United States: US Employment Litigation Round-Up for February 2016: A Review of Key Cases and New Laws Affecting Employers

US Department of Labor Issues Guidance Proposing Broad Joint-Employer Standards

Guidance: On January 20, 2016, the US Department of Labor's (DOL) Wage and Hour Division issued guidance stating that a growing number of companies are joint employers for liability purposes under the Fair Labor Standards Act (FLSA) and the Migrant Worker Seasonal Agricultural Worker Protection Act (MSPA). In the guidance, the DOL emphasizes that the concept of joint employment under the FLSA and MSPA is "notably broader" than under common law and that the laws should be applied to ensure that the scope of joint employment "is as broad as possible." According to the DOL, courts should reject the common law control test traditionally used in many jurisdictions and instead assess the "economic realities" of the working relationship by applying the factors developed for migrant farm workers under the MSPA. The DOL believes that this will "ensure that all responsible employers are aware of their obligations and [will] ensure compliance with the FLSA and MSPA."

Impact: Following in the footsteps of the National Labor Relations Board's controversial Browning-Ferris decision, the DOL is also taking an expansive view of joint employment under the FLSA. Although recognizing that more and more businesses are in a franchisor/franchisee relationship, or that they rely on staffing agencies to hire staff and handle day-to-day employment issues, the DOL believes joint employment under the FLSA should be determined using the factors developed specifically for migrant farm workers. The DOL is also intending to use its joint employer interpretation to target larger companies because this will help it "achieve statutory coverage, financial recovery and future compliance" with the FLSA. Employers should also keep in mind that the DOL guidance raises, but does not address, the question of whether a joint employer must verify, on Form I-9, the employment authorization of an "employee" that is not on its payroll.

For now, the Office of the Chief Administrative Hearing Officer, which has jurisdiction over I-9 issues, continues to adhere to a traditional notion of "employee" for I-9 purposes. With the DOL taking a broader view of joint employment under the FLSA, employers should proactively review any existing franchisor, staffing agency, or outsourcing agreements to determine whether they may be considered a joint employer and what the implications that designation may have with respect to compliance and potential liability under the FLSA.

California District Court Denies Collective Action Certification

Decision: In Johnson v. Goodyear Tire & Rubber Company, a former non-exempt hourly employee filed a putative collective action for failure to pay regular and overtime wages. Johnson alleged that at the end of his shift, after clocking out, he was often required to deposit the day's earnings at a bank, and that Goodyear never compensated him for these bank runs, which usually took about 15 minutes. The district court denied Johnson's motion for collective action certification, holding that individualized issues predominated because Johnson's "idiosyncratic" experience on uncompensated time was not closely aligned with other employees' experience.

Specifically, the court noted that Goodyear's policy regarding the bank runs was facially lawful, and that Johnson had failed to establish a common policy or practice of not ensuring proper payment of wages and overtime. The court relied on declaration testimony from other employees, who stated that they completed their bank runs on the clock or were compensated for them in finding that "the manner and timing of bank runs varied between supervisors and locations; therefore, any claim based on uncompensated bank runs would necessarily entail individualized inquiries that would dwarf any common questions."

Impact: The district court's decision underscores the importance for employers of have having facially compliant policies. Employers should review their handbooks and policies to ensure that they are valid. Having facially valid policies makes it more difficult for employees to succeed in class and collective actions, since employees are then required to establish uniform policies and practices that diverge from the employers written policies for certification purposes.

EEOC Seeks Public Comments on Updated Workplace Retaliation Guidance

Guidance: On January 21, the US Equal Employment Opportunity Commission (EEOC) issued a 76-page proposed revision to its guidance on workplace retaliation laws. It is the EEOC's first new guidance since it issued its Compliance Manual on Retaliation in 1998. Citing court decisions from the past 18 years, the EEOC states that its guidance simply adapts its old interpretations to the recent influx of retaliation charges. Retaliation claims have nearly doubled since 1998 and are now the most frequently alleged violation raised with the agency. Some commentators posit, however, that the EEOC's new interpretations overly broaden employers' liability, for example, by expanding the scope of what constitutes an adverse employment action and making it easier for a charging party to demonstrate causation between a protected activity and an adverse employment action.

According to the EEOC's proposed guidance, a charging party may establish that causation by showing, as one appellate court characterized it, a "'convincing mosaic' of circumstantial evidence that would support the inference of retaliatory animus." The proposed guidance also provides examples of adverse employment actions, including such things as disparaging the employee to others or in the media, threatening reassignment, and scrutinizing the employee's work or attendance more closely than that of other employees, without justification.

Impact: Though not binding on courts deciding retaliation claims, the new guidance will strengthen the EEOC's ability to enforce retaliation laws and will likely be a leading authority on workplace retaliation moving forward. Given the EEOC's recent attention on retaliation charges, and the heightened number of those charges, employers should review the new guidance closely. The proposed guidance signals increased scrutiny over a widening interpretation of retaliation, and employers can expect retaliation claims that are more numerous, and more difficult to defend, in the future.

EEOC Proposes Adding Pay Data to Required EEO-1 Reports

Guidance: The EEOC recently announced a proposal that would require federal contractors and to all employers with more than 100 workers to provide pay data on EEO-1 forms. The proposal would require covered employers to identify employees' total W-2 earnings for a 12-month period looking back from a pay period between July 1 and September 30, and then report, by race, gender and job category, the number of employees whose earnings for the prior 12 months fell within each of 12 pay bands. The proposal, according to the EEOC, is designed to assist the agency in identifying possible pay discrimination and assist employers in promoting equal pay in their workplaces . The public comment period on the proposed changes will remain open until April 1, 2016. If approved, the proposed changes would take effect for the September 2017 reporting period.

Impact: This proposal signals to employers that the EEOC and the Office of Federal Contract Compliance Programs (OFCCP) intend to increase their focus on wage-related concerns, including regulatory compliance for federal contractors and pay discrimination by all covered employers. As such, before the EEOC's proposed rule takes effect, employers should consider conducting privileged audits of their pay practices to ensure compliance with the relevant laws and regulatory requirements. Further, employers should assess their compensation tracking systems to ensure that they are set up to provide the pay data required by the new EEO-1 form.

Originally published 29 February 2016

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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

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