Alternative compensation plans pose wage and hour risks

Employees can be paid in many different ways: an hourly rate, an annual salary, by commission, by piece, a flat rate, with additional established or discretionary bonuses, or in some combination of any of the above. The more creative an employer becomes in how it compensates its employees, the more risks it takes under the wage and hour laws. Baden-Winterwood v. Life Time Fitness, Inc., decided earlier this week by the 6th Circuit, provides a good illustration of how certain alternate compensation schemes can jeopardize employees’ exemptions and render an employer liable for unpaid overtime.

Life Time Fitness paid its employees a pre-determined, semi-monthly base salary, in addition to monthly bonus payments based on year-to-date performance as set forth in a written bonus plan. For the years 2004 and 2005, the bonus plan permitted Life Time Fitness to make deductions from employees’ salary to recover prior bonus overpayments. In 2006, it amended the plan to provide that while it could still make semi-monthly salary deductions for overpayments, “[o]n an annual basis, in no case will the Guarantee Pay be lowered.”

The Sixth Circuit found that the 2004 and 2005 plans violated the FLSA, which does not permit salary deductions “for the reduction of guaranteed pay under a purposeful, incentive-driven bonus compensation plan.” Because the deductions were illegal, the employer could not claim the benefit of the FLSA’s exemptions for its employees during those years.

The loss of the exemptions in this case opened the employer to significant exposure for unpaid overtime. If you are considering implementing an alternate compensation scheme for your employees, also consider a review by experienced employment counsel to avoid a similarly expensive wage and hour miscue.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Adopt the TEAM approach to fight unions

Whether the EFCA will become law, and in what form, is very much up in the air. Democratic support for the measuring is waning, and business organizations have united in an unprecedented level of opposition. There is no doubt that if card-check becomes law, labor unions will have a much easier time becoming certified in workplaces. Yet, it is unclear whether unions even need the EFCA. In 2007, unions won 60.1% of elections, compared to a mere 51.5% in 1997. In the first half of 2008, the number of elections won by unions increased to 66.8%.

Because unions have become increasingly aggressive, even without the EFCA, I recommend that employers adopt the T.E.A.M. approach to union avoidance:

Train supervisors
Educate employees
Accessibility
Modernize policies


1. Train Supervisors. If a union is organizing, supervisors are likely to be the first people to know. They will also be the people that rank-and-file employees will come to with questions or concerns. Thus, supervisors need to know how to report, monitor, and legally respond to union activity.


2. Educate Employees. Employees should not be told that the company is anti-union, but why it is anti-union – competitive wages and benefits; positive communication between management and employees; history of peaceful employee/management relations; management’s openness to listen to employees and handle their concerns without an intermediary; and an unwillingness to permit a third-party to tell the company and employees how to do their jobs.


3. Accessibility. Management should routinely round its employees to learn what is happening and what they are thinking. Management should walk the floor on a daily basis. It should also hold regular meetings with employees, whether in small sessions with HR or large town hall-style meeting.


4. Modernize Policies. In an ideal world, employee handbooks and other corporate policies should be reviewed and updated annually. I’ve yet to come across a company that does so this frequently. The threat of the EFCA is a perfect excuse to take a good, hard look at current policies. Do you have a written statement on unionization? An open door policy? An issue resolution procedure? Peer review? An employee bulletin board? An electronic communications policy? Most importantly, do you have a no solicitation policy? It is the single most important policy to help fight labor unions.
No program is foolproof. No matter what steps are taken, no matter the quality of employee relations, every company is at risk for a union organizing campaign. Businesses should strive to be an employer of choice for employees, and not an employer of opportunity for labor unions.

How to Stay Union-Free in a Union- Friendly World: PowerPoint now available

For those who were unable to attend last week’s Breakfast Briefing, you not only missed a free meal, but you also missed a timely discussion on union avoidance. The PowerPoint slides are below. You’re on your own for breakfast this morning.

KJK Breakfast Briefing: How to Stay Union-Free in a Union-Friendly World

View more presentations or Upload your own.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

WIRTW #79

The newly launched Warren & Hayes Employment Law Blog, written by the Cleveland-based HR consulting company of the same name, discusses the discrimination liability risks inherent in searching employees’ on-line profiles. In other social networking news, Robert Ambrogi at the Legal Blog Watch discusses the Wall Street Journal’s recently drafted social networking policy for its employees. Workplace Privacy Counsel discusses whether there are any limits on how far employers can go in regulating employees’ private social networking profiles. Business Management Daily warns employers against overreacting to employees’ online presence.

Overlawyered let’s us know that academics are debating whether “heightism” should be added to the list of protected classes. (ugh).

WorkplaceHorizons reports on two recently-introduced bills that would amend the FMLA – one to repeal this year’s new regulations, and other to expand the permissible reasons for FMLA-leave.

Current Employment details the EEOC’s position that employee health risk assessments violate the ADA.

Molly DiBianca at the Delaware Employment Law Blog shares her thoughts on the effects of caregiver discrimination on dual-income households.

Dan Schwartz at the Connecticut Employment Law Blog, on issues to consider when settling employment disputes.

Bob Sutton, with some outside-the-box ideas on curbing employee theft.

PC Magazine’s Eric Griffin presents the 25 golden rules of e-mail.

Christopher McKinney at the HR Lawyer’s Blog digests a half-million dollar verdict for a transgendered employee whose job offer was rescinded after he showed up on the first day of work as a she.

The Evil HR Lady opines on the evils of draconian vacation policies.

The Washington Labor & Employment Wire reports on the EEOC’s recently announced regulatory agenda for 2009 and 2010. The highlights include regulations for GINA and the ADA Amendments Act.

Finally, the U.S. Chamber of Commerce’s Chamber Post discusses Ohio’s recent growth despite the stale economy.

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

“Who wants to see a 56-year-old stripper?”

Those were my wife’s words when I told her last night what I’d be writing about today. The EEOC is suing a Houston strip club for firing a 56-year-old dancer. According to the Houston Chronicle [h/t: ABA Journal]:

Mary Bassi, who was 56 at the time of her termination, worked at Cover Girls, where she was allegedly subjected to disparaging remarks. According to the lawsuit, which was filed last week in federal court, she was frequently called “old” by managers and endured comments about experiencing menopause and showing signs of Alzheimer’s disease.

According to Connie Wilhite, the EEOC lawyer in charge of the case, “It doesn’t matter what industry you work in. You are still protected by anti-discrimination laws.” While I agree that every individual has the right to be free from unlawful job discrimination regardless of one’s chosen occupation, I seriously question whether this lawsuit is a judicious use of our government’s resources. After all, to translate my wife’s question into legal terms, can anyone really dispute that age is a bona fide occupational qualification for a strip club employee?

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

How to recover a stolen computer in four easy steps

Law.com reports that 60% of employees who are laid-off, fired, or quit  admit to stealing company data. I previously reported that it costs an average of $50,000 to replace a stolen computer, with 80% of that value coming from the recovery of sensitive, confidential, and proprietary information. When you put these two pieces of information together, it becomes increasingly apparent that businesses must take proactive steps to protect their technology and data.

According to a case recently decided by a Missouri federal court, employers can use the Computer Fraud and Abuse Act (CFAA) to recover a stolen laptop. The CFAA is a federal law that creates a private causes of action for individuals or businesses damaged by computer fraud. In Lasco Foods v. Hall & Shaw Sales & Marketing, the district court permitted the employer to pursue a claim under the CFAA against two ex-employees who failed to return their laptops after resigning to start a competing enterprise. The ability to use the CFAA in this context is an important weapon for employers, because it allows for the recovery of a variety of damages and costs, including forensic investigation fees incurred in examining the computer after its return.

Yet, litigation is just one step in an overall four-step plan I recommend to secure corporate technology from ex-employees:

1. Institute a strong Electronic Communication and Technology Policy, making clear that all data and equipment belong to the company, and must immediately be forfeited upon the end of employment.

2. Remind employees upon termination or resignation of their duty to return all data and equipment, including laptops.

3. If any data or equipment is missing, enlist the aid of an attorney to send a friendly, yet clear message that unless everything is returned immediately, the company will enlist the aid of a court.

4. Sue.

Notice that a lawsuit against the employee is step four, not step one. Going to court is the last resort. It should always be the last resort. It is expensive and time consuming. Yet, it many instances it is unavoidable. The CFAA, at least as some courts are interpreting it, provides employers with a key weapon in combating employee theft of computer equipment if one is left with no choice but to sue.

[Hat Tip: EBG Trade Secrets & Noncompete Blog]

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Presented by Kohrman Jackson & Krantz, with offices in Cleveland and Columbus.

For more information, contact Jon Hyman, a partner in our Labor & Employment group, at (216) 736-7226 or jth@kjk.com.

Do you know? Volunteerism under federal wage and hour laws

According to EVliving.com, one employer has come up with a creative idea to combat the current economic downturn. The CEO of Greenleaf Book Group, a publishing company, has decided that instead of laying off any employees, his company will simply require its employees to volunteer one hour of time per week to the company.

“Cutting one person from the team is losing one invaluable resource that helps make this entire company tick,” he said. “In the short term, it’s hurting morale and lowering the productivity of a department. In the long run it means the entire company’s time and money spent trying to make up for the loss-redistributing tasks and overburdening departments, struggling to make up the slack, dealing with the paperwork, and eventually putting additional man-hours toward rehiring and retraining. And of course, the toll layoffs take on the economy are tremendous.” … 

“Essentially, every employee is putting in one voluntary extra hour per day at work,” he explained “One extra hour to be used in the most advantageous way possible: finishing up projects, having a meeting with a client or vendor, assisting a coworker, getting hands dirty working in another department. Even cleaning a desk or organizing files, if it helps improve efficiency.” 

The numbers work, he said:

• 30 employees x 1 hour per day
• Multiplied by a 5 day workweek
• Equates to 150 extra hours
• Divide that number by 40 hours per standard workweek
• The result is 3.75, the equivalent of almost 4 full time employee work weeks
• For any company, an extra hour increases the work week from 40 to 45 hours and is a simple 12.5% increase. 

Before you decide to copy Greenleaf’s idea in your own workplace, consider that it almost certainly violates federal wage and hour law. The FLSA requires employees to be paid for all hours worked. Requiring employees to work an hour without pay violates this law. For private employers, there is no such thing as a volunteer employee. All work hours must be paid hours.

To demonstrate the anachronistic nature of the FLSA, however, consider that Greenleaf could have achieved the exact same goal without violating any laws. Instead of asking for an hour of work without pay, it could have simply reduced each employee’s effective weekly rate of pay by one-fortieth. In other words, one could figure out what hourly rate of pay would get an employee to 39 hours worth of pay for 40 hours of work. There is nothing illegal about prospectively reducing pay, as long as the hourly rate is above the minimum wage.

[Hat tip: Workplace Prof Blog]