New Joint Employer Test for FLSA Cases

An interesting case from the Third Circuit raises a seldom litigated feature of the FLSA, albeit a critical one.

Unlike some other employment laws, notably Title VII, the ADEA, and the ADA, the FLSA (and its cousin, the FMLA) has a very broad definition of the term "employer." Individual supervisors can be employers under the FLSA, as can corporate entities up or down the line of the corporate entity actually employing the plaintiff.

That was the situation in this case. The Court was confronted with a type of joint employer claim in the form of a rental car company (a holding company) that used some 38 separate leasing organizations, all under the umbrella of the corporate parent. The parent provided services in the form of business guidelines, benefits plans, car rental reservation tools, insurance, technology and legal support. The business guidelines were communicated directly to the subsidiaries' employees in the form of a corporate manual. The holding company also offered HR services, including recommended pay scales and wage rates, to the subsidiaries. But the use of the services was optional to each of the subsidiaries, and the subsidiaries paid for each of the services that they used or subscribed to.

Assistant branch managers for the 38 subsidiaries sued collectively under the FLSA for overtime wages, claiming they were improperly categorized as "exempt" employees who are not entitled to overtime, and instead work on a fixed salary basis. Noteworthy is the fact that the holding company had previously recommended that the subsidiaries consider the assistant managers "exempt" and not pay them overtime. The assistant managers sued their subsidiaries and the holding company, claiming that the holding company was an employer under the FLSA. The holding company denied liability, saying that it was not an FLSA employer because it did not involve itself sufficiently in the day-to-day operations of the individual leasing companies.

The Court determined that the holding company was not an employer, based on its review of the facts, as measured against the standard the Court fashioned for this case. The factors in measuring the employer status in a joint employment circumstance are whether the alleged employer has:

Authority to hire and fire employees;
Authority to determine work rules and assignments, and set conditions of employment (e.g., compensation, benefits, hours and work schedules, including the rate and method of payment);
Day-to-day supervision of the workforce, including employee discipline; and
Control of employee records, including payroll, insurance, taxes, and the like.

While this list looks relatively straightforward, the Court said that each situation will be different, and there may be factors militating strongly one way or the other that are not contained in the formal list. One of the keys here was that the holding company sold its services, and that the policies that it did put forth were not binding on the subsidiaries. Companies should note that less entanglement in actual supervision of employees, and the use of recommended rather than mandatory policies, is a good way to maintain enough legal distance from subsidiary employees to avoid wage and hour liability. This is one of those legal areas where it would be smart to consult your employment counsel before making any final determinations.

The NFL Litigation Bonanza

The dust has settled a little following the NFLPA filing its lawsuit relating to discipline imposed on Saints players for participating in the alleged bounty system designed to knock other teams' players out of football games. So far, a couple of things are pretty clear:

--The NFLPA has a lousy case. The main thrust of the union's complaint is that it wants relief from a federal judge in the form of invalidating a process that the union itself authorized. This is a loser from the get-go in all but the most egregious situations. Basically, the union is asking to be saved from its own bad judgement in allowing the NFL to negotiate and win a provision that gives the league commissioner the power to not only impose discipline, but then rule on whether he himself was reasonable in making his decision. I don't know why anyone would think that's a good idea--most union contracts have SOME type of check and balance provision on the discretion of management. But the NFLPA allowed that process to stand, and federal courts are notoriously reluctant to mess with union agreements and disputes.

--The only way the union prevails is to show that the process was so awful and unfair that the league was not following the CBA terms when it approved the discipline handed down. That's going to be tough, because the players didn't participate in their own defense at the arbitration, and because it appears that NFL Commissioner Roger Goodell didn't do anything other than rule on what he believed was the evidence. Procedurally, there has to be more than that to sustain an arbitration challenge (Grantland has a nice analysis here).

--Notwithstanding the comment above, the union had to file its lawsuit in order to save some kind of face with its membership, and to preserve the jobs of the union leadership. After all, that $5K a year per player in dues has to go for something, right?

--The NFL isn't exactly covered in sugar here, though. The league has pretty much demonstrated that its "airtight" case against the players has a few leaks. Audio tapes that aren't clear, a failure to produce the infamous ledger of bounty payments, and a number of other shortcomings all show that there was a lot of slippage between those press releases of a fully operational payoff scheme to injure other players and reality. Maybe the players should have showed up for the hearings, after all.

--Linebacker Jonathan Vilma's defamation lawsuit, which is a separate filing from the bounty gate union suit, but is seeking much of the same relief, should probably be kicked out of court because the subject of the dispute falls under the conflict resolution provisions of the union contract. In fact, the NFL filed a grievance against Vilma basically asking that an arbitrator require Vilma to use the CBA grievance procedure instead of court. The interesting question is whether a personal claim of defamation against Goodell can be preempted by the union contract, which nominally only applies to disputes between the union and the league in the course of football business. For example, if Goodell punched Vilma, Goodell , in addition to getting a severe beatdown, would be sued directly as an individual for battery.

One thing for sure--those of us who thought there would be relative labor peace following the CBA signing last fall could not have been more wrong. And isn't it interesting to see a union defending members that were allegedly willing participants in a system that set out to deliberately injure other union members?

Sexual Harassment and the CIA

The CIA is apparently dealing with some problematic issues involving sexual harassment, and a few of the details are leaking out of the Agency.

With respect to sexual harassment cases, at least, the Agency is probably no different from any other long hour, high stress organization. Romantic liaisons between bosses, subordinates and coworkers are also common in places like hospitals, law firms, and financial investment companies. Moreover, paramilitary organizations are usually highly male-dominated, so it's not surprising at all that the women working there might be exposed to the occasional dirty joke, explicit remark or come on. Although the article doesn't mention it, managing these cases is a real challenge in this environment because of the security clearances of the people involved and the nature of their work. In addition, internal CIA personnel matters are typically classified, meaning that much of the investigation of a complaint has to take place behind closed doors.

And whatever stresses there are at the headquarters, the situation is only exacerbated once the agents are placed into the field.

Which raises the issue of whether typical Title VII jurisprudence should even apply to this kind of employment situation.

New Online Guidance on the FMLA From the US Department of Labor

For those of you looking for a relatively comprehensive and updated review of FMLA entitlements (albeit from an employee perspective, of course), the DOL has put out two new online resources.

DOL's "The Employee's Guide to the Family and Medical Leave Act" is a nice, straightforward review of FMLA procedures and rights. It might be handy to have in an HR manager's toolkit for situations where something needs to be explained, or reviewed with an employee.

DOL also put on a webinar outlining these provisions, and addressing some frequently asked questions. If you have time, you can view the webinar here.

Again, note that both products are geared toward employees. But they provide a useful overview of the statute and the basic rules of engagement for FMLA situations.

Assault and Batter

This has nothing to do with employment law, but some cases are simply too good to pass up.

From Lowering the Bar comes the story of a man who was arrested for "battering" his sister in a dispute over how much maple syrup should be put on pancakes.

You can't make this stuff up.

Miniature Horses, Golf Courses, and Allotments of Common Sense

A recent news story highlights another aspect of the Americans with Disabilities Act that occasionally touches on employment law- ADA public accommodation rules, which are found in the regulations entitled "Nondiscrimination on the Basis of Disability in Public Accommodations and Commercial Facilities" , a guide published by the Department of Justice.

These are the regulations that have plenty of good intention, but in practice frequently create what I would characterize as absurd results. Case in point-a requirement for business establishments, including restaurants, to accommodate so-called "guide or companion miniature horses" for people who, out of choice, allergy, or religious belief (Muslims, for example, frequently do not want to use guide dogs) can't use a guide or companion dog. In an apparent effort to "normalize" the presence of novelty animals, the regulations note that people have traveled, including air travel, with miniature horses, as if this were an everyday and relatively inconsequential event.

Personal note-I have yet to get on an airplane with a horse, miniature or otherwise. I would bet that no one in the DOJ has, either.  And I can't imagine the accommodation that would be necessary for other passengers who found a horse in the seat next to them.

There are some similarly problematic requirements for miniature golf courses (you can't have too much slope on the putting areas), shooting ranges (accommodations have to be made so that the disabled can shoot in all positions.  Really? Even the prone position?), and health clubs. Unfortunately, what seems to be missing from the analysis is some type of cost-benefit assessment. I'd like to know whether someone at the DOJ had to account for whether it makes economic sense for these establishments to make thousands of dollars in retrofit adjustments for the benefit of relatively few users. Or whether it makes sense for airlines to put a "horse friendly" seating area on every airplane. At some point there will be some type of public backlash. But I think we'll have to see how this initiative plays out in terms of enforcement actions before we get a real feel for the true cost of compliance.

It Hasn't Been a Good Month for Public Employee Unions

The Supreme Court yesterday delivered another blow to public employee unions by limiting their use of mandatory member dues for political purposes. Following on the heels of the Wisconsin recall campaign, which featured copious amounts of mandatory union dues used in to support various unions' political ends, and resulted in a significant hit to public employee unions' bottom lines, it's been a rough first part of June for public-sector, collective-bargaining.

This case comes out of California, the land of powerful and well-heeled public employee unions. California law permits public-sector employees to create so-called "agency shops" in which all employees are represented by a union, and nonmember employees are required to pay an annual fee for "chargeable expenses". Chargeable expenses in this setting are fees required to support non-political union activities related to collective-bargaining. In order to properly collect chargeable expenses, public unions are required to provide employees with so-called Hudson notices, that advise the nonmembers of how much of their dues payments go to political activities, and allowing the nonmembers to opt out of paying for non-chargeable costs.

Of course, the unions do not want people to opt out of paying non-chargeable political costs. Much of the public employees' political influence comes from the ability of their unions to amass significant war chests to fund campaign contributions and political advertising on behalf of candidates who will then support public-sector pay increases.

In the circumstances here, the SEIU sent out the requisite Hudson notice to the members of a bargaining unit, estimating that approximately 56% of its total dues requirements would be chargeable. Nonmembers had 30 days to object to the full payment of dues, but were on the hook for the chargeable costs, nonetheless. A month after sending out the Hudson notices (after the time to object had expired), the union announced a temporary 25% increase in dues and the elimination of a dues contribution cap, in order to increase political funding for the November 2006 election. Nonunion employees were not given a choice as to whether they would pay in to the fund, and in fact the union indicated that all of the 25% increase would go to pay for political operations.

The plaintiffs in this case were a group of employees who did not like having their dues co-opted for political purposes to which they did not subscribe. They prevailed and got their money back at the trial court level, but the Ninth Circuit ruled for the union, setting up the appeal.

The Supreme Court, as is its normal practice, reversed the Ninth Circuit, finding that what the union did with respect to public employees constituted a violation of their First Amendment rights of free association and free speech. Specifically, the Court determined that the union should have provided a fresh Hudson notice advising employees of their right to opt out of the increase, and allowing them to do so. The Court said that a public entity effectively compelling the funding of the speech of individual speakers or groups is virtually the same as a public entity compelling speech and association. Mandatory subsidies from a public employee group for private speech are subject to exacting First Amendment scrutiny and those subsidies cannot be sustained unless there is a comprehensive regulatory scheme involving a mandated association among those who are required to pay the subsidy.

What this means is that public employee unions will have to be more careful about how they spend their money, how they account for the money, and how they give notice to their workforce. Public sector unions may not use nonmember dues for political purposes, without those employees' consent. This case sends a relatively clear message that the Court is looking carefully at the coercive practices of unions, especially in the public sector.