HIGHLIGHTS FOR THE MONTH OF JULY 2007

By Adam S. Belzberg

RECENT DEVELOPMENTS

Security-Related Preliminary and Postliminary Activities Are Not Compensable Under the Fair Labor Standards Act

In Gorman v. the Consolidated Edison Corp., the U.S. Court of Appeals for the Second Circuit affirmed the dismissal of a Fair Labor Standards Act (FLSA) collective action lawsuit seeking compensation for pre-shift and post-shift security related activities.

Facts of the Case: The employees, who worked at a nuclear power plant, filed suit alleging that they were required to spend between ten to thirty minutes per day passing through multiple layers of security before reaching their worksites. The security measures included badge and vehicle inspections at the entrance of the plant, swiping an identification badge, passing through a radiation detector, performing a palm print identification and entering a locker room to obtain safety equipment. At the end of the shift, the employees would perform most of the same actions in reverse. The district court did not agree that the time spent on such preliminary and postliminary activities was compensable under the FLSA, and granted the employer’s motion to dismiss.

The Court’s Ruling: On appeal, the Second Circuit affirmed the trial court’s ruling that the security related activities at issue were non-compensable. Relying on Supreme Court precedent from the 1950s, the Second Circuit explained that in order to be compensable, preliminary and postliminary activities must be “integral and indispensable” to the employees’ principal work activities.

The Court agreed with the employees that the activities were “indispensable” to their principal job duties, but noted that the employees failed to show how the activities were also “integral” to their jobs. The Court reasoned that the security-related activities “are necessary in the sense that they are required and serve essential purposes of security; but they are not integral to principal work activities.”

In response to the employees’ argument that there has been significant increases in time spent on security measures that did not exist when the FLSA was enacted in 1938, the Second Circuit concluded that “the text of the statute does not depend on the purpose of any preliminaries, or how much time such preliminaries may consume. . . .”

In a similar case, Bonilla v. Baker Concrete Constr., Inc., decided the same day as Gorman, the U.S. Court of Appeals for the Eleventh Circuit similarly held that employees working at an airport were not entitled to any compensation for the time spent passing through security before arriving at their jobsites within the airport.

Lessons Learned: The issue of whether preliminary or postliminary activities are compensable under the FLSA continues to be a field of liability for employers. The rulings of the Second and Eleventh Circuits in these cases were favorable, and make sense from a public policy perspective given the need for increased security measures in virtually all aspects of business. Employers must remain mindful, however, that determining whether wages are due for certain preliminary or postliminary work activities will also be a fact-specific inquiry, not determined or controlled by any one decision or case. Involving competent counsel on wage-hour matters remains the best means for implementing proper practices.

FMLA Settlements Must Be Approved By A Court Or The U.S. Department Of Labor

In Taylor v. Progress Energy, Inc., the U.S. Court of Appeals for the Fourth Circuit reinstated its earlier decision, which was vacated in 2006, holding that employees cannot waive the right to sue for past or future violations of their Family and Medical Leave Act (FMLA) rights without approval from a court or the Department of Labor (DOL).

Facts of the Case: In 2001, the plaintiff was selected for a reduction in force and signed a separation agreement that included a general release of all rights relating to her employment and the termination of her employment arising under any federal and state laws. Despite the settlement agreement, the plaintiff later filed suit against the Company, claiming various violations of her FMLA rights. The Company argued that the plaintiff’s claims were barred by the general release she had signed as part of her separation agreement. Concluding that the FMLA’s regulations barred only prospective waivers (and not retrospective waivers), the district court ruled for the Company. The plaintiff appealed and the Fourth Circuit concluded that the plain language of the FMLA regulations did not distinguish between prospective and retrospective waivers. Accordingly, the Court held that FMLA rights may be waived only with prior approval from a court or the DOL. The Company petitioned for reconsideration by the full Fourth Circuit Court of Appeals. The Secretary of Labor also filed an amicus curia brief in support of the Company’s petition, arguing that the regulations solely bar prospective waivers of FMLA rights and that the DOL has never interpreted the regulations to prohibit the private settlement of FMLA claims arising out of prior acts. While the Court denied the petition for rehearing en banc, the panel that originally decided the appeal granted the Company’s petition and vacated its previous decision. The case was reargued in October 2006.

The Court’s Ruling: The original panel of the Fourth Circuit concluded, once again, that the FMLA’s regulations prohibit all waivers, both past and future of FMLA rights, unless the waiver has been pre-approved by a court or the DOL. The Court reasoned that the similarities between the FMLA and the FLSA support the position that the FMLA’s regulations, like those enforcing the FLSA, should be read to bar any release or waiver of FMLA rights without prior court or DOL approval.

Lessons Learned: While the DOL has indicated that it will soon be filing a petition for rehearing by the full Fourth Circuit, this case serves as a warning that, absent court or DOL approval, an employee’s release of claims will not be considered valid as to any FMLA claims. This case also serves as a reminder that any release of claims under the FLSA must also be approved by a court or the DOL.

TAKE NOTE

Gender Identity Discrimination. New Jersey recently added “gender identity and expression” to the list of protected characteristics under the New Jersey Law Against Discrimination (NJLAD). In New Jersey, the amendment to the NJLAD specifically protects individuals “having or being perceived as having a gender related identity or expression whether or not stereotypically associated with a person’s assigned sex at birth.” This includes transsexuals (i.e., individuals who identify themselves with being a member of the opposite sex, and may have undergone surgery and/or hormone therapy), transvestites (i.e., individuals who adopt the attire and often the behavior that is typical of the opposite sex without surgery or hormone therapy), and individuals who appear androgynous.

Regarding company dress codes, the NJLAD amendment provides that “[n]othing in the provisions of this section shall affect the ability of an employer to adhere to reasonable workplace appearance, grooming and dress standards not precluded by other provisions of State or federal law.” The amendment also provides, however, that “an employer shall allow an employee to appear, groom, and dress consistent with the employee’s gender identity or expression.” Accordingly, New Jersey employers may not discriminate against men who want to dress as women, and women who want to dress as men, in the workplace so long as they adhere to the employer’s requirements that employees dress and appear professional for the gender with which the employee identifies (which, by definition, cannot be a fleeting decision).

With respect to restrooms, the amendment provides that “individuals shall be admitted [to facilities in places of public accommodation] based on their gender identity and expression.” Accordingly, places of public accommodation in New Jersey must now permit individuals to use the restroom associated with their gender identity or expression. While the issue of whether employers must permit employees to use the restroom associated with their gender identity or expression is not spelled out in the amendments, employers that operate in places of public accommodation should permit their employees the same rights as customers.

The addition of gender identity to the list of protected characteristics represents a growing trend among states. This year, Colorado, Iowa, Oregon, and Vermont added gender identity to the list of protected characteristics under their state employment discrimination laws. At the federal level, there is also a pending bill, titled the Employment Non-Discrimination Act of 2007, which if passed will provide employment protections similar to those of Title VII for gay, lesbian, bisexual and transgender employees.

America’s Job Bank. On July 1, 2007 , the DOL closed America ’s Job Bank (free online nationwide job postings) for the stated reason that it “duplicates what is already available in the private sector.” The closing of America ’s Job Bank has frustrated federal contractors who have relied on the Job Bank, for over ten years, as an expressly recognized means of complying with the Vietnam Era Veterans Readjustment Assistance Act’s (VEVRAA) mandatory job posting requirements. In an effort to assist federal contractors with its compliance obligations, the DOL has announce that as a matter of enforcement discretion, and until further guidance is provide by the Office of Federal Contract Compliance Programs (OFCCP), it will not cite contractors for noncompliance with VEVRAA’s job posting requirements, so long as the contractors continue to make good faith efforts to recruit, hire, and retain qualified covered veterans. In order to assist contractors in finding alternatives to the Job Bank, the DOL’s Employment and Training Administration has compiled a list of hyperlinks to state job banks at: http://careeronestop.org/ajbprsjbl/.

Age Discrimination. On July 6, 2007 , the Equal Employment Opportunity Commission (EEOC) issued a final rule amending its Age Discrimination in Employment Act (ADEA) regulations to conform to the Supreme Court’s 2004 holding in General Dynamics Land Systems, Inc. v. Cline. In Cline, the Supreme Court held that the ADEA does not prohibit employment decisions that favor older employees. Under the amended regulations, employers may post advertisements that express a preference for older individuals using terms such as “over age 60,” “retirees,” or “supplement your pension.” While the EEOC’s amendments specifically provide that the ADEA solely prohibits employment discrimination based on age, they also provide that “the ADEA does not require employers to prefer older individuals and does not affect applicable state, municipal, or local laws that prohibit such preferences.” The text of the EEOC’s final rule is available at http://edocket.access.gpo.gov/2007/E7-13051.htm.

Disability Discrimination. In Berry v. T-Mobile USA, Inc., the U.S. Court of Appeals for the Tenth Circuit held that an employer will not be found to regard an employee as disabled under the Americans with Disabilities Act (ADA) simply because it granted the employee’s request for FMLA leave. In late 2003 Barbara Berry, a manager in T-Mobile’s customer care department, requested FMLA leave due to extreme fatigue caused by multiple sclerosis. At about the same time, the plaintiff’s supervisor informed the general manager that she was failing to hold her subordinates accountable and refused to work as a team with her peers. On November 24, 2003, the plaintiff submitted an application for FMLA leave, which was granted by the Company the day before it terminated her for “poor performance.” Accordingly, the plaintiff filed suit alleging, among other things, that she was terminated because T-Mobile “regarded her as disabled” under the ADA. The trial court dismissed the plaintiff’s claims and the Tenth Circuit affirmed, explaining that due to the different focus of the ADA and the FMLA’s protections, the plaintiff’s application for FMLA leave (and the employer’s decision to approve the leave) could not support her claim that her employer regarded her as being disabled under the ADA.

TOP TIP

Hiring Individuals As Independent Contractors Can Be Risky.

While there are significant financial incentives to hiring independent contractors, there are also significant risks associated with misclassifying employees as contractors. Whether a person is an independent contractor or employee turns on the nature of the relationship rather than the parties’ agreement. A bona fide independent contractor is one that satisfies a rigorous 20-factor test developed by an Internal Revenue Service Ruling issued in 1987.

If an individual is misclassified as a contractor, the employer may be liable for failure to withhold taxes, failure to make FICA/FUTA contributions, and failure to pay overtime. If the worker is injured or terminated, there also may be adverse workers’ compensation and unemployment compensation consequences. Finally, because qualifying employees generally must be afforded an opportunity to participate in company benefit plans, individuals wrongly denied such opportunities might have legal recourse (think Microsoft).

An individual is not an independent contractor simply because the employer and the individual agree to such title. Instead, the legal status remains tied to very specific requirements and those requirements are vigorously scrutinized by the state and federal agencies when the question arises. Typically, misclassification issues arise when an “independent contractor” is “fired” and files for unemployment or the “independent contractor” suffers an on-the-job injury and tries to file for worker’s compensation. In either scenario, once the employer offers as a defense that the individual was not an employee but an independent contractor; the field audit inspection may soon follow. Therefore, employers who have a list of “1099” individuals on their books should consult with counsel to ensure that it has properly classified such individuals before having to make such analysis under the fire of a federal or state department of labor inspection.

 

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

 

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