologist that he suffered from adult ADHD which led to his poor interpersonal skills.  He requested “all reasonable accommodations” to help him cope better in the workplace.  But the police force found that his ADHD diagnosis was no excuse for causing a hostile work environment, and terminated him.

The police officer sued for disability discrimination under the Americans with Disabilities Act (ADA), claiming that he was fired because he had the disability of ADHD which limited his ability to get along with others in the workplace.

The police offer did win at trial and was awarded over three quarters of a million dollars as damages, but a federal appeals court recently reversed that sizable jury award after concluding that the police officer was not disabled as that term is defined under the ADA.  The appeals court drew a distinction between an inability to “get along” with others and the inability to “interact” with others, and that only the latter could rise to the level of a disability.  The court found that the police officer did have trouble getting along with his co-workers, but there was no evidence that he suffered from social withdrawal or problems with communication that would severely impact his ability to interact with others to merit protection under the ADA.

A word of caution: This case does not stand for the proposition that adult ADHD is not a disability under the ADA.  Rather, the courts are clear that employers must consider the facts and circumstances of each particular employee when making this determination.

Declan Leonard is managing partner of the Washington, DC regional business law firm Berenzweig Leonard, LLP. He can be reached at DLeonard@BerenzweigLaw.com.

A Cautionary Tale For Employers to Make Sure Your FMLA Policy Is Up-To-Date

A recent case from the 6th Circuit shows just how important it is to make sure your Family and Medical Leave Act (“FMLA”) policy is up to snuff. In the case of Tilley v. Kalamazoo County Road Commission, an employee requested time off after a suspected heart attack. The company granted the request and sent the employee FMLA paperwork, representing that he was eligible for FMLA leave. Additionally, the company’s personnel manual contained a statement that employees who “accumulated 1,250 work hours in the previous 12 months” were eligible for FMLA leave, yet importantly omitted the third requirement for FMLA eligibility, namely that there be “50 workers within a 75 mile radius” in order to be covered. The employee was ultimately terminated after failing to complete a specific task on time, which the employee claimed was due to his need to take time off. The employee filed a lawsuit claiming that the company interfered with his right to FMLA leave and retaliated against him for taking FMLA leave.

The lower court dismissed the lawsuit relying on the undisputed fact that at the relevant time, the company did not employ at least 50 workers within a 75 mile radius - a necessary condition for FMLA eligibility. Therefore, because all three criteria needed for FMLA eligibility were not met, the district court dismissed the employee’s FMLA claim. The employee appealed the decision and the US Court of Appeals for the 6th Circuit reversed and held that the employee’s claim must proceed to trial. The 6th Circuit ruled that because a reasonable person in the employee’s shoes could reasonably believe that he was protected by the FMLA due to the company’s personnel handbook and its own misstatements regarding FMLA eligibility, the employee was allowed to proceed with his FMLA claim. In essence, even though the employee was technically ineligible for FMLA leave, because the employer made misrepresentations that the employee reasonably relied upon, the court found that the FMLA claim would survive and go to trial.

This case shows that courts can be extremely unforgiving when mistakes are made regarding coverage of federal employment laws. Misstatements made either in employee handbooks or providing the wrong paperwork can serve as a reasonable justification to allow an otherwise ineligible FMLA claim to proceed to trial. This case should serve as a wake-up call for employers to heed their attorneys’ advice to frequently make sure their employee handbooks are up-do-date. In the case above, a quick consult with their attorney could have saved thousands of dollars in litigation fees that the company is now faced with because they had an incomplete employee handbook.

Nick Johnson is an attorney with Washington, DC business law firm Berenzweig Leonard, LLP. He can be reached at njohnson@BerenzweigLaw.com.