Supreme Court revises 50 years of precedent on FLSA exemptions (posted April 3, 2018)

Generations of lawyers, judges, and litigants have understood that exemptions from the overtime requirements of the Fair Labor Standards Act are construed narrowly to give the widest possible effect to those requirements. That exemptions must be construed narrowly had become a canon of interpretation. No more.

On April 2, 2018, the Supreme Court in a 5-4 decision rejected that canon in Encino Motorcars v. Navarro. Writing for the majority, Justice Thomas wrote:

"The Ninth Circuit also invoked the principle that exemptions to the FLSA should be construed narrowly. 845 F. 3d, at 935–936. We reject this principle as a useful guidepost for interpreting the FLSA. Because the FLSA gives no “textual indication” that its exemptions should be construed narrowly, “there is no reason to give [them] anything other than a fair (rather than a ‘narrow’) interpretation.” Scalia, Reading Law, at 363. The narrow-construction principle relies on the flawed premise that the FLSA “‘pursues’” its remedial purpose “‘at all costs.’” American Express Co. v. Italian Colors Restaurant, 570 U. S. 228, 234 (2013) (quoting Rodriguez v. United States, 480 U. S. 522, 525–526 (1987) (per curiam)); see also Henson v. Santander Consumer USA Inc., 582 U. S. ___, ___ (2017) (slip op., at 9) (“[I]t is quite mistaken to assume . . . that whatever might appear to further the statute’sprimary objective must be the law” (internal quotation marks and alterations omitted)). But the FLSA has over two dozen exemptions in §213(b) alone, including the one at issue here. Those exemptions are as much a part of the FLSA’s purpose as the overtime-pay requirement. See id., at ___ (slip op., at 9) (“Legislation is, after all, the art of compromise, the limitations expressed in statutory terms often the price of passage”). We thus have no license to give the exemption anything but a fair reading."
The issue arose in a case dealing with automobile dealership service writers. Under the FLSA, "any salesman . . . primarily engaged in selling or servicing automobiles . . . ." is exempt from the overtime requirements. The Supreme Court had previously reversed and remanded the case to the Ninth Circuit because the Court rejected the Ninth Circuit's deference to the Department of Labor's 2011 regulation that made service writers non-exempt following more than forty years of precedent that they were exempt. The Court held no Chevron deference applied to that regulation. On remand, the Ninth Circuit again held in favor of the service writers, deciding that they were not salesmen engaged in selling or servicing automobiles. The Court reversed again, holding that service writers are salesmen that sell customers services for their vehicles.

But the specific holding as to service writers is not what makes Encino Motors important. Rather it is the rejection of the canon of narrow construction of FLSA exemptions. This rejection could have far-reaching effects on FLSA cases far beyond the specific exemption at issue in Encino Motors. Writing for the dissent, Justice Ginsburg noted that the majority rejected a "longstanding principle as applied to the FLSA . . without even acknowledging that it unsettles more than half a century of our precedent." It will be interesting to see how the lower courts adjust to the changed landscape of FLSA overtime claims. To do so, they will have to reexamine the statutory text and determine what degree of deference to accord DOL regulations and interpretive guidance that may now be called into question.

Recent Presentations (posted 11/16/17)

On November 8, 2017, I presented on common employer errors in employment law to human resources professionals of the Virginia Ship Repair Association.  The presentation covered common mistakes involving joint employment, overtime exemptions, recordkeeping, disability accommodation, and medical leave requests.

On October 2, 2017, I presented a continuing legal education seminar on the Fair Labor Standards Act as part of an Advanced Employment Law program offered by National Business Institute.  My presentation discussed compliance strategies for proper classification of employees under the FLSA, including joint employment, improper classification as exempt from overtime, improper classification as independent contractors, off-the-clock work, DOL Wage & Hour audits, and recent case law developments. 

Employer Liable For Firing Employee Who Refuses To Sign An Unlawful Agreement (posted 10/17/17)

The Second Circuit Court of Appeals affirmed an order by the National Labor Relations Board that held an employer committed an unfair labor practice for firing an employee who refused to sign a Confidentiality Agreement that included a prohibition on discussing "administrative information such as salaries [and the] contents of employment contracts."  The employer argued that the employee had long-running performance issues, but the NLRB disagreed, and the 2d Circuit upheld the NLRB's decision.   The Court agreed that "An employer may not require even one individual employee to agree to abide by unlawful restrictions as a condition of employment. That the employees have not yet organized in order to protest the unlawful nature of the restriction at issue does not make it any less unlawful."  It did not matter that the employee had not acted with other employees to protest the terms of the agreement.

The employer and employee were in a non-union setting, which emphasizes that the National Labor Relations Act applies to all private employers, not only those with a unionized workforce.  Non-union employers cannot impose unlawful rules on employees.

Police Detectives Not Entitled To Overtime Pay For Off-Hours Work On Mobile Electronic Devices (posted 8/17/17)

The Seventh Circuit Court of Appeals rejected the claims of police detectives in Chicago who claimed damages under the Fair Labor Standards Act for work performed off-duty using mobile electronic devices (BlackBerrys).  The detectives claimed they performed work for which they were not paid and supervisors knew of the work.  The trial court, after a bench trial, ruled against the detectives. 

The appeals court agreed with the trial court.  Though some of the BlackBerry time was compensable under the FLSA, the supervisors did not know that the detectives were not claiming the work.  Detectives completed "time due slips" for overtime pay, and the evidence showed that the supervisors thought the detectives were claiming the work on the slips, and the detectives never told the supervisors that they were not being paid for the work. 

The detectives contended there was an unwritten policy not to pay them for the off-duty BlackBerry work.  Interestingly, there were written policies that prohibited overtime pay for off-duty BlackBerry use except in certain conditions, but the trial court found them to be guidelines only, and guidelines that were not followed.  The trial court also found there had been no culture pressuring detectives not to report overtime. 

The trial and appeals courts considered and rejected the detectives' argument that the City had constructive knowledge that the detectives had not been paid for all of their work because the time due slips did not match the BlackBerry activity records.  The standard for employers' knowledge of employee work is one of reasonable diligence.  "The reasonable diligence standard asks what the employer should have known, not what 'it could have known.'"  Since the employer did not know of the unpaid work, it was not liable to pay for it.

Employer Required To Reinstate Employee With Back Pay Despite Vulgar Social Media Post About Supervisor (posted 4/25/17)

The Second Circuit Court of Appeals addressed the protection for an employee’s use of Facebook™ in a union organizing campaign.  The Second Circuit’s opinion highlights the difficult terrain an employer must navigate in enforcing policies on social media use.  In NLRB v. Pier Sixty, LLC, issued April 21, 2017, a catering company was in the midst of a union organizing campaign.  At an event, an employee took offense at his treatment by a supervisor.  During a break during the event, the employee posted on Facebook™:

[Supervisor] is such a NASTY MOTHER **CKER don’t know how to talk to people!!!!!! **ck his mother and his entire **cking family!!!! What a LOSER!!!! Vote YES for the UNION!!!!!!!

The employer fired the employee because of the post, and the employee complained to the NLRB, which instituted an unfair labor practice charge against the employer.  The NLRB ordered the employee reinstated and awarded him back pay, and the employer appealed the order to the Second Circuit. 

As the court noted, “The National Labor Relations Act generally prohibits employers from terminating an employee based on that employee’s union-related activity.  But even an employee engaged in protected activity ‘can, by opprobrious conduct, lose the protection of the [NLRA.]’” The court adopted the NLRB’s preferred test to determine opprobrious conduct in the use of social media since the employer had not objected during the NLRB proceedings to that test.

Under that test, the fact-finder looks to the totality of the circumstances and considers: (1) any evidence of antiunion hostility; (2) whether the conduct was provoked; (3) whether the conduct was impulsive or deliberate; (4) the location of the conduct; (5) the subject matter of the conduct; (6) the nature of the content; (7) whether the employer considered similar content to be offensive; (8) whether the employer maintained a specific rule prohibiting the content at issue; and (9) whether the discipline imposed was typical for similar violations or proportionate to the offense.

The Second Circuit enforced the NLRB’s order because it found that the post, though “dominated by vulgar attacks on [the supervisor] and his family” was addressed to workplace issues.  Further, the employer had “consistently tolerated profanity among its workers,” the “location” of the post “was an online forum that is a key medium of communication among coworkers and a tool for organization in the modern era,” and the post did not disrupt customers.

Former Employee Sued For Accessing Former Company's Electronic Information (posted 3/28/17)

A former employee should never access the computer systems of a former employer, even if the former employer neglects to change passwords or terminate access. 

In Estes Forwarding Worldwide, LLC, v. Cuellar, Eastern District of Virginia no. 3:16cv853, a former employee, more than one year after leaving employment with Estes, accessed a Google Drive account that he had created as an employee of Estes and ultimately downloaded 1900 spreadsheets of Estes operational data.  After identifying the former employer through his internet service provider, Estes filed suit, asserting claims for breach of contract, misappropriation of trade secrets, violation of the Virginia Computer Crimes Act, and violations of the Federal Computer Fraud and Abuse and Stored Communications Acts.  

The former employer sought to have the Computer Fraud and Abuse Act (CFAA) and Stored Communications Act (SCA) claims dismissed, but the court rejected the attempt.  It held that even though the former employer created the Google Drive account and the account was not on a computer belonging to Estes, he created the account in the course and scope of his employment and exclusively for employment use.  Since he had no authority to access the account after his termination, the claims were proper.

Is A Discharge Ever “Wrongful” In Virginia? (posted 3/10/17)

Virginia is an employment-at-will State, which means that the employer and employee may terminate the employment relationship at any time for any reason.  The only notice required is notice that the relationship is terminated.

There are limited exceptions to the employment-at-will doctrine for discharges that are “wrongful.”  But a Virginia Supreme Court decision on February 23, 2017, illustrates how very narrow those exceptions are.

In the case of Francis v. National Accrediting Commission of Career Arts & Sciences, Inc., the plaintiff was threatened by a co-worker who yelled obscenities at her, called her derogatory names, and had to be physically restrained by other co-workers.  When the employer took no action against the offending co-worker, Francis obtained a protective order from a court against him.  The sheriff served the co-worker with the order on a Thursday; the following Monday, the employer terminated Francis because she “did not fit the vision of the organization.”  Francis sued for wrongful discharge, arguing that her termination violated the public policy in the protective order statutes.  The trial court dismissed her claim, and she appealed.

The Supreme Court reviewed the three scenarios that afford an exception to the employment-at-will doctrine for wrongful discharge.  Those three scenarios are:

(1) When “an employer violated a policy enabling the exercise of an employee’s statutorily created right;”

(2) When “the public policy violated by the employer was explicitly expressed in the statute and the employee was clearly a member of that class of persons directly entitled to the protection enunciated by the public policy;” and,

(3) When “the discharge was based on the employee’s refusal to engage in a criminal act.”

The Court held that none of the scenarios applied to Francis.  It reasoned that though the protective order statutes clearly stated a public policy “to protect the health and safety of the petitioner or any family or household member of the petitioner,” Francis’ termination of employment itself did not violate the stated public policy of protection of health and safety.  She was not endangered by the termination, and she was not prevented from obtaining the protective order.

The Francis case is a reminder that a “wrongful discharge” is a rare discharge indeed.

What is effective notice of the need for leave under the Family and Medical Leave Act? (posted 2/16/17)

On February 9, 2016, the Second Circuit Court of Appeals reversed summary judgment for an employer on the issue of what notice an employee had to provide of the need for FMLA leave to his employer.  In the case of Coutard v. Municipal Credit Union, the employee had requested leave to care for a sick grandparent but had not informed the employer that the grandparent had raised him.  Under the FMLA, care of a grandparent with a serious health condition is not a covered absence unless the grandparent served as in loco parentis to the employee.  The trial court had ruled that the employee needed to provide that information to the employee, and since he had not, his later termination for absences was not an interference with his FMLA rights.

The Second Circuit disagreed, holding that the regulations for the FMLA only require the employee to provide sufficient information that the absence may qualify for leave, at which point it is the employer's responsibility to request additional information.  "In light of these regulations, we conclude that the obligation of an employee to give notice of his need for FMLA leave is not the obligation, imposed by the district court on Coutard, to provide the employer with all of the necessary details to permit a definitive determination of the FMLA's applicability at or before the time of the request. Rather, in the absence of a request for additional information, an employee has provided sufficient notice to his employer if that notice indicates reasonably that the FMLA may apply."

This case underscores that employers should have proactive procedures in place to evaluate and inquire into leave requests to determine if the absence qualifies for FMLA leave. 

Joint Employment under the Fair Labor Standards Act (posted 2/1/17)

The question often arises whether an individual who is not recognized as an employee of an Employer is nevertheless an “employee” of the Employer under the FLSA.  This situation often involves those who are classified as independent contractors or employees of a contractor of the Employer. 

The FLSA defines an employer as an entity that “suffers or permits” the individual to work.  That is a much broader concept than a W2 employer or under the common law of agency.

The Fourth Circuit Court of Appeals on January 25, 2017, explained and expanded its guidance on joint employment in the case of Salinas v. Commercial Interiors, Inc.  In its opinion, the Court adopted a six-factor test for lower courts to use in determining joint employment under the FLSA.  The factors are not exhaustive, as the “ultimate determination of joint employment must be based upon the circumstances of the whole activity.”  But they reflect an expansion of the joint employment doctrine from prior case law in the Fourth Circuit (applicable to MD, WV, VA, NC, and SC).  The factors are:

(1) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;

(2) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to—directly or indirectly—hire or fire the worker or modify the terms or conditions of the worker’s employment;

(3) The degree of permanency and duration of the relationship between the putative joint employers;

(4) Whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;

(5) Whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and

(6) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll; providing workers’ compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.

As a result of this decision, employers and workers could find that hours worked for different companies must be aggregated in determining whether workers worked more than forty hours in a workweek, entitling them to overtime compensation.


Does Concealed Carry Mean You Give Up Other Constitutional Rights? (posted 1/31/17)

The Fourth Circuit Court of Appeals issued an opinion on January 23, 2017, that should be of interest to all concealed carry permittees within its jurisdiction (including VA, NC, WV, and SC - plus MD should it allow concealed carry). In the case of United States v. Robinson, the full court held that "an officer who makes a lawful traffic stop and who has a reasonable suspicion that one of the automobile’s occupants is armed may frisk that individual for the officer’s protection and the safety of everyone on the scene" regardless of whether the weapon is lawfully carried. In other words, said the court, if you are armed, you are dangerous, regardless of the legality of the firearm. In a concurrence, Judge Wynn made the troubling observation that the "majority decision today necessarily leads to the conclusion that individuals who elect to carry firearms forego other constitutional rights" including the right against no-knock warrants and "greater restriction on their concurrent exercise of other constitutional rights, like those protected by the First Amendment." 
This could prove to be the beginning of very contentious fights over the Second Amendment's protections in light of recent Supreme Court decisions, including District of Columbia v. Heller and MacDonald v. City of Chicago.