Common Sense and the FLSA

The Supreme Court this week struck a blow for form over substance in its Fair Labor Standards Act decision here. The language of the decision indicates that the justices took a commonsense type of approach to statutory and regulatory analysis in finding that pharmaceutical sales representatives were indeed exempt employees and not entitled to overtime.  Given that the sales representatives at issue in this case earned in excess of $70,000 a year (which would equate to their normal 40 hour week compensation if they were not exempt employees), the potential overtime damages here would have been substantial.

The decision by the Court is relatively narrow in that it applies to a specific subset of the outside sales job classification. Pharmaceutical sales representatives visit doctors' offices (a totally irrelevant aside here-my doctor friends note that many, if not most, of the sales representatives  they deal with are strikingly attractive young women, leading to this hilarious comment from a Wall Street Journal post about the economic effect of the decision:  "There are going to be a LOT of really, pissed off former college cheerleaders…"), bring them samples of products, take them to dinner, play golf with them, and generally do everything that a normal outside sales representative would do, except close the sale.  Drug companies may not sell directly to physicians via the sales representatives. Instead, the sales representatives get a nonbinding verbal commitment from the physician customer that the physician will prescribe a particular drug or treatment regimen using the drug to their patients.

The sales representatives are compensated in part based on the volume of prescriptions for particular drugs in their territory, and do a considerable amount of work outside normal business hours in the service of promoting their company's products. The sales representatives had been treated as exempt employees under the traditional interpretation of the FLSA until fairly recently.   Then the Department of Labor under the Obama administration changed its position on the exemption issue in a series of friend of the court briefs that it filed supporting plaintiffs in several FLSA cases.

In affirming the Ninth Circuit (something that is noteworthy enough on its own), the Court looked to both the language of the regulations and the statute to determine that the definition of what constituted a “sale” was broad enough to encompass a circumstance where the transaction in question was tantamount to a sale in
every important respect. The irony is even more direct because the Department of Labor has traditionally focused on the actual duties of positions to determine exemption status, something that DOL failed to do here.

What's particularly noteworthy about the Court's decision is the beat down that it administers to the Department of Labor. The Court determined that the DOL's position was flatly inconsistent with both the FLSA's regulatory structure, and the language of the statute itself. I've commented in other posts about the growing dissatisfaction of federal judges with changing executive agency opinions based on whatever administration happens to be in power in Washington. Now the highest court in the country has rebuked the Department of Labor for taking a position that is inconsistent with its long-standing precedent, based on nothing else than a change in administration.

Whether that will matter in the long run remains to be seen. But for right now, there is a solid basis to examine and challenge federal agencies' interpretations of their own regulations and statutes. As employment law practice becomes increasingly statute dependent, this decision might prove to have a much greater reach.

Roger Clemens--Case Closed

And so the DOJ wastes another tranche of taxpayer money pursuing a case that no one really cared about--the "perjury" of Roger Clemens before Congress.

My firm opinion is that whether Clemens used performance enhancing drugs is a matter for Major League Baseball, not for Congress or the Justice Department. I believe he was under no legal obligation to even appear in the Congressional freak show that involved dragging major league players in and trying to get them to confess in the face of incompetent cross examination.

But someone at the hearing apparently got upset at Clemens and no doubt a phone call was made to light up the right Justice official, and the wheels of government turned to move Clemens into the crosshairs. The whole affair was ridiculous, and the DC jury knew it. From the failure to properly review Andy Pettitte's previous congressional deposition testimony, in which he admitted he was not clear on precisely what Clemens said with respect to drug use, to the devastating testimony of the soon-to-be ex-wife of the star witness, Brian McNamee, the government's case was poorly thought out and executed from the start. That alone is enough to indicate that the prosecution was being pursued for political rather than juridical reasons (in my experience, the DOJ attorneys at this level are highly competent).

And while I'm at it, I don't think Lance Armstrong should face anything other than the wrath of the cycling community if what is alleged about his drug use turns out to be credible. The international sports community has more than enough lawyers, regulations and judicial resources to deal with him.

Law enforcement has bigger fish to fry.

Careful Terminations: Why Blurting out Justifications for Employee Terminations Is Almost Always a Bad Idea

I typically advise clients that it's a mistake to rush into employment decisions, even though a situation may call for immediate and drastic action. The reason I give this advice is that rushed employment decisions are almost always based on sloppy, incomplete, or misleading investigations, leading to sloppy, incomplete or misleading conclusions. The pressure to get something done almost always overrides the pressure to get something right. And there are significant consequences for not getting things right.

Case in point: an employee at a retail establishment found herself being accused of racism after she innocently typed in generic data on a computer database purchase return record. Unfortunately, a former employee had sabotaged the database so that when the commonly used generic data was entered, the return receipt printed out a racial slur. When the receipt went to an African-American family, the incident went viral and spread over the Internet. Two days after learning about the return, and before its internal investigation was complete, the company fired the employee.

The company then compounded its error by releasing a statement designed to mollify the public relations firestorm that was developing around the incident, indicating that it had fired the offending employee. And even after its investigation indicated that in fact another employee had been responsible for the incident, the company issued a "clarifying" statement that simply indicated that corrective actions have been taken, but did not correct the impression that the fired employee was guilty of racial harassment.

The appellate court reviewing the case (the trial court dismissed plaintiff's claim of defamation) determined first that the initial and subsequent press releases created a relatively clear implication that the plaintiff was responsible for entering the racist language, something that was not true. The court then determined that the plaintiff was not a public figure, so that she was only required to make a showing of negligence on the part of her former employer to sustain her defamation claim. Finally, the court noted that the plaintiff had little difficulty in showing damage to her reputation, given the widespread publicity she received as result of the store's press release. The appellate court reversed the lower court and put the case back for trial.

Much of the problem here could've been avoided if the store had: a) completed its investigation before releasing the public statement about what happened; b) published a or issued a correction in its clarification that did not point at the plaintiff as the cause of the problem. But because of the publicity storm, store management apparently felt it was necessary to put something out to mollify the mob. The end result-a defamation case that is going to go to a jury whose sympathy will likely reside almost solely with the plaintiff.

The NFL and DoD Partner on Head Injuries

This is noteworthy.  The NFL and the US military are collaborating on efforts to get their employees to stop trying to "gut it out" with respect to head injuries.

I hope that this works--I can say from personal experience that there is a lot of history and game culture at work that discourages players from telling their coaches that they have a concussion and need to come out.  And it's even worse in combat units--no one wants to be the guy left behind and not contributing because of an injury that can't be seen or understood by your fellow soldiers.

One More Time, Folks: E-Mail is Permanent

And here's a really good example of why you should not conduct romantic relationships with your paramour using the company's email system.  That goes double when you are a senior public employee, and all of your messages can be discovered through a state freedom of information request.

Holy Fifty Shades of Gray, Batman!

A Bright Line Retaliation Test, High Ranking Harassers, and Judgment Offers, All in One Case!

Every so often you read a case that has important concepts littered through it like those unpopped kernels at the bottom of the popcorn bag (I love those things).  Here's an example from the Second Circuit, involving harassment, retaliation, and some litigation strategy advice.

Retaliation claims in employment discrimination law are based on the concept of "protected activity."  This is not exactly the kind of protected activity discussed below under the NLRA  social media cases ("protected, concerted activity"), but rather activity in which an employee either complains about discrimination to management (because he experienced discrimination or observed it), or participates in some type of investigation or litigation activity in a way that undercuts or damages his employer's interest.

One of the issues that arises in "participation" retaliation cases is determining when the protected activity starts.  Generally, any employee participation in an EEOC or state fair employment practice agency investigation is protected.  But what about a situation where there is no EEOC charge or other formal claim of discrimination filed, yet?  Where the employer starts its own investigation of alleged discrimination, is participation in that process protected?

This case (and a number of others that it cites) says "no".  An HR director was terminated shortly after she commenced investigating a claim of sexual harassment against the company president's husband.  She claimed that she was fired because of her investigation, which was running before any EEOC or other process had been invoked by the harassment victim.

The Second Circuit Court of Appeals held that there was no liability here, because an employer investigation is not protected activity under the terms of Title VII.  An employee must be participating in a formal investigative process prescribed by statute before his conduct in that investigation becomes protected.

There are several other important points in the case.  Sexual harassment claims involving a supervisor of the victim are generally subject to the Faragher defense.  The defense is a doctrine that allows an employer to escape liability from a harassing supervisor if it can show that there was a systematic effort to prevent such harassment, complete with an adequate reporting system for victims, and that the victim unreasonably failed to avail herself of the opportunity to report the conduct.

But, as the Second Circuit, held, the Faragher defense is not available when the harasser is of such a high rank that he is effectively the alter ego of the corporate entity itself.  There is an excellent discussion of how much business authority gets you tagged as the equivalent of the company, but the short answer is that high level managers, especially those who report directly to the company president and who happened to be married to the president, are particularly bad defendants in harassment cases.  Their stature severely limits the ability of the company to defend itself.

Finally, there is an unusually clear discussion of the requirements and ultimate effect of an offer of judgement, a litigation tool seldom used by defendants, but that ought to be considered more often.  A offer of judgement under federal litigation rules allows a defendant to essentially place a bet on the amount the plaintiff will recover.  The defendant offers a specific amount of money at a pretrial stage; if the plaintiff rejects the offer, and doesn't recover at least as much as the offer (and the attorneys fees expended at the time of the offer) at trial, then the defendant can recover its costs (attorneys fees, for example) from the time the offer is made.

As noted above, the offer must account for the plaintiff's attorneys fees that have accrued at the time of the offer is made.  Here, the defendants made an offer that they thought would catch everything, and they would have been right, except that the trial court did not base its fee calculation on the rates charged in plaintiff's retainer agreement.  Instead, the court used (properly, the Second Circuit held) the prevailing fee rates in the community.  Those rates were higher than the contract rates, and pushed the award past the offer's value.  Thus, no recovery for the defendants.

So the lesson here is that offers of judgement must be calculated carefully--use the prevailing counsel rate, and be a little generous.

This is a highly highly instructive opinion.

Entitlement Mentality

It's not Penn State, or even Ohio State, but the latest college football scandal at UNC speaks volumes about how big time college athletics is run, even at non-factory schools.

Phony coursework and assignments for football players in the African-American studies department were so obvious that it should have been detected almost immediately, at least by the people providing academic oversight of the athletic department (this is nothing new, although easy courses for football players in my day were grounded a little more in the hard sciences, e.g. a "rocks for jocks" geology offering).  Perhaps the fact that the courses were being taught by the head of the department (make that the "former" head of the department) provided a smokescreen for what was actually going on.  But no one can read these accounts without thinking that the whole enterprise of major college athletics is corrupt and corrupting, from recruitment to graduation.

And it's that corruption and corrupting influence that we see on display now in Chapel Hill, and in State College, PA. Once a program sends the word that integrity doesn't matter, it's not much of a leap from wholesale academic fraud that no one bothers to report, to turning a blind eye to allegations of sexual assault.

There needs to be some serious housecleaning of this entire system.