Congress Passes Legislation Excluding Employee Stock Option Profits From Compensation

On May 3, 2000, the House of Representatives passed a bill, which had already been approved by the Senate, that would amend the Fair Labor Standards Act (FLSA) to permit employers to exclude from an employee's regular rate of pay the profits earned by the employee as a result of participating in the employer's stock option plan. Under current law, employers must take into account the value of such stock option profits when calculating an employee's overtime rate of pay. The legislation, known as the Worker Economic Opportunity Act, is endorsed by the Department of Labor and shares bipartisan support within Congress. President Clinton is expected to sign the bill.

Other efforts are under way within the House and Senate to adopt new legislation that would exclude other payments, such as certain bonus payments, from an employee's regular rate as well. Passage of these bills is less likely.

There are currently several bills pending in Congress, in addition to the Worker Economic Opportunity Act, that would amend the FLSA. The first of these would amend the FLSA to provide private sector employees the same opportunities for time-and-a-half compensatory time off and biweekly work programs that Federal employees currently enjoy. The bill would also clarify the provisions of the FLSA relating to exemptions from the overtime requirements for certain professionals. A separate bill that is currently before the House Committee on Education and the Workforce would clarify the exemption from the minimum wage and overtime compensation requirements of the FLSA for certain computer professionals. Yet another bill introduced in the House would amend the FLSA to repeal, for employees of motor carriers, the exemption from the overtime requirements.

• Bill to amend the Civil Rights Act, the Age Discrimination in Employment Act, and the Americans with Disabilities Act to exclude individuals who are employed, but who are unlawfully present in the United States.
• Legislation to amend the Americans with Disabilities Act to require, as a precondition to commencing a civil action with respect to a place of public accommodation or commercial facility, that an opportunity be provided to correct the alleged violations.
• The United States Department of Labor has published proposed regulations regarding Birth and Adoption Unemployment Compensation. The proposed regulations, if passed by your state legislature, would authorize your state to use unemployment compensation funds to pay parents who take leave under the Family and Medical Leave Act (FMLA) to care for a newborn or for a newly adopted child. Currently, the FMLA provides only that covered employers must provide unpaid leave to qualifying employees. While the new regulations would not alter employers' current responsibilities under the FMLA, many more parents may take advantage of their FMLA rights if they will be compensated for their time off.

In early April 2000, the Office of Federal Contract Compliance Programs (OFCCP) mailed a survey to 7,000 federal contractors who are suspected of being out of compliance with equal employment and pay laws, and plans to send out over 83,000 more surveys. The survey seeks, among other information, the targeted companies' annual pay data by gender and race, and is being sought regardless of whether the government intends to schedule a compliance review with the survey recipient.

The OFCCP, which generally performs only about 4,000 compliance reviews annually, expects that pouring over the survey responses will be a more efficient means of identifying targets for compliance reviews. As such, should you receive a survey, it is critical that you, or the person within your organization that is selected to compile the data requested, take the time to ensure that your responses are adequate, accurate, and will not set off alarms that will result in an expensive and time consuming OFCCP audit. The surveys, in many respects, seek information in terms of broad categories that may not accurately describe your organization, and may offer a misleading picture of your work force. Attorneys at Ross & Hardies can assist you in navigating through the survey and can advise you with respect to your options.

Many employers maintain dress codes and grooming requirements as a result of both safety concerns and a desire to reflect societal customs. While such requirements are common, they also can implicate Title VII's prohibition on discrimination based on a protected trait.

As a general rule, dress codes and grooming requirements are permissible so long as they are reasonable and are not unevenly applied (i.e., they cannot be applied or enforced unequally based on race, gender, etc.).¹  In other words, a grooming requirement cannot be adopted or enforced in such a way that it treats individuals in a protected class differently from others.

Notwithstanding this general rule, courts are in agreement that grooming codes under which certain rules apply to men, but not women (such as rules prohibiting men from wearing earrings or requiring them to wear ties or have short hair), do not constitute sex bias and are permissible under Title VII so long as the difference in treatment is minor and serves to reflect social norms.² On the other hand, a policy that promotes stereotypes of women or requires them to wear sexually suggestive uniforms as a condition of employment will violate Title VII.³

Even where a particular grooming policy is generally permissible, however, exceptions may be required where the policy relates to innate characteristics, has a disparate impact on individuals in a protected class, and has no business justification. This is true even if such a policy is supported by customer preference. For example, a Domino's Pizza policy that prohibited pizza delivery personnel from wearing a beard had a disparate impact on African-American males, because certain African-American males suffer from a facial condition known as pseudofoliculitis barbae (PFB), which prevents them from shaving. The Eighth Circuit Court of Appeals concluded that the policy was impermissible as applied to PFB-sufferers, because customer preference for non-bearded deliverers could not supply a business justification for the policy in this case. The court noted, however, that Domino's Pizza was "free to establish any grooming and dress standards it wishes," so long as it provided a narrow accommodation for PFB-sufferers.⁴

It is not only the most obvious actions and policies that can result in Title VII violations, but also those policies relating to personal characteristics that indirectly implicate a protected trait. As a result, everyday employment policies and practices should be re-evaluated to determine whether they are being applied consistently or could be having a negative impact on individuals in a protected class.

1Compare Bellissimo v. Westinghouse Elec. Corp., 37 FEP Cases 1862 (3d Cir. 1985) (upholding an employer's request that a female attorney "tone down" her attire under a consistently-applied dress code requiring all employees to dress conservatively) with Hollins v. Atlantic Co., Inc., 80 FEP Cases 835 (6th Cir. 1999) (reversing a grant of summary judgment for the employer and finding that the plaintiff, an African-American female, could proceed with her claim of race discrimination based on evidence that the employer enforced its grooming policy relating to hairstyles differently as to the plaintiff than as to white, female employees).

2See, e.g., Kleinsorge v. Eyeland Corp., 81 FEP Cases 1601 (D.C. Pa. 2000) (dismissing a Title VII claim brought by a male plaintiff who was terminated for violating his employer's policy against male employees wearing earrings to work, where the plaintiff did not allege that the grooming policy was unevenly applied or unevenly enforced); Harper v. Blockbuster Entertainment Corp., 139 F.3d 1385, 1387 (11th Cir. 1998) (grooming policy prohibiting men, but not women, from wearing long hair does not violate Title VII); Austin v. Wal-Mart Stores, Inc., 78 FEP Cases 457 (N.D. Ind. 1998) (same).

3See, e.g., Michigan Dep't of Civil Rights v. Sparrow Hosp., 36 FEP Cases 253 (Mich. Ct. App. 1982) (concluding that an employer's policy of requiring female technologists to wear white or pastel-colored uniforms while permitting male technologists to wear white lab coats because patients "were used to seeing males dressed like doctors and females dressed like nurses" was discriminatory, because it was based on gender stereotyping); EEOC v. Sage Realty Corp., 24 FEP Cases 1521 (S.D.N.Y. 1981) (finding impermissible an employer's policy of requiring female employees to wear sexually suggestive clothing); Priest v. Rotary, 40 FEP Cases 208 (N.D. Cal. 1986) (same).

4See Bradley v. Pizzaco of Neb., Inc., 68 FEP Cases 245 (8th Cir. 1993). Reasonable accommodation also is required under Title VII for an employee's desire to dress or maintain a particular physical appearance (such as having a beard) in accordance with religious beliefs.