Best of -- Use a wage and hour audit to proactively head off claims

"Wage Wars: Workers are Winning Huge Overtime Lawsuits," graces the cover of this week's BusinessWeek magazine. It should serve as a harsh wake up call for all companies. The article cites recent huge wage and hour settlements and verdicts, including an $18 million settlement paid by Starbuck's and eight and nine figure jury verdicts against Wal-Mart. In fact, the article estimates that American companies have collectively paid over $1 billion to settle these types of claims over the past few years.

The sweatshops of the 1920s and 1930s that led to the passage of the Fair Labor Standards Act and its 40-hour workweek are virtually non-existent. Nonetheless, claims for unpaid overtime continue to rise, more than doubling in the federal courts from 2001 to 2006. Almost always, these cases are not the result of the intentional withholding of overtime premiums. Instead, they fall into two classes: off-the-clock pay claims and the misclassification of employees. The former concerns pay for working through lunch breaks, donning and doffing gear, and required travel time. Regarding the latter, employees fall into two basic classes for coverage by the FLSA, exempt and non-exempt. Companies and the employees themselves often mistakenly assume that white collar employees are exempt, and blue collar employees are not. Paying an employee a salary (as opposed to an hourly wage), however, is not enough to qualify an employee as exempt. The FLSA only provides an exemption if an employee meets the specific qualifications for the executive, administrative, professional, outside sales, or computer employee exemptions. These exemptions are highly fact specific, and wholly depend of the nature of the actual work performed, and not a job title. For example, merely labeling an employee as a manager or supervisor is not enough to qualify an employee for the executive exemption, unless that salaried employee customarily and regularly directs the work of two or more other employees, and has the authority to hire or fire. The other exemptions have similarly stringent requirements (click here for a copy of the federal regulations on these exemptions).

The question is not whether companies need to audit their workforces for wage and hour compliance, but whether they properly prioritize doing so before someone calls them on it. According to the BusinessWeek article: "While violations appear widespread, employees themselves rarely think to make wage and hour claims. Instead, they usually have it suggested to them by lawyers." It is immeasurably less expensive to get out in front of a potential problem and audit on the front-end instead of settling a claim on the back-end. The time for companies to get their hands around these confusing issues is now, and not when employees or their representatives start asking the difficult questions about how employees are classified and who is paid what.

Best of -- Document, document, document

As the record reflects, there was a myriad of problems with Plaintiff's job performance and treatment of his subordinates that justified Defendants' decision to fire Plaintiff. This, however, is not what Defendants told Plaintiff during their final meeting. Defendants did not tell Plaintiff he was being fired for poor performance, but rather because of an unspecified "personality conflict." While the law does not specifically require an employer to list every reason or incident that motivates its decision to terminate an employee, we are skeptical of undocumented accounts of employee conduct that may have been created post-termination. Under the facts of this case, however, ample evidence exists that indicates that Plaintiff's performance was inadequate to meet his job requirements. In sum, Plaintiff has not put forth sufficient evidence for a jury reasonably to conclude that Defendants did not have an honest belief that Plaintiff performed his job duties poorly.

So said the Sixth Circuit last week in Abdulnour v. Campbell Soup Supply Company, a national origin discrimination case brought by an Iraqi national fired by Campbell Soup for job performance that was less than "M'm M'm Good". The Sixth Circuit upheld the trial court's dismissal of the lawsuit on summary judgment because Abdulnour could not come forward with any evidence, other than his own subjective disagreement, that Campbell Soup did not honestly believe in the reasons proffered for his termination. Clearly, however, as the quote above demonstrates, the appellate court was troubled by the lack of documentation in Abdulnour's personnel file for the alleged performance deficiencies. It is safe to assume that if Abdulnour could have come forward with any evidence at all to support his allegation of pretext, the court would not have hesitated to ding the company for its poor documentation.

The lesson to be learned is basic, but one that cannot be repeated enough. Any employer's greatest defense against a claim of discrimination is a well-documented history of performance problems to support the termination, coupled with comparable treatment of similarly situated employees. When in doubt, document all performance problems with all employees. If the discipline or counseling is oral only, document that fact also. Have all employees sign off on all such records, and if the employee refuses to signify the receipt of the discipline, document that failure as well. The Sixth Circuit in the Abdulnour case cannot be any clearer that when an employer relies on undocumented accounts of misconduct to support a termination, it is fair for the court and a jury to draw the inference that those accounts were created post-termination. The Abdulnour decision is the anomaly, and almost universally cases with poorly documented personnel files will not end well for the employer. Campbell Soup dodged a bullet; do not put your company in similar risk.

Best of -- A Whopper of a Sex Harassment Claim

One of the surest ways for a company to guard against harassment lawsuits is to have in place a reasonable mechanism by which a victim of harassment can complain to the company. In today's workplace, one would be hard pressed to find a company that does not have a harassment policy, either in its employee handbook or otherwise. It is not enough, however, merely to have complaint procedures in place. Those procedures much be understandable, workable, and meaningful for them to provide any protection to an employer. EEOC v. V & J Foods, out of the 7th Circuit, illustrates the important distinction between a complaint procedure that is or is not meaningful, and the consequences that can befall an employer with an unworkable system.

Samekiea Merriweather, 16 years old, worked after school and on weekends at a Burger King restaurant. It was her first paying job. Unfortunately for her, her boss and the store's general manager, Tony Wilkins, had a propensity of sleeping with his female employees. He rubbed up against her, tried to kiss her, told her he wanted a "young girl" because of "their body. You know, it's not all used up." He offered $600 to have sex with him in a hotel room," and when she refused and told him she had a boyfriend, he told her he wasn't going to do anything else for her because she was giving her body away for free instead of selling it to him. Samekiea, both on her own and through her mother, repeatedly complained of the harassment to her shift supervisors and the assistant manager, who essentially ignored her. Shortly after Samekiea turned down Wilkins's offer to pay her for sex, he became hostile towards her and fired her.

Instead of summarizing the Court, I'll merely quote from the well written opinion of Judge Posner:

[A]n employer can avoid liability under Title VII for harassment (on a ground, such as sex, that constitutes a form of discrimination that the statute forbids) of one of his employees by another by creating a reasonable mechanism by which the victim of the harassment can complain to the company and get relief but which the victim failed to activate....

The mechanism must be reasonable and what is reasonable depends on “the employment circumstances,” ... and therefore, among other things, on the capabilities of the class of employees in question. If they cannot speak English, explaining the complaint procedure to them only in English would not be reasonable. In this case the employees who needed to be able to activate the complaint procedure were teenage girls working in a small retail outlet....

An employer is not required to tailor its complaint procedures to the competence of each individual employee. But it is part of V & J’s business plan to employ teenagers, part-time workers often working for the first time. Knowing that it has many teenage employees, the company was obligated to suit its procedures to the understanding of the average teenager....

Ignoring this point, the company adopted complaint procedures likely to confuse even adult employees. The employee handbook that new employees are given has a brief section on harassment and states that complaints should be lodged with the “district manager.” Who this functionary is and how to communicate with him is not explained. The list of corporate officers and managers at the beginning of the handbook does not list a “district manager,” or for that matter a “general manager,” but instead a “restaurant manager”; and there is evidence that employees confuse “district manager” with “restaurant [or general] manager” — that is, Wilkins, the harasser. There is a phone number on the cover of the handbook, and if you call it you get a receptionist or a recorded message at V & J’s headquarters. But an employee would not know whom to ask for at headquarters because she is not told who her district manager is or the district of the restaurant at which she works.

If an employee complains to a shift supervisor or assistant manager, that person is supposed to forward the complaint to the general manager (and thus in this case to Wilkins) even if the complaint is about the general manager. After receiving the complaint the general manager is supposed to “turn himself in,” which of course Wilkins did not do. Nor did the shift supervisors or assistant manager report Merriweather’s complaints to Wilkins or to anyone else. A policy against harassment that includes no assurance that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law….

An unreasonably costly complaint mechanism would not be reasonable. But it would cost very little, certainly for a company of V & J’s size, to create a clear path for complaints of harassment and other forms of illegal discrimination.... All that it would have to do, we should think, would be to post in the employees’ room (thus not visible to the restaurant’s customers) a brief notice that an employee who has a complaint about sexual harassment or other misconduct can call a toll-free number specified in the notice. The number would ring in the office of a human relations employee and the receptionist would identify the office as that of the company’s human relations department....

Because of the ineffective complaint procedure, Merriweather’s lawsuit was reinstated.

There are several lessons to be learned in the drafting and enforcement of an effective harassment complaint procedure:

1. Comprehension. It must relate to and be understandable by the employees who are going to rely upon it. It cannot be written in legalese or jargon. If your workforce is multi-lingual, so should the harassment policy.
2. Confidentiality. It must not only explain to whom complaints can be made, but how to confidentially contact those people.
3. Options. It must provide optional avenues for complaints that guard against an employee being faced with the Hobson's Choice of staying silent or complaining to the harasser. In Judge Posner's cautionary words: "A policy against harassment that includes no assurance that a harassing supervisor can be bypassed in the complaint process is unreasonable as a matter of law."
4. Policing. It should mandate that supervisors or managers report to senior management and/or human resources any complaints they receive or any conduct they perceive that may be a violation of the harassment policy.
5. Publication. It must be disseminated to the employees, should be conspicuously posted in the workplace, and the workforce should receive periodic training on the policy and complaint procedures.

Best of -- Sixth Circuit confirms that it will not second-guess an employer's honest belief

The following two Sixth Circuit decisions make it clear that pretext for discrimination or retaliation does not exist if the employer engages in a reasonable investigation and has an honest and good faith belief in the rationale for its employment decision. These cases are a good reminder that one of the best defenses to any discrimination, retaliation, or harassment claim is a thorough, well-documented investigation.

Michael v. Caterpillar Fin. Servs. Corp. concerned a six-year African-American employee who had a good employment record until her manager was replaced. Shonta Michael claimed that the discipline, including a very confrontational meeting in which the new manager aggressively yelled at her, was racially discriminatory and that she was retaliated against after she complained over the manager's treatment of her. Caterpillar, on the other hand, claimed that any conflict and discipline was solely because of legitimate performance issues.

The Court skirted the issue of whether the disciplinary action (a performance plan) constituted an "adverse employment action," finding that regardless Michael could not prove that the employer's actions were pretext for discrimination or retaliation. Caterpillar's investigation included interviews of all of Michael's co-workers, many of whom found her difficult to work with. Michael claimed that her disagreement those facts established pretext. The Court disagreed:

Michael's disagreement with the facts uncovered in Caterpillar's investigation does not create a genuine issue of material fact that would defeat summary judgment "as long as an employer has an honest belief in its proffered nondiscriminatory reason." The key inquiry in assessing whether an employer holds such an honest belief is "whether the employer made a reasonably informed and considered decision before taking" the complained-of action. An employer has an honest belief in its rationale when it "reasonably relied on the particularized facts that were before it at the time the decision was made." "[W]e do not require that the decisional process used by the employer be optimal or that it left no stone unturned." ... Caterpillar presented sound, nondiscriminatory reasons for the action that it took based on a reasonable investigation of events that occurred after Michael’s favorable performance review.

Because Caterpillar had extensive documentation of its investigation, it could reasonably rely on its conclusions with no finding of pretext or retaliatory animus.

By comparison, in Denhof v. City of Grand Rapids, the issue was whether the Grand Rapids Chief of Police reasonably relied upon a psychological fitness for duty exam in refusing to permit the plaintiff to return to work. The Court found that the Chief's reliance on the medical opinion was unreasonable because the doctor's written opinion showed that he had a preordained opinion on Denhof's unfitness for duty:

In his January 11, 2002, letter recommending a fitness for duty examination for Patricia Denhof, Dr. Peterson employed language that, at a minimum, suggested his opinion had already been formed. For instance, he noted that in view of the tension between Denhof and the department, "it is difficult to imagine how she could continue to work in this environment." ... This language should have signaled to Chief Dolan, and indeed any reasonable recipient, that Dr. Peterson was predisposed to finding Denhof unfit for duty. Indeed, after comments like this, it is hard to see any possibility that Dr. Peterson's examination would yield a result other than finding that Denhof should be separated from the police force. Instead, when Dolan was confronted with a psychologist who had already formed his opinion before examining the patient, he asked that doctor to proceed with the examination. In doing so, he forfeited the protection of the honest belief rule, because the jury could have easily concluded that his reliance on a doctor who had already made up his mind did not qualify as reasonable reliance.

According to the Court, the employer could not have an honest belief about Denhof's lack of fitness to return to work because, according to the opinion the doctor upon whom it was relying was predisposed. Thus, the decision could not have been bona fide. I'm troubled by the ease with which the Denhof panel writes off the employer's reliance on a medical opinion and delves into the motivations of the psychologist. The doctor's language does not seem nearly as clear to the me as it did to the Sixth Circuit. Moreover, if an employer cannot have an honest belief about a medical opinion what can it hold an honest belief about? Nevertheless, these two cases reaffirm the honest belief rule, and demonstrate that courts will not second-guess a personnel decision if it is based on a rational, reasoned, honest belief.

The softer side of employment law

Ellis v. United Parcel Service, decided this week by the 7th Circuit, is legally interesting in its dealing with the issues of interracial dating, race discrimination, and the ultimate lawfulness of UPS's termination of a manager for violating its nonfraternization policy. What's more interesting to me, though, is the Court's cautionary words on the issue of whether a nonfraternization policy makes good business sense:

In closing, we emphasize that our decision today should not be construed as an endorsement of the UPS nonfraternization policy. When a company like UPS runs expensive ads that ask "What can Brown do for you?" it might be wise for it to ask if this policy is really worth all of the fuss this case has created. As we observed in Hennessy v. Penril Datacomm Networks, Inc., 69 F.3d 1344, 1353 (7th Cir. 1995):

As the work force grows and people spend more of their time at work, the workplace inevitably becomes fertile ground for the dating and mating game. It is certainly not unusual, and it may even be desirable, for love to bloom in the workplace. Contiguity can lead to sexual interest, which can lead to soft music, candlelight dinners, serious romance, and marriage, or any stops along the way.

By all accounts, Ellis was a good employee. He started with UPS as a driver right out of high school in 1979 and worked his way up to a managerial position. After 21 years with the company he met a woman, apparently fell in love, and, after a 4-year relationship, got engaged. A year later he got married. That's a fairly nice story, and so is the fact that Ellis and his wife were smooching at a summer concert several months after their wedding. Heck, some marriages today don’t even last that long. Although UPS, for the reasons we have stated, comes out on top in this case, love and marriage are the losers. Something just doesn't seem quite right about that.

When implementing employment policies, there are legal considerations and human considerations. I too often write about the perils employers face when ignoring the former. The Ellis case is a good reminder that employers face different dangers, such a poor retention and lackluster morale, when they ignore the latter.

Lawsuit illustrates potential problems with employee testing

Today's Jackson (Tennessee) Sun is reporting that Kilgore Flares Co., a Tennessee defense weaponry manufacturer, has been hit with a class action lawsuit related to its neurological testing of hirees:

The class action lawsuit, filed on behalf of Robinette Anderson, states that the company uses a nerve test to determine who it hires. The test is supposed to determine the risk of potential employees' developing carpal tunnel syndrome, according to the suit.

The suit states Anderson was denied a position at the Toone plant after being tested. The suit also states the findings from these tests are "based upon unreliable measures." ...

"The country's leading scientists have concluded the nerve conduction exam has an exceptionally small, and often times wrong, predictive value for determining carpal tunnel syndrome," Anderson's attorney Justin Gilbert said in a press release.

"More fundamentally, we believe this type of 'propensity testing' flings open the door to forced genetic exams for purposes of hiring discrimination," Gilbert said. "We want employers to make judgments based on workers' abilities, not on dubious genetic predictions."

Depending on the results of the nerve testing, job applicants are either rated as having no restrictions as to where they work or as it being inappropriate for them to work in "highly wrist-intensive" jobs, the suit states.

The lawsuit contends Kilgore violates the Americans with Disabilities Act because it requires a person who's hired to fall into the no restriction category, according to the lawsuit.

The ADA allows for medical testing of job applicants as long two conditions are met: 1) a conditional offer of employment has been made before the testing occurs; and 2) the employer requires the same testing for all individuals entering the same job category. There is no requirement that the medical exam be job related. Once an employee is hired, however, an employer may only require medical exams if doing so is job-related and consistent with business necessity.

By all accounts, then, Kilgore's testing appears to be on the level in how it's administered. The lawsuit, however, seems to delve deeper by claiming that even if the testing itself is legitimate, Kilgore used the results to discriminatorily screen out any hiree with a propensity for carpal tunnel syndrome. That use of employee testing may pose problematic for Kilgore, even if the testing itself is legal. The test does not seek to determine which hirees currently have carpal tunnel syndrome and therefore might be job restricted, but which have a propensity to develop it down the road. I also question Kilgore's reasonable accommodation obligations to those hirees with actual carpal tunnel syndrome. It will also be a problem for Kilgore if it proves true that the exam has a small and often times wrong predictive value.

The takeaway for employers from this story is two-fold:

• Employers should make sure that any tests and selection procedures are properly validated for the positions and purposes for which they are used, and can be reasonably relied upon for that purpose.
• Selection criteria should be job-related and consistent with business necessity. If a criteria singles out a specific group, employers should scrutinize the risk of using that criteria versus the benefit derived from it.

What else I'm reading this week #29

Just a quick heads-up for everyone that I will be taking next week off from regular blogging while I'm out of town in depositions. In my absence, and in anticipation of the blog's upcoming birthday, I plan on re-running some of the past year's best posts. New content will resume on May 12.

This week's review starts with a couple of wage and hour highlights. The aptly named Wage & Hour -- Developments & Highlights brings us the story of Fenway Park's food vendors, who have filed a class action for unpaid wages and overtime. Meanwhile, HR World reports that Quest Diagnostics has settled with the Department of Labor for $688,772 in overtime back wages regarding the misclassification of 238 employees as non-exempt.

Alaska Employment Law has an interesting bit about how one judge empirically determines a witness's credibility.

The Connecticut Employment Law Blog has more information on the Genetic Information Non-Discrimination Act.

Finally, BLR's HR Daily Advisor discusses religious accommodations for tattoos and piercings.