MN Employment Law Report

MN Employment Law Report

The Bottom Line on Labor & Employment Law

NLRB Says its OK to Lie…Sometimes

Posted in Labor Law, NLRB

 

Bloc-Pic---Construction-Worker.jpgI Never Promised You a Weingarten

If you are a unionized employer, you almost certainly know that your employees have something called “Weingarten” rights, meaning that unionized employees may request (and must then receive) union representation as a condition of participation in any interview the employee reasonably believes may result in disciplinary action. The rule does not apply, however, where the employee could not reasonably believe that an interview may lead to discipline – e.g., run-of-the-mill shop-floor conversations, task-related instructions, training or corrections, or meetings in which previously determined discipline is actually imposed.

While Weingarten guarantees the presence of a union representative upon request, it does not give that representative the right to turn the interview into a full adversarial proceeding. The Supreme Court has ruled that employers still may investigate the issue at hand without interference, including the right to insist on hearing the employee’s account of the events rather than a sanitized version offered by the union representative. Still, recent National Labor Relations Board (NLRB) decisions have begun to authorize expanded rights for the union representative, including the right to “remind” the suspect employee of his story by writing out answers to the employer’s questions, and the right to direct the employee not to respond until the employer “clarified” the questions to the union representative’s satisfaction.

No Truth + No Union Rep = No Worries

The NLRB recently went one step (or perhaps two or three) further in the case of E.I. Dupont de Nemours & Co., where an employee with a history of dishonesty was questioned on multiple occasions by managers about an alleged work-related injury he claimed to have suffered. The employer denied his requests for union representation and then fired him for providing what the NLRB described as “seemingly inconsistent and dishonest answers. . .” to the employer’s questions.

The employee and union filed an unfair labor practice charge against the company, which the NLRB upheld. Essentially, they assumed that a union representative would have protected the employee from acting contrary to his best interest and therefore, the employee should not be held accountable for dishonesty or intemperate behavior taking place during an unlawful investigative interview. The employee was ordered reinstated with full back pay.

This decision is particularly significant, and not just because of the NLRB’s attenuated reasoning. In previous cases, employees did not necessarily get their jobs back if the NLRB concluded that an employee was suspended or discharged for reasons unrelated to the denial of the employee’s Weingarten rights. Now, the NLRB seems to tell us that any misconduct during an unlawful interview will be considered out of bounds for disciplinary action, and that the employer will need to be able to prove that they would have discharged the employee even absent the purported interview-related misconduct.

Bottom Line

It is now more important than ever that employers understand the protections afforded union employees and their representatives when planning to conduct workplace interviews. Employers must determine in advance whether the interview is or is not investigative, how they will respond to a demand for representation and how they will deal with the increasingly broad rights union representatives now have during interviews.

New DOL Guidance Says “Most” Workers (including Independent Contractors) Are Covered By FLSA

Posted in Wage & Hour

Contractors DatabaseThe U.S. Department of Labor (DOL) has now issued guidance in the form of an Administrator’s Interpretation (the Guidance) intended to curb the misclassification of employees as independent contractors.  The DOL contends that “most” workers qualify as “employees” under the Fair Labor Standards Act (“FLSA”) and therefore are subject by the Act’s minimum wage and overtime protections.  Treating such workers as independent contractors would therefore violate the FLSA.

Background

The DOL contends that the use of independent contractors to perform work previously done by employees is on the rise.  They even suggest that some employers deliberately misclassify their workers this way to cut costs and avoid legal compliance.  The DOL recently has stepped-up scrutiny in this arena, recovering more than $79 million in back wages for more than 109,000 workers in various industries in 2014.

WHD Administrator’s Interpretation No. 2015-1

The Guidance notes that the FLSA is extremely broad and covers any entity that “suffers or permits” an individual to work.  Under the “economic realities test,” the following factors are generally used to determine whether a worker is an independent contractor or an employee:

  1. the extent to which the work performed is an integral part of the employer’s business;
  2. the worker’s opportunity for profit or loss depending on his or her managerial skill;
  3. the extent of the relative investments of the employer and the worker;
  4. whether the work performed requires special skills and initiative;
  5. the permanency of the relationship; and
  6. the degree of control exercised or retained by the employer.

The Guidance directs these factors to be considered in totality and according to the “overarching principle that the FLSA should be liberally construed to provide broad coverage for workers.”

The Guidance sets out contrasting examples of how each of these factors is to be evaluated in order to give effect to the broad coverage they claim is intended under the law.  A few highlights include:

Is the work an “integral” part of the business:

For a construction company that frames residential homes, carpenters are integral to the business – the company is in business of framing houses and that is what carpenters do.

In contrast, that company’s software developer might create programs that help track bids, schedule projects and maintain inventory.  Such work is beneficial but not integral to the company’s business.  Thus, this factor weighs in favor of independent contractor status.

The “managerial skill” factor:

A worker for an office cleaning service performs tasks outlined for him by the company.  He does not make the schedule, nor does he solicit additional clients, advertise his services, or seek out ways to reduce costs. His efforts to earn more depend solely upon being assigned more hours by the company.  There is no managerial skill involved, which indicates an employment relationship between the worker and the cleaning company.

If that same worker advertised his services, negotiated contracts with clients, set the cleaning schedule and brought in additional help when needed, this level of managerial skill would point toward an independent contractor status.

The “relative investment” factor:

The same cleaning company worker is issued all cleaning equipment and supplies for his jobs, and is assigned a vehicle for travelling to assignments.  Although the worker may occasionally bring his own preferred cleaning products to his jobs, the company’s investment into the work is clearly greater and therefore favors a determination of an employment relationship.

If the worker buys a van not suitable for personal use and uses it to travel to various worksites, rents space to store the vehicle, and purchases all the material, supplies and equipment he uses to clean his clients’ facilities, an independent contractor relationship is suggested.

The “control” factor:

A registered nurse is listed with a nurse registry to provide skilled nursing.  The registry interviewed the nurse and required her to undergo their multi-day training.  The registry then sends the nurse a list of potential clients each week and requires the nurse to fill out a form with them prior to contacting any clients. The registry sets the wage range, limits the available work days and must be contacted if the nurse will miss any work to which she was assigned.   This level of control points toward an employment relationship. ,

Another registered nurse might list with a different registry, which merely sends a list of potential clients.  This nurse then is free to work for as many or as few clients as she wishes, may negotiate her own wage rate and may determine her own schedule with the client. In this scenario, the degree of control exercised by the registry is not indicative of an employment relationship.

Bottom Line

This is just an administrative interpretation that does not have the force of law.  Nevertheless, it is a clear indication of how the DOL looks at the law and how they will decide claims of this type that are presented to them.  Moreover, we know that courts often look to the DOL’s interpretations for guidance in deciding cases in their jurisdictions.  Therefore, employers currently utilizing workers classified as independent contractors should revisit those arrangements to be very certain that they pass muster in an environment where employment status is so clearly the presumption in the eyes of the government regulators.

Internships Part 2: The Return of Unpaid Status

Posted in Wage & Hour

Internship Blue MarkerUnpaid internships are back in the spotlight after a federal appeals court reversed a ruling classifying a movie company’s unpaid interns as employees entitled to compensation. The Second Circuit Court of Appeals decision in Glatt et al. v. Fox Searchlight Pictures, Inc. et al. casts doubt over the Department of Labor’s (DOL) restrictive view of this issue and may set the stage for a more practical and employer-friendly test to determine the right script for an internship.

Old Standard

The DOL has had a longstanding requirement that the following six tests all had to be met before a true internship could be found:

1. The internship is similar to training that might be provided in an educational environment;

2. The internship experience is for the benefit of the intern;

3. The intern does not displace regular employees;

4. The employer derives no immediate advantage from the intern’s activities, and on occasion its operations may actually be impeded;

5. The intern is not necessarily entitled to a job after the internship and

6. The parties mutually understand that wages are not expected.

While courts are not absolutely bound by DOL regulations, they often look to them for guidance on interpreting the law.

The Second Circuit viewed things through a different lens, setting out a new test focusing primarily on who is the “primary beneficiary” of the internship. If the intern is the star of the show, the relationship can be billed as an unpaid internship even if the employer gets some benefit from the intern’s efforts.

New Standard

This new approach looks to the practical, economic realities of the relationship and requires a balancing of all relevant factors, including those that the DOL previously identified, such as:

1. The extent to which the parties clearly understand that is, or is not, expected;

2. The extent to which the internship provides training similar to what might be given in an educational environment, including clinical and hands‐on training;.

3. How much the internship is tied to the formal educational program through integrated coursework or the receipt of academic credit for the experience;

4. Whether the internship accommodates the intern’s academic commitments by corresponding to the academic calendar;

5. The extent to which the internship’s duration is limited to a specific period for beneficial learning (rather than continuing on with no prescribed agenda);.

6. The extent to which the intern’s work complements the work of paid employees instead of displacing them; and

7. The extent to which there is an understanding that there is no promise of a paid job when the internship ends.

The fate of the individual interns in the case remains up in the air since the matter was remanded to the lower court to evaluate the claims under the new Second Circuit test.

Bottom Line

This decision comes after another large entertainment company, Viacom, recently settled the wage and hour claims of several unpaid interns who argued they should have been classified as paid employees, as we reported on June 5.

Make no mistake – the DOL intends to apply their rigid six-factor test when claims are filed with them, and they will certainly advocate their test in the courts. However, employers defending those claims now have a new argument for the validity of internships even if they don’t meet all of the DOL factors. It remains to be seen how other courts (especially the Eighth Circuit which encompasses Minnesota) intend to handle this issue. Until we know, use caution in setting up unpaid internships to make sure there is a happy ending to the story.

ACA Reporting Penalties Increased In New Trade Bill

Posted in Employee Benefits

Blog-Pic---Emergency.jpgThe trade bill recently signed into law included provisions steeply increasing the penalties related to employers’ Affordable Care Act (ACA) reporting.

Large employers (employers with 50 or more FTEs) are required to provide information on health coverage to their employees using Form 1095-C; they must further file this information with the IRS using Form 1094-C.  If an employer fails to provide and/or file the forms, the employer is subject to IRS penalties.

The trade bill made steep increases in the penalties for reporting failures. In addition to applying to Forms 1094-C and 1095-C, these increased penalties also apply to other information returns and filings required to be filed or furnished after 2015, such as W-2s.

  • The general penalty for failure to file will increase from $100 per return to $250 per return.
  • The cap on the total amount of penalties for such failures during a calendar year will increase from $1,500,000 to $3,000,000.
  • If a failure relates to both an information return (e.g., a Form 1094-C required to be filed with the IRS) and a payee statement (e.g., Form 1095-C required to be furnished to the individual), the penalties may be doubled.

If a failure is caused by intentional disregard, the new $250 penalty is doubled to $500 for each failure, and no cap applies to limit the amount of penalties that can be applied with respect to that calendar year.

The IRS has stated that it will not penalize employers who  “make good faith efforts to comply” with the ACA reporting requirements. Therefore, employers should document their efforts to comply with the ACA reporting requirements to avail themselves of a “good faith” compliance defense, if need be, against any assessed “failure to file penalties.”

 

Minnesota’s Minimum Wage is Going Up, and Up and . . .

Posted in Wage & Hour

Money in the hands of the peopleAmid the hubbub of proposed federal regulations expanding overtime eligibility, let’s also remember that minimum wage for Minnesota employees is set to increase on August 1.

Right now, minimum wage for employees working for large companies (defined as $500,000 in annual gross revenues) is $8.00 per hour, while workers for smaller companies are entitled to at least $6.50 per hour (although they must receive at least $7.25 per hour if they are covered by the federal minimum wage).

When the new regulation takes effect on August 1, 2015, the minimum wage at large employers must be $9.00 per hour while the standard for smaller employers will be $7.25.   Don’t get too used to those numbers, though – the rates increase again on August 1, 2016 to $9.50 and $7.75 respectively.  Thereafter, the minimum wage in Minnesota will be indexed for inflation, although state regulations limit any such increase to 2.5%.

Remember that Minnesota permits all employers to pay a training wage to any worker under 20 years of age for their first 90 days of employment, and to all workers under the age of 18.  Those rates also increase to $7.25 next month and to $7.75 on August 1, 2016.

For more information, contact Dennis Merley at 612-373-8434 or dmerley@felhaber.com.

DOL Proposes Overhaul to Overtime Rules

Posted in Wage & Hour

man holding drawing moneyToday, the U.S. Department of Labor (DOL) proposed significant changes to the federal overtime regulations.  The Proposed Rules are in response to a March 2014 order from President Obama, which directed the DOL to overhaul its overtime regulations.

The new Proposed Rules more than double the salary basis needed to qualify for one of the white collar exemptions (administrative, executive, professional), from $455 a week ($23,660 a year) to $970 a week ($50,440 a year) in 2016.  The Proposed Rules also seek to establish a mechanism for automatically updating the salary and compensation levels annually, to prevent the level from becoming outdated with the often lengthy passage of time between rulemakings.

In its Proposed Rules, the DOL also solicits comments regarding the current “duties test” framework and the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement.

Key Provisions

While we are still reviewing the nearly 300 pages of proposed regulations, the Proposed Rules focus primarily on updating the salary and compensation levels needed for white collar workers to be exempt.

Specifically, the DOL proposes to:

  1. Set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers (which, in  2013, was $921 per week, or $47,892 annually);
  2. Increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually); and
  3. Establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

According to the DOL’s calculations, the 40th percentile of weekly earnings will be $970 a week ($50,440 a year) in 2016.  Thus, the Proposed Rules establish $970 per week as the initial salary basis, but would automatically update the salary and compensation thresholds on an annual basis using either a fixed percentile of wages or the Consumer Price Index (CPI-U).

To be exempt, employees would still need to satisfy the “duties test,” which the DOL does not change (at least yet).   Instead, the DOL solicits comments regarding the current “duties test” framework and the possibility of including nondiscretionary bonuses to satisfy a portion of the standard salary requirement.

Bottom Line

The Proposed Rules will undoubtedly make it more difficult for employees to qualify for any of the FLSA’s white-collar exemptions.  Indeed, by the DOL’s own calculation, more than 4.6 million workers who are currently classified as “exempt,” will no longer be exempt under the Proposed Rules.

While the Proposed Rules still need to go through the notice and comment period before final regulations are promulgated, employers would be wise to begin reviewing their payrolls to determine whether the exemption status of any of its employees may be affected if the Proposed Rules are eventually adopted.

We will continue to monitor this story as it develops.

High Court Holds Health Reform Law Subsidies Are Legal

Posted in Employee Benefits

Obamacare word cloud shapeIn a 6-3 decision, the U.S. Supreme Court ruled in King v. Burwell, No. 14-114 (U.S. June 25, 2015) that the Affordable Care Act (Obamacare, to many) may provide subsidies to people who cannot afford health coverage if they participate in a federally-run health exchange.

At issue were 6 words in the Affordable Care Act.  The Act states that subsidies are available for people who cannot afford health coverage if they purchase insurance through “an Exchange established by the State.”   The Petitioners argued that these words excluded subsidies where insurance was purchased through a federally-run exchange.  Thirty-four states have federally-run exchanges; the remaining states, including Minnesota, have state-run exchanges.

Justice Roberts, writing for the majority, conceded that the Petitioners “plain-meaning arguments are strong.”  However, “[T]he Statutory scheme compels the Court to reject petitioners’ interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange . . .”

“The Affordable Care Act contains more than a few examples of inartful drafting,” noted Justice Roberts.  An observation generally agreed upon in the dissent filed by Justice Scalia, and joined in by Justices Thomas and Alito.

The result of this decision is that the Affordable Care Act continues to operate unchanged, including reporting requirements on insurers and employers taking effect this year.  And, taxpayers who meet certain income criteria will be able to receive a tax subsidy if they participate in an Exchange operated by either a state or the federal government.

Colorado OK’s Firing Employee Using Medical Marijuana

Posted in Lesser-Known Employment Laws

Blog Pic - Colo Medical MarijuanaThe Colorado Supreme Court has ruled that an employer legally fired an employee whose off-duty use of medical marijuana under state law resulted in a positive drug test and violation of their zero-tolerance policy.

In Coats v. Dish Network, LLC, No. 13-SC-394 (June 15, 2015), the employee claimed that his use of lawfully prescribed medical marijuana was protected under Colorado’s “lawful activities statute” which prevents employers from firing workers based on their “lawful” activities outside of work.  The Colorado Supreme Court thought otherwise, noting that marijuana is still listed as a Schedule I substance under the Federal Controlled Substances Act and its use, possession and manufacture is therefore still illegal except in federally approved research.  As such, the lawful activities law did not protect the employee because “an activity…that is unlawful under federal law is not a “lawful” activity under [the Colorado statute].”

Minnesota’s Non-work Activities Act will likely be interpreted the same way regarding medical marijuana.  Similar to Colorado, this Minnesota law bars adverse employment action based on the “use or enjoyment of lawful consumable products, if the use or enjoyment takes place off the premises of the employer during nonworking hours.” Since our law also does not define the term “lawful”, it is likely that Minnesota courts would agree with Colorado to find that employees are protected only if their off-duty activities are legal under both federal and state law.

Does Minnesota’s Medical Marijuana Act Change Things?

This could be a bitter pill for Minnesota employers since our medical marijuana law contains an anti-discrimination provision that is much more expansive than its Colorado counterpart.  While Colorado only prohibits criminal prosecution of medical marijuana users, Minnesota’s Medical Marijuana Act bars employers from discriminating against any person based on (1) the person’s status as a patient enrolled in the registry program or (2) a patient’s positive drug test for cannabis components or metabolites, unless the employee used, possessed, or was impaired by medical cannabis on the job.  Therefore the legitimacy of a termination will not depend on the definition of what is “lawful” but rather, whether the employer can prove that the employee “used” marijuana at work or was working while “impaired” by marijuana use.

Bottom Line

Minnesota employers must exercise great caution.  While the Colorado decision on its non-work activities statute is instructive on how to interpret Minnesota’s parallel law, it does not impact the primary protection afforded to medical marijuana users in our state, namely the anti-discrimination provisions of Minnesota’s medical marijuana law.  These provisions are new and obviously untested in the courts so be sure to address each situation carefully and with good counsel on this emerging area of law.

NLRB Wonders WTF (Why the Fuss?) Over Employees Wearing Crude Insignias

Posted in NLRB

Blog-Pic---Protesters.jpgPacific Bell Telephone Co. recently was cited by the NLRB (“the Board”) for suspending and docking pay from workers wearing buttons and stickers with crude and potentially offensive language.  The Board concluded buttons saying things like “WTF Where’s the Fairness” and “Cut the Crap! Not My Healthcare” were not so vulgar that they forfeited legal protection, and that the employer failed to demonstrate any special circumstances that would overcome an employee’s right under the National Labor Relations Act to wear union insignia.  Pacific Bell Telephone Co., 362 NLRB No. 105 (June 2, 2015).

The employees in this instance traveled to customers’ locations to install and repair telephone and cable services.  After a long history of collective bargaining, the employer instituted a new dress code barring employees from wearing buttons, pins and stickers on their company-brand apparel.

In 2012 when the collective-bargaining ended, employees took to wearing buttons and stickers that bore statements such as “WTF, Where’s The Fairness,” “FTW Fight To Win,” “CUT the CRAP! Not My Healthcare,” as well as other less provocative expressions.  In response, the company refused to assign these employees to jobs until they removed the offending items, and those who refused were sent home without pay and subject to attendance infractions.

A Case of Delicate Sensibilities?

The company claimed that these items were so vulgar and offensive that they no longer constituted protected speech.  The Board disagreed, noting that the buttons with the “WTF” and the FTW” acronyms actually bore non-profane explanations on their face so as to eliminate their offensiveness.  As for the “Cut the Crap!” buttons, the employer argued that the font of the words was offensive because it resembled human waste.  While agreeing that such an argument could be valid in some cases, the Board disagreed with the employer’s artistic interpretation and ruled that the buttons were protected.

The company contended that special circumstances permitted the ban on these items since they had a heightened interest in maintaining a particular image in the community. If the was true, the Board reasoned, why did they historically allow these workers to  wear such items as baseball caps, sweatshirts, logoed t-shirts and jewelry that also deviated from the policy?

The Board also invalidated the company’s ban on buttons saying “No on Prop 32”, a state ballot initiative seeking to prevent labor unions from using payroll deducted monies for political purposes.  While agreeing that employers might ban buttons favoring controversial political issues, the Board found that the issue at hand did not rise to that level, nor did the buttons necessarily misrepresent that the company as a whole was taking a position on the issue. Without   specific evidence supporting their concerns, the employer’s parade of horribles about what might happen if the buttons were worn in public was not enough to overcome the employees’ right to wear those buttons.

Bottom Line

The NLRB currently takes a strong stand on efforts to curb employee speech.  Before taking action to do so, employers must be confident that their efforts will not be rebuffed by the NLRB.

Intern Settlement Is a Blockbuster

Posted in Wage & Hour

Internship Blue MarkerAs summer internships start up, a recent New York case reminds us of the steep price employers can pay for improperly classifying interns as unpaid workers in violation of the Fair Labor Standards Act (FLSA).

Viacom Inc., Black Entertainment Television, LLC and Viacom International Inc., entered into a preliminary settlement agreement last week calling for total payment of an estimated $7.2 million to thousands of unpaid interns from their New York and California locations.  The interns claimed that they performed the duties of employees and should have been paid at least minimum wage for the hours they put in.

Interns or Employees?

What makes an intern exempt from the requirement to be paid wages?  The Department of Labor (DOL) regulations require that all of the following six tests must be met for interns in the “for profit” sector:

  • The internship must be similar to the type of training given in an educational environment;
  • The internship must be for the benefit of the intern;
  • The internship must not displace regular employees and requires close supervision by staff;
  • The internship does not provide the employer with any immediate benefits from the work performed;
  • The internship does not entitle the intern to a job when it is over; and
  • The internship is clearly acknowledged as an unpaid relationship by both the company and intern.

Internships in the public sector and for non-profit charitable organizations are generally permitted when the intern volunteers without expectation of compensation.

Terms of Settlement Agreement

While Viacom maintains that the interns were properly classified as unpaid under federal and state laws, they have agreed to the settlement calling for each of a class of thousands of interns to be paid $505.00 per semester for up to two semesters of participation in the internship.  In addition, Viacom agreed to pay the two named Plaintiffs $5,000 each while two other class members received somewhat smaller pay-outs.  Viacom also will pay up to $900,000 in attorneys’ fees and costs.

The settlement is expected to become final after a hearing before the court in December.

New Test Coming Soon?

Employers are watching two cases in the Second Circuit Court of Appeals (Wang v. Hearst Corp. and Glatt v. Fox Searchlight Pictures, Inc.), to see if a more lenient “primary beneficiary test” might be adopted. This test will simply look to whether the intern benefited from the experience more than the company in order to declare the worker a legitimate unpaid intern.

Until another test is adopted, “for profit” private employers must be very cautious in designating any worker as an unpaid intern.  Unless the worker truly is there for the learning experience and does not provide any real benefit for the employer, it is best to consider that worker an employee and pay at least the applicable minimum wage.  This is what is often called a “paid internship” but be sure to put the emphasis on the word “paid.”