HIGHLIGHTS FOR THE MONTH OF APRIL 2008

By: Darryl G. McCallum

RECENT DEVELOPMENTS

FMLA Applies To Agency Employee Assigned To Employer With Less Than 50 Employees

The United States Court of Appeals for the Sixth Circuit (covering Kentucky, Michigan, Ohio and Tennessee) recently held that an employer who did not meet the FMLA’s 50-employee threshold could nonetheless be liable for violating the FMLA’s job restoration requirement with respect to an employee who had been assigned to the employer by a temporary staffing agency.

Facts of the Case: In Grace v. USCAR et al., the plaintiff was a temporary staffing agency employee and was assigned by her employer to work at a company known as USCAR. The plaintiff requested, and was granted, an FMLA medical leave from her staffing agency employer. When she attempted to return to work, she was told that USCAR had eliminated her position in a division restructuring. The plaintiff sued both the staffing agency and USCAR for alleged FMLA job restoration violations. The district court found the agency and USCAR to be joint employers, but also found that USCAR was not subject to the FMLA because it did not have 50 employees. The plaintiff appealed.

The Court’s Ruling: The Sixth Circuit reversed the trial court’s ruling that the FMLA did not apply to USCAR, and remanded the case so that the jury could determine whether USCAR had violated the plaintiff’s FMLA job restoration rights. The Court recognized that the FMLA itself does not address joint employment, but that the Department of Labor’s regulations provide that a joint employment relationship will exist “where one employer acts directly or indirectly in the interest of the other employer in relation to the employee.” 29 C.F.R. § 825.106(a)(2). Even more specifically, “joint employment will ordinarily be found to exist when a temporary or leasing agency supplied employees to a second employer.” 29 C.F.R. § 825.106(b).

The FMLA regulations distinguish between the “primary” and “secondary” employers. The primary employer is the employer who can hire, fire, and assign the employee, as well as the one who pays and provides benefits to the employee. The regulations recognize that for employees of temporary help or leasing agencies, the placement agency most commonly is the primary employer. In joint employment relationships, only the primary employer is responsible for giving required notices to its employees, providing FMLA leave, and maintenance of health benefits. Both the primary and secondary employers, however, are subject to job restoration and anti-retaliation requirements. For the secondary employer, these obligations attach even if the secondary employer is not independently covered by the FMLA, per the FMLA regulations. 29 C.F.R. § 825.106(e).

Lessons Learned: This case serves as a good reminder of a company’s FMLA obligations towards its temporary agency employees with regard to job reinstatement and with regard to non-interference with the employee’s FMLA rights, even when the host company does not have 50 employees of its own (or is otherwise not a covered FMLA employer).

Comments And Behavior Directed Toward Muslim American During Two-Year Period Can Establish Religiously Hostile Work Environment

The Fourth Circuit Court of Appeals recently held that a Muslim American, who alleged that he had been subjected to demeaning comments and degrading actions directed at him because of his Muslim faith over a two-year period, presented sufficient evidence that the conduct he experienced was sufficiently severe and pervasive to warrant a jury trial.

Facts of the Case: In EEOC v. Sunbelt Rentals, the plaintiff was an African-American convert to Islam who was hired to work for the company in October 2001, one month after the September 11th attacks. The plaintiff, the only Muslim in the workplace, was open about his religion while at work. He used a private room for short prayer sessions and attended weekly congregational prayer sessions. The plaintiff wore a beard and a kufi, traditional male headgear. He alleged that during his employment, his co-workers called him names, such as “Taliban” and “towel head,” frequently made fun of his appearance, challenged his allegiance to the United States, suggested he was a terrorist, would hide his timecard when he was in prayer sessions, unplugged his computer equipment and would deface his business cards. The plaintiff alleged his supervisors not only witnessed, but participated in some of the alleged harassment.

The employee made verbal complaints to management, without result. The plaintiff then submitted a written complaint to Human Resources, resulting in an investigation by his managers. After completing their investigation, the managers instructed the plaintiff’s co-workers to avoid making comments about the plaintiff or about Muslims in general. The situation improved for a short time thereafter, although no discipline was imposed on any employees. The co-workers soon renewed their behavior, however, and the plaintiff’s verbal complaints to his managers were ignored. The alleged harassment continued until the plaintiff was terminated in February 2003. Plaintiff sued for religious harassment under Title VII. The district court granted summary judgment to Sunbelt, finding that the plaintiff did not prove that he was subjected to a hostile work environment based on his religion, and further, Sunbelt had adequately attempted to address the problems noted in the employee’s written complaint.

The Court’s Ruling: The Court of Appeals reversed, holding that the circumstances alleged by the plaintiff could lead a reasonable juror to believe that he was subjected to a religiously hostile work environment. The Court found that the plaintiff “was subject to repeated comments that disparaged both him and his faith …. In addition, [the plaintiff] was persistently harassed about his appearance, particularly his kufi and beard.” In addition, two Muslim Sunbelt customers testified that they too were subjected to derogatory names and comments about their faith when they came into the Sunbelt office where the plaintiff worked. In short, the Court concluded that the “constant and repetitive abuse” that the plaintiff allegedly experienced was sufficient to raise a jury issue as to whether or not he was subjected to a hostile work environment.

The Court also held that the plaintiff’s frequent verbal complaints to his managers (and not just his written complaint to Human Resources) were sufficient to put Sunbelt on notice of the alleged harassment. The Court noted that there was “scant evidence” that the Company did anything meaningful to respond to the plaintiff’s verbal complaints. Moreover, despite the alleged warning to the other employees not to make inappropriate comments to the plaintiff, a rational juror could find that the company failed to take sufficient action that was reasonably calculated to end the alleged harassment.

Lessons Learned: This case demonstrates the importance of having an effective, widely disseminated harassment policy and complaint procedure. An employee must be permitted to bypass management and complaint directly to Human Resources or an alternative source. In this case, the employee’s manager failed to adequately address his verbal complaints and when the employee ultimately complained to the Human Resources department, the issue was put back in management’s lap to investigate and respond, which they did not do effectively. Human Resources (or some other independent body) must conduct a thorough investigation, administer and document appropriate disciplinary action, and advise the employee to bring any further concerns directly to Human Resources.

TAKE NOTE

New Jersey Paid Family Leave. The New Jersey Legislature recently passed amendments to its Temporary Disability Benefits Law (the “TDBL”) that will provide eligible employees up to six weeks of paid leave to care for sick family members or a newborn or newly adopted child. These amendments, known as the Paid Family Leave Law, will, effective July 1, 2009, provide eligible employees with up to six weeks of paid time off during a leave of absence to care for a newborn or newly-adopted child or a family member with a serious health condition. All employers who are subject to New Jersey’s unemployment compensation laws (i.e., virtually all employers in New Jersey) are required pursuant to the law to permit their employees to use paid family leave benefits. Benefits under the law are to be funded by a new tax on employee wages beginning on January 1, 2009. Employees who have worked at least 20 weeks in covered New Jersey employment or earned in total at least 1,000 times the applicable minimum wage in such employment during the prior year (currently $7,150 per year) will be entitled to apply for and receive benefits. Eligible employees will be able to collect up to two-thirds of their weekly salary during the leave period (capped at $524 based on 2008 benefit levels under the TDBL), subject to a one-week waiting period.

Union Recognition. In Parkwood Dev. Center, Inc. v. N.L.R.B., the U.S. Court of Appeals for the D.C. Circuit affirmed the NLRB’s decision that an employer violated the National Labor Relations Act by withdrawing recognition of a union during the life of a collective bargaining agreement (CBA) based on a petition signed by a majority of workers stating that they no longer wanted union representation. The employer received the petition slightly more than three months before the CBA was set to expire. This was within the “open period” for health care institutions during which the Board accepts election petitions. Upon receiving the workers’ petition, the employer informed the union that the company would not engage in collective bargaining for a new agreement. However, the day before the CBA was set to expire, the union presented the employer with a counter-petition, also signed by a majority of the workers, voicing support for union recognition and rescinding the earlier petition. Nonetheless, the employer still refused to bargain with the union on a new CBA. The Court agreed with the NLRB that the employer could not sustain its decision to withdraw its recognition of the union based on the initial employee petition in light of the second, inconsistent petition. The employer instead should have filed a petition with the NLRB once it received the workers’ petition withdrawing employee support for the union, and secured an NLRB-supervised secret ballot election to determine whether it had an obligation to bargain with the union.

Title VII Retaliation. In Smith v. International Paper Co., the U.S. Court of Appeals for the Eighth Circuit (which covers Arkansas, Iowa, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota) held that an employee’s retaliation claim failed where the employee complained that his supervisor yelled and cursed at him, but did not assert that he was being mistreated because of his race (or any other protected category). During an employee survey, the plaintiff, an African-American, had been asked what he did not like about his job. He responded that his manager, who was Caucasian, “on a nightly basis … was cussing [him], hollering, yelling at [him].” Human Resources investigated. The manager about whom the plaintiff had complained asked him if he had complained to Human Resources. When the plaintiff admitted he had, the manager allegedly responded “I’m going to get you.” Over the next fourteen months, the plaintiff received four disciplinary notices, ultimately leading to his termination. The plaintiff filed suit, alleging race discrimination and retaliation. He argued that the manager’s alleged “I’m going to get you” statement was sufficient evidence of unlawful retaliation. The district court and Eighth Circuit disagreed with the employee, holding that the plaintiff’s complaint of inappropriate treatment by his manager did not constitute the type of protected activity required to support a retaliation claim because he never indicated in his internal complaint that any inappropriate treatment by the manager was directed at him because of his race. As such, his complaint was merely one about workplace civility and was not protected under Title VII.

Arbitration Agreements. The U.S. Court of Appeals for the Third Circuit, in the case of Zimmer v. CooperNeff Advisors, Inc., held that an agreement to arbitrate containing a provision allowing the employer (but not the employee) to institute court proceedings to enforce its intellectual property rights, was not unconscionable, and thus could be enforced against the employee. In CooperNeff, the plaintiff, a stock portfolio manager, signed an employment agreement containing an arbitration provision requiring that all claims arising from the termination of his employment would be subject to arbitration. The provision further permitted the company to file suit (and not arbitrate) any claims to assert its rights to intellectual property developed by the employee while working for the company. The plaintiff ultimately resigned his employment and a dispute arose concerning the plaintiff’s right to use in his new job a stock trading model that he had used while at his former employer. Both the plaintiff and employer instituted litigation. The former employer moved to compel the plaintiff to arbitrate his claims. The trial court found the arbitration provision to be unconscionable, in part, because the agreement limited the plaintiff’s access to the courts while reserving the company’s right to proceed to court. The Third Circuit reversed noting that there is no presumption of unconscionability simply because an arbitration agreement reserves judicial remedies for one party and not for the other.

Internet Privacy. This month, the New Jersey Supreme Court, in a unanimous opinion, held that individuals have a privacy right under the New Jersey Constitution in their anonymity while accessing Internet websites. State v. Reid, a criminal case, involved the prosecution of a former employee for attempting to sabotage her employer by logging into the website of a company equipment supplier and changing her employer’s password and shipping address to a non-existent address. The supplier informed the employer of the change and gave them the IP address of the computer used to access the supplier’s website. The employer was able to use an internet address locator website to determine that the IP address was registered to a Comcast user. When Comcast refused to disclose the identity of the subscriber, the employer reported the situation to local police. In response to a subpoena issued by the local prosecutor, Comcast disclosed the identity of the subscriber, who turned out to be a company employee. She was subsequently indicted for criminal computer theft.

The employee filed a motion to suppress the evidence obtained from Comcast, which was granted by the trial court and affirmed by the Appellate Division. The New Jersey Supreme Court also affirmed, recognizing that just as New Jersey citizens have a privacy interest in their bank records and telephone billing records, they also have a reasonable expectation of privacy, guaranteed by the New Jersey Constitution, in the subscriber information they provide to Internet Service Providers. Law enforcement officials can satisfy this constitutional protection and obtain subscriber information only by serving a grand jury subpoena on the Internet Service Provider (ISP). Although this opinion sets forth standards for obtaining ISP subscriber information in criminal cases, the Court made clear: “[w]e express no view today on the appropriate standard for disclosure of ISP subscriber information in civil cases ….”

TOP TIP

Tracking Non-Exempt Employee At-Home Work or Training Time

The U.S. Department of Labor (DOL) recently issued a letter opinion regarding an employer’s method of tracking a non-exempt employee’s time while performing at-home online training. (FLSA 2008-2NA (Feb. 14, 2008)). The employer had a policy which said:

“[Nonexempt] employees performing online [training at] home are responsible for keeping accurate records of all time spent performing online [training]. The [time sheet] must be used, signed by the employee’s manager and turned into the department time editor, in order for the employee to be compensated for their time. It is important to note that failure of an employee to accurately record time for online [training amounts to] falsification of payroll records….”

In its opinion letter, the DOL noted that employers are obligated to pay for all hours worked by an employee, including time worked at home if the employer knows or has reason to believe that the work is being performed. The regulations pertaining to the Fair Labor Standards Act do not specify a particular method of keeping required records of employee time worked, so long as the relevant information is maintained and preserved. Based on these principles, the DOL concluded that the policy described by the employer was an acceptable method of tracking the hours worked by employees.

Employers should be vigilant about tracking non-exempt employees’ time when they are teleworking. If an employer permits a non-exempt employee to work from home, it should have a policy that makes clear that the employee is required to accurately track their time worked and report it to the employer in a timely fashion. Significantly, even when working from home is not permitted by an employer’s rules absent prior authorization, if the employer is nonetheless aware that an employee is working from home, it is still required to pay for the time worked. That said, an employer may take disciplinary action against an employee who works at home without prior authorization if such authorization is required under the employer’s rules.

For greater clarification of any of these issues, you may contact any Shawe Rosenthal attorney.

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