Employment Law Blog

Obama-Era FLSA Amendment DOA

Posted on: September 11, 2017

The continuing saga of the Obama-era overtime rule now appears to be officially over.  This rule, if implemented, would have required employers to pay employees more than $47,000 annually to qualify under one of the Fair Labor Standards Act’s white collar exemptions.  As set forth in a previous post below, the rule was in serious limbo after a Texas federal district court judge temporarily prevented its enforcement just before Thanksgiving last year, and now that same judge has struck down the rule permanently.

In a nutshell, the court said the DOL exceeded the authority granted to it by congress by fashioning a rule that effectively doubled the salary employers had to pay employees to qualify under the white-collar exemptions. Although the court didn’t quite shut the door on whether the US Department of Labor (“DOL”) has any authority to alter the salary basis test, the decision substantially limits DOL’s authority to implement a new salary basis test and dramatically alter the landscape of workers eligible for overtime compensation.

Anticipated FLSA Salary Requirements Blocked by Federal Judge

Posted on November 23, 2016

Late on November 22, a federal district court in Texas enjoined nationwide implementation of the Labor Department’s new overtime requirements that have been the subject of several articles posted below.  The new regulations were to go into effect on December 1.  Judge Amos Mazzant, ruling on a consolidated lawsuit brought by 21 states and a business coalition, concluded that the executive, administrative, or professional employee exemption contained in FLSA Sec. 13(a)(1) does not grant the Department of Labor the authority to utilize a salary-level test or an automatic salary updating mechanism under the rule. “With the Final Rule, the Department exceeds its delegated authority and ignores Congress’s intent by raising the minimum salary level such that it supplants the duties test. Consequently, the Final Rule does not meet [step one of the] Chevron [deference test] and is unlawful,” the court ruled (State of Nevada, et al v. Dept. of Labor, et al, Dkt. No. 4:16-CV-00731, Nov. 22, 2016.

Side-Stepping the New FLSA Requirements

Posted on November 11, 2016

In the article below, we informed readers that effective December 1, 2016, sweeping changes will be implemented with regard to the Fair Labor Standards Act (“FLSA”) that will require employers to more than double the minimum weekly salaries of exempt employees in order to maintain the exemption and avoid paying overtime.  Under existing regulations, employers have to pay employees a weekly salary of at least $455 to maintain the exemption.  Under the new regulations, employers must pay a minimum weekly salary of $913 to maintain the exemption.

As a practical matter, most employers probably won’t face a doubling of salaries for their exempt staff as weekly salaries tend to be substantially higher that $455 for most exempt employees.  Yet, many employers will still face a substantial and sudden economic impact as of December 1st.

There are a few ways to avoid or minimize the financial impact of the new regulations.  First, consider the fact that many exempt employees actually don’t work overtime (more than 40 hours per week).  For these employees, there would be no need to increase their pay to maintain the exemption.  Exposure for occasional overtime work could be controlled by carefully managing overtime hours and requiring approval before overtime is worked.  Employers should therefore carefully analyze the hours actually worked by their exempt employees to determine if there is even a need to comply with the new regulations.

If your exempt employees actually do regularly work overtime, consider surrendering the exemption and paying hourly.  Consider this example.  An exempt employee making $455 per week is making $11.38 an hour based on a 40 hour work week.  After December 1st, this employee will be making $913 per week, or $22.83 per hour.  If this same employee is converted to hourly pay at $11.38 an hour and consistently works 10 hours of overtime each week, his weekly pay would be $625.70 — far less than the $913 per week required by the new regulations.

Significant FLSA Changes Looming

Posted on June 17, 2016

Under the Fair Labor Standards Act (“FLSA”), employees are entitled to minimum wage and overtime (i.e. time and one-half of the employee’s regular rate of pay) for all hours worked over 40 in any given work week).  However, certain categories of employees are considered “exempt” from the FLSA’s minimum wage and overtime provisions.  In this regard, employees that meet the definition of executive, professional, administrative, outside sales and computer employees are exempted from the FLSA’s minimum wage and overtime requirement.

In order to qualify as exempt under any of these categories, employees must perform certain duties defined in Department of Labor regulations and must be compensated on a salary basis at a rate of not less than $455 per week ($23,660 per year).  Employees who are not paid on a salary basis at the required rate are not considered exempt and must be paid overtime (and minimum wage).

Effective December 1, 2016, the minimum weekly salary required to maintain the exemption under the FLSA increases from $455 per week to $913 per week (or $47,476 per year) — more than doubling the current minimum.  The Department of Labor will permit employers to satisfy up to 10 percent of the new standard salary requirement with nondiscretionary bonuses, incentive payments, and commissions, provided these forms of compensation are paid at least quarterly.  This regulation, 29 CFR Part 541, can be found here.

Undoubtedly, unless employers are willing to dramatically increase the pay of exempt workers in order to avoid losing the exemption, this change will dramatically increase the number of employees eligible for overtime compensation.

Court Upholds DOL Requirement For Paid Breaks

Posted on January 16, 2016

The Fair Labor Standards Act requires employers to pay their non-exempt employees for hours worked. The Department of Labor has a implemented a regulation that states: “Rest periods of short duration, running from 5 minutes to about 20 minutes, are common in industry . . . . They must be counted as hours worked.” 29 C.F.R. § 785.18.

Courts are not bound to follow such agency regulations, but they do afford them some deference.

In Perez v. American Future Systems, Inc. the Eastern District of Pennsylvania adopted the DOL regulation, holding that employers in most circumstances must pay non-exempt employees for breaks not exceeding 20 minutes.

Montgomery County To Require Paid Sick Leave

Posted on January 3, 2016

Effective October 1, 2016, Montgomery County will require employers to provide paid sick leave to their employees. “Sick and safe” leave under this amendment is earned for all work performed in the county. Employers with five or more employees must provide at least one hour of paid leave for every 30 hours worked, not to exceed 56 hours of earned paid leave in a calendar year. Employers with fewer than five employees must provide leave at the same rate – one hour for every 30 hours worked – and up to 56 hours of leave per year. However, for these small employers, only 32 hours must be paid and 24 hours can be provided on an unpaid basis. Employees exempt from overtime requirements earn leave pursuant to their normal workweek, up to 40 hours each week.

Employers may either award leave as it accrues throughout the calendar year or grant the full amount of leave to be earned over the course of the calendar year at the beginning of the year. Employers who utilize the accrual method must permit earned unused leave to carry over from year to year, although an annual carryover cap of 56 hours is permitted. Even with carryover, employers may limit the use of paid leave (or the combination of paid/unpaid leave for small employers) to 80 hours a year. Leave taken pursuant to this amendment is paid at the employee’s usual rate and with the same benefits. For tipped employees, earned leave must be paid at the county’s minimum wage rate, which is currently $9.55 on Oct. 1, 2015, but will rise to $10.75 on July 1, 2016. Leave accrues at the beginning of employment but employers may prohibit use during an initial 90-day probationary period.

Employees may elect to use leave in the smallest increment available under the employer’s payroll system and must not be required to take leave in increments of more than four hours. Earned leave does not have to be paid upon termination.

A Common Misconception About Tipped Employees in Maryland

Posted on November 12, 2015

In my 25 years of practice, I have represented both restaurant owners and employees in a variety of wage and hour matters. One issue that I have seen on a recurring basis concerns the payment of minimum wage to tipped employees, such as wait staff and bartenders. Many restaurant employers appear to believe that receipt of tips by employees somehow relieves them of the responsibility to pay minimum wage. This is simply not true.

In Maryland, tipped employees are indeed entitled to receive some form of minimum wage in addition to their tips. However, Maryland employers take can advantage of what is known as a “tip credit” to in effect reduce the amount of minimum hourly wage due a tipped employee. This is how it works — minimum wage in Maryland currently stands at $8.25 per hour (as set forth in the article below, minimum wage for Montgomery County employees is $9.55 per hour). If a tipped employee works 20 hours in any given week, he/she is entitled to at least $165.00 in compensation (20 hours x $8.25 per hour). However, if during that same period the employee earned $200.00 in tips, the employer would be entitled to a “tip credit” up to the required minimum hourly wage, less $3.63 (this is known as a “sub minimum” wage). So, in this example, the employer would only be required to compensate the tipped employee at the rate of $3.63 per hour.

Employers should be aware that if they fail to pay at least the required sub-minimum wage to tipped employees, they will be obligated to pay the full applicable minimum wage of $8.25 per hour and the employee will be entitled to retain all tips. This common mistake can cost employers thousands of dollars.

Montgomery County Passes “Ban the Box” Legislation Prohibiting Inquiries About Criminal Convictions Before Conclusion of First Interview

Posted on July 14, 2015

In a relatively below-the-radar manner, Montgomery County has enacted the “Fair Criminal Record Screening Standards Act” (the “Act”), prohibiting most private employers, as well as the County government itself, from inquiring about criminal arrests or convictions before the conclusion of a first interview. This prohibition applies to both applicants for initial hire and promotions of current active employees. The Act went into effect on January 1, 2015.

Often referred to as “ban the box” legislation (referring to the box appearing on many job applications inquiring about criminal arrests and convictions), this Montgomery County law prohibits employers from requiring an applicant or potential applicant to disclose on an employment application the existence or details of his or her arrest or conviction record. According the Act, an “applicant” is any person who is considered, or requests to be considered, for employment in the county, including a current employee who requests to be considered for a promotion. In a nutshell, prior to the conclusion of a first interview, Montgomery County employers are prohibited from requiring any criminal background disclosure, conducting a criminal record check, or inquiring of the applicant or others about whether the applicant has an arrest or conviction record or otherwise has been accused of a crime.

While an employer may not try to gather (directly or indirectly) criminal background information, the employer may ask questions about an applicant’s criminal or arrest record when the applicant voluntarily discloses its existence. After the conclusion of the first interview, the Act permits employers to inquire about an applicant’s criminal arrest or conviction records. However, if an employer makes a conditional offer, and then intends to rescind the offer based on the applicant’s arrest or conviction record, the employer will be subject to certain additional notice and other requirements, similar to those currently required under the federal Fair Credit Reporting Act. Specifically, prior to rescinding the offer, the employer must first:

  1. provide the applicant with a copy of any criminal record report that formed the basis of the decision to take the adverse action;
  2. notify the applicant of the employer’s intention to rescind the offer, and identify the items on the criminal record report that form the basis for its intention; and
  3. delay rescinding the offer for seven days to permit the applicant to give the employer notice of inaccuracy of the item(s) on which the intention to rescind is based.

If, at the end of the seven-day period, the employer still intends to take the adverse action, it must notify the applicant of the rescission in writing.

The Act in its present form is relatively toothless. An aggrieved individual Act may file an administrative complaint with the Executive Director of the County’s Office of Human Rights; however, the only remedy is a fine for each violation of up to $1,000, payable to the County as a civil penalty.   Nevertheless, covered employers (those employers who employ 15 or more full time employees) would be well advised to remove the “box” from all job applications and train employees with regard to the Acts requirements.

Employers Beware — Maryland’s Confusing Minimum Wage Laws

Posted on May 13, 2015

Federal minimum wage now stands at $7.25 per hour — meaning that non-exempt employees (i.e. those entitled to overtime) must generally receive an hourly wage that is equivalent to or greater than $7.25.  Pretty simple — unless you happen to work or own a business in a jurisdiction with a minimum wage that is greater than the federal minimum wage.

Maryland happens to be one of these jurisdictions.  Effective January 1, 2015, the minimum wage in Maryland (Labor and Employment Article, Title 3, Subtitle 4, Annotated Code of Maryland) is $8.00 per hour.  This summer (on July 1, 2015), the minimum wage in Maryland will increase to $8.25 per hour — $1.00 greater than the federal minimum wage.

To make matters even more confusing for employers (and employees), Montgomery County has its own minimum wage law.  As of October 1, 2014, the minimum wage for employees who work in Montgomery County is $8.40 per hour, which will increase to $9.55 per hour on October 1, 2015.   By July 1, 2017, the minimum wage in Montgomery County will be $11.50 per hour.   A chart summarizing the law can be found here.    PG County has a similar law summarized here.

Employers in Maryland outside of Montgomery and PG County must pay employees the higher Maryland minimum wage.  Employers in Montgomery and Prince George’s counties must pay the even higher minimum hourly wage established by the county.

Secret Service Fully Implements Relief Imposed by EEOC

Posted on February 15, 2015

Some months ago, I wrote an article concerning a case in which we successfully pursued a discrimination and retaliation case against the Secret Service on behalf of a former Special Officer.  Although it had a right to refuse to implement the EEOC Administrative Judge’s order and appeal the case, the Department of Homeland Security (of which Secret Service is a part) reviewed the hearing transcript and evidence admitted during the hearing, and elected to fully implement the Judge’s order granting relief to my client.

Firm Prevails in Discrimination and Retaliation Case Against Secret Service

Posted on October 2, 2014

In February 2013, we began representing a former Secret Service Special Officer in a discrimination (age and race) and retaliation claim against the Service Service from which he had recently retired after more than 20 years of service. Among other things, our client claimed that he was denied a promotion because of his race (white) and age (mid 60’s) and was retaliated against for prior EEO activity.

After engaging in months of discovery, including many depositions of Secret Service officials and employees, the Agency moved for summary judgment on all of our client’s claims.   The Motion was promptly denied by the EEOC Administrative Judge handling the case.

In July and August 2014, a three-day hearing was conducted before Administrative Judge Mary Ryerse during which 11 witnesses testified, including our client. The Agency was represented by two attorneys from its General Counsel’s office. During the hearing, a number of Secret Service employees testified that documents relating to the promotion sought by our client had been disposed of in a “burn bag.”   These witnesses were unable to clearly articulate why 2 substantially younger Special Officers (one of whom was African American) were promoted.   Further, testimony from several key Secret Service employees was inconsistent with other evidence introduced at the hearing, damaging the credibility of these witnesses.

Today, we received the Judge’s opinion, who found that the Secret Service had indeed discriminated against our client on the basis of his age and race. The Judge also found that the Secret Service had retaliated against our client for engaging in prior EEO activity. In her decision, the Judge awarded our client full back pay from the date he should have received the promotion, a corresponding increase in his monthly pension, compensatory damages in the amount of $25,000 and attorney’s fees.   A very gratifying win in a difficult case.

EEOC — A Black Hole?

Posted on October 1, 2014

In most jurisdictions (DC excluded), the filing of what is known as an “administrative complaint” is a prerequisite to filing a discrimination lawsuit. The administrative complaint process, in theory, is supposed to result in an investigation of the claim and an opportunity to conciliate the complaint through alternate dispute resolution, such as mediation.

Unfortunately, the administrative complaint process is very often (but not always) flawed, at best. Many complaints filed at the Baltimore field office (where complainants of discrimination in Maryland are filed) are now frequently farmed out to other field offices across the country, which can cause delay and other procedural issues. Other complaints are not investigated and simply sit idle at the EEOC with no action at all. Fortunately, but only after waiting 6 months, the complaining party can request a “Right to Sue” notice from the EEOC and proceed with the filing of a lawsuit.

I have had some positive experiences with EEOC filings — but have had some bad ones as well. Most memorable involves a case I handled for a federal employee with the FDA. In this case, I was hired to represent the employee in a failure to promote case in a hearing before the Chief Administrative Judge of the EEOC. After a multi-day hearing at the Agency, the parties submitted written closing arguments to the judge and awaited the decision. That hearing took place during the summer of 2009. Now, more than 5 years later, the parties are STILL waiting for a decision.

Fortunately, there are some benefits that are provided during the EEO process. However, I tell this story to all of my federal sector clients who are considering filing an EEO claim so they know what to expect.

The Surprising Costs of Mandatory Arbitration

Posted on September 26, 2014

Over the years, the benefits of arbitration versus litigation have been repeatedly touted by employers. With increasing frequency, provisions mandating arbitration of employment-related claims have appeared in employee handbooks or employment contracts. These provisions, which are generally enforced, preclude an aggrieved party from filing a lawsuit and instead require that party to have his or her claims resolved through arbitration.

There are certainly some benefits to arbitration. It is generally quicker and less formal than litigation. But the advantages are often offset by the limited discovery often afforded by arbitration, out of state forum requirements and arbitrators who lack the necessary expertise to determine the merits of the dispute.

While arbitration can be less expensive than litigation, the opposite is often true. In this regard, the filing fee at the American Arbitration Association (“AAA”) — the organization that is often appointed as the administrator of arbitral proceedings — can be prohibitive. These filing fees can exceed $10,000 (depending on the amount sought by the aggrieved party) and arbitrators frequently require advance payment of their estimated fee which can easily drive the initial cost of just starting the arbitration to $20,000 or more. In contrast, a case can be filed in the Circuit Court for Montgomery County for $135.

Who foots the bill for the potentially prohibitive cost of initiating arbitration? Unfortunately, in some cases, a substantial part of this cost is shifted to the employee. In this regard, the AAA will examine whether the dispute arises from an “employer promulgated plan” (i.e. a standardized, company-wide policy) or from a “negotiated agreement” (i.e. a contract that was or could have been negotiated by the parties).   For disputes arising out of employer promulgated plans, the current fee schedule would require the employee to absorb only $200 of the filing fee and the employer has to pay the remaining costs of arbitration, including the arbitrator’s fee. For disputes arising out of individually negotiated agreements, the employee is required to pay a much higher filing fee (depending on the amount claimed) and one-half of the arbitrator’s fee.

Thus, in the case of a $200,000 dispute arising out of a negotiated agreement, the employee would be required to pay a $2,800 initial filing fee, a subsequent filing fee of $1,250 and absorb one-half of the arbitrator’s fee (which can often exceed $20,000).   In other words, the employee in this example would be potentially required to pay over $14,000 just for the privilege of pursuing his claim in arbitration. Without a mandatory arbitration provision, this same employee could pursue his case in court by paying a filing fee of $135.

While there are some benefits to arbitration, the hidden costs often eclipse these benefits. Sadly, because of these costs, employees with legitimate claims often cannot afford to arbitrate their claims and are left without a remedy.

Obama Seeks to Expand Overtime Coverage to Previously Exempt Employees

Posted on March 14, 2014

On Thursday March 13, 2014, President Obama ordered the U.S. Department of Labor to revise applicable regulations governing overtime pay to expand eligibility for potentially millions of employees to receive overtime pay when they work in excess of 40 hours in any given week.

According to the Obama White House, as many as 88 percent of salaried workers are not guaranteed overtime pay (i.e. time and one-half of a worker’s regular rate of pay) because they supervise (even if minimally) other employees and earn more than the current cap of $455 a week.   Under current regulations, these workers can be denied overtime pay — typically under the so-called “white-collar” exemption no matter how many hours they work each week. Thus, the “working supervisor” can be forced to work significant overtime (i.e. more than 40 hours per week) without receiving any additional compensation provided he or she makes a salary of at least $455 per week.

Although the winds of change are blowing, Obama’s order does not prescribe a new salary threshold, and it does not take effect immediately. Instead, he has instructed Labor Secretary Thomas E. Perez to come up with a plan that would expand the number of workers eligible for overtime pay. During a period of public comment, business groups will almost surely seek to dramatically scale back this initiative by limiting the number of employees who might benefit from the change.

Marc J. Smith Selected by XpertHR as Contributing Author

Posted on August 13, 2012

Recently, Marc was selected by XpertHR, a comprehensive on-line resource for human resource and other employment specialists, to be a contributing author on various issues relating to employment law in the Commonwealth of Virginia.

The articles are focused on Virginia law and include the following topics:

  • Terms of Employment
  • Involuntary and Voluntary Pay Deductions
  • Payment of Wages
  • Minimum Wage
  • Health Care Continuation
  • Employee Classification
  • Hours Worked

Marc’s biography on XpertHR can be found here. A summary of the articles written by Marc can be found here.

Maryland Legislature Prohibits Employers from Demanding Facebook Access

Posted on July 22, 2012

Maryland became the first state to enact legislation prohibiting employers from requesting or requiring an employee or applicant to disclose any user name, password, or other means for accessing Facebook or any other similar service. The legislation was prompted by a state agency’s policy of demanding prospective employees disclose their user names and passwords to social media websites as part of its background investigation process. The agency had discontinued the practice after an employee claimed that the practice was a violation of his personal privacy.

Employers are prohibited from requesting or requiring an employee or applicant to disclose a user name, password, or any other means of accessing Facebook or similar on-line accounts or other service through an “electronic communications device” (defined as “computers, telephones, personal digital assistants, and other similar devices”). Employers cannot refuse to hire an applicant or discharge, discipline or otherwise penalize an employee who refuses to disclose any user names and passwords relating to a personal account or service.

Under this law, employers may require an employee to disclose any user names, passwords or other means for accessing an employee’s “non-personal” accounts related to the employer’s computer or information systems. Further, employers are not prohibited from acting upon and investigating information it may receive regarding an employee’s unauthorized downloading of proprietary or financial data or conducting an investigation for the purposes of ensuring compliance with applicable securities or financial law or regulatory requirements.

All private and public employers are covered.   The law becomes effective October 1, 2012.

Marc J. Smith Has Second Appearance on “Law School For the Public” To Discuss Worker Misclassification

Posted on May 9, 2012

Recently, I was invited for my second appearance on “Law School for the Public” — a television series produced by Montgomery Community Television/Montgomery Community Media that runs on cable channel 19/21 on Comcast, Verizon and RCN in Montgomery County. We filmed on May 8, 2012. A recording of the program can be found here.

We had a great time filming the show, which was hosted by Lauri Cleary, a partner with Lerch, Early & Brewer in Bethesda. Rick Vernon, Lauri’s partner, was also a guest. The topic of discussion concerned the widespread problem of misclassifying workers as independent contractors and the impact of such misclassification on both the workforce and employers. During the show we also discussed the factors used by various agencies and courts to identify whether a worker is an employee, independent contractor or intern, why correctly classifying workers is so important and the penalties associated with misclassification.

Department of Labor Creates App That Allows Employees to Track Work Hours

Posted on October 19, 2011

This past spring, the U.S. Department of Labor announced the launch of its first application for smartphones, a time sheet to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break time and any overtime hours for one or more employers. Glossary, contact information and materials about wage laws are easily accessible through links to the Web pages of the department’s Wage and Hour Division.

Additionally, through the app, users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly and monthly format; and email the summary of work hours and gross pay as an attachment.

This new technology highlights the importance of accurate time keeping for employers who typically bear the burden of proof in wage and hour cases.  Without accurate time records, employers may be very vulnerable in wage and hour litigation and during DOL investigations.

The app can be found here.

IRS Creates Incentive to Fix Worker Classification Errors

Posted on October 19, 2011

As we have written elsewhere in this blog, when an employer misclassifies a worker as an independent contractor, the employer exposes itself to a host of potential claims and liabilities, including but not limited to  payroll taxes, income tax withholding, workers compensation, unemployment insurance, overtime pay, and benefits.

To encourage employers to voluntarily fix worker classification errors, the IRS has created a new program known as the Voluntary Classification Settlement Program (“VCSP”) pursuant to which eligible employers can significantly decrease their exposure as a result of misclassifying employees as independent contractors.

With the creation of the VCSP, employers that use independent contractors should re-evaluate their independent contractor relationships and confirm whether the facts support the independent contractor label.  If an eligible employer determines that one or more independent contractors should have been classified as employees, it may apply for relief under the VCSP.

An employer participating under the VCSP: (i) agrees to prospectively treat a class of workers as employees; and (ii) pays to the IRS an amount equal to 10% of the employment tax liability that would have been due on compensation paid to the misclassified workers for the most recent tax year and will not be liable for any interest or penalties.  In exchange, the employer becomes exempt from an employment tax audit with respect to the worker classification for the group of workers reclassified under the VCSP.

While the relief offered under the VCSP is potentially significant, employers must keep in mind that the VCSP provides relief only from federal payroll tax liabilities. The program does not reduce the exposure relating to other potential claims and liabilities, such as state taxes, workers compensation, overtime pay, and benefits.  Accordingly, employers should ensure that they understand and weigh both the benefits and the potential risks of participating in the program.  For more about the program, the IRS website contains useful information.

Firm Settles Large Sales Commission Case Against Public Tech Company

Posted on August 10, 2011

Late last year, we began representing a sales executive of a publicly traded technology company with unpaid commission claims exceeding $1 million dollars. Our client had greatly exceeded his assigned sales goals that triggered accelerators under his compensation plan that significantly enhanced his commissions. The unique legal issue in the case involved the employer’s attempt to retroactively amend our client’s compensation plan in an effort to offset the huge commission that had accrued. In fact, after the plan was “amended,” the company claimed our client actually had obligation to repay thousands of dollars in commissions that had been paid to him when the original compensation plan was in effect. It was our position that such retroactive changes were permissible only with respect to future commissions, but were unenforceable for commissions that had already been earned.

Recognizing its tenuous legal position, the company agreed to settle just prior to the initiation of binding arbitration. After months of negotiations, the company agreed to pay a substantial portion of the commissions we claimed were owed.

New Maryland Law Prohibits Employer Use of Applicant and Employee Credit Information

Posted on May 16, 2011

Many employers require applicants to sign forms providing authorization for the employer to access an employee’s credit report — particularly in the banking and financial services fields. When negative information is uncovered, such as poor credit or bankruptcy, that information is often used as the basis for denying employment.

However, effective October 1, 2011, a new law will severely constrain the ability of Maryland employers to request or use an applicant’s or employee’s credit report or credit information to make employment decisions. The Job Applicant Fairness Act applies to all employers (with several exceptions outlined below) and allows an employer to request or use an applicant’s credit information only after an offer of employment has been made. Even then, credit information cannot be used: (i) to deny employment; (ii) as the basis for terminating the employee; or (iii) to determine the terms, conditions or privileges of employment, such as the employee’s salary level.

Although most employers will be required to comply with this new law, the Job Applicant Fairness Act does not apply to various financial institutions, as well as employers who are required to inquire into an applicant’s or employee’s credit history under federal or state law.

The Act does not provide a private right of action — i.e. individuals cannot sue for violations. Rather, a complaint must be filed with the Commissioner of Labor and Industry who can assess a civil penalty of up to $500 for an initial violation and up to $2500 for repeat violation.

For more information, see House Bill 87.

Court Issues Judgment of $70,000 To Client In Wage Payment And Collection Law Case

Posted on April 5, 2011

Last year, we began representing an employee of a local business in an unpaid wage case involving rather extraordinary facts — the employer had issued an astounding total of 57 paychecks to our client which the bank would not honor due to insufficient funds. We filed suit in the Circuit Court for Montgomery County seeking treble (triple) damages and attorney’s fees under Maryland’s Wage Payment and Collection law which requires employers to promptly pay their employees wages or face severe penalties.

On March 31, 2011, the Court entered judgment in favor of our client and against the defendant employer for $70,000. Unfortunately, the individual defendant than proceeded to file a Chapter 7 bankruptcy seeking to avoid her obligation to our client. For the short term, the defendant’s bankruptcy filing stays any effort on our part to collect the judgment entered in favor of our client; however, we anticipate challenging the defendant’s ability to discharge her obligation to our client on the grounds of fraud.

Maryland Agency Suspends Policy Of Requiring Applicants To Provide Usernames and Passwords To Facebook and Other Social Media Accounts

Posted on March 30, 2011

Not long ago, I wrote about the unfortunate waitress who was fired after posting posting derogatory information about her employer’s customers on her Facebook account. In this day and age, workers should understand that employers routinely scour social media sites in conjunction with hiring decisions, when confronted with troubled employees and in a myriad of other circumstances. Putting aside the legal pitfalls associated with this practice, employees and job applicants have discovered the brutal consequences of posting information, pictures or videos that employers may take a dim view of. Think about it — if two qualified candidates with equal credentials apply for the same position but one had explicit and inappropriate information plastered all over his “wall,” which would you hire?

Recently, a large Maryland employer decided to push the envelope on this issue and demanded that applicants and some employees provide their usernames and passwords to their social media accounts as a condition of employment.  According to the ACLU, the Maryland Division of Corrections (“MDOC”) “has a blanket requirement that applicants for employment with the division, as well as current employees undergoing recertification, provide the government with their social media account usernames and personal passwords for use in employee background checks.”   According the ACLU’s blog, an employee of MDOC was required to provide his Facebook login and password during a recertification interview. Once he provided it, the interviewer logged on to his account and reviewed the content. The ACLU’s letter to Maryland’s Public Safety Secretary and a video of the employee telling his story can be found on the ACLU Blog.

An NBC report states that the MDOC simply wanted to make sure that their employees are not engaged in any illicit activities. The MDOC has issued their own statement, defending and explaining their actions: “DPSCS reserves the right to inquire about a possible candidate’s Facebook account during the hiring or re-certification process. However, it does not require/demand it as stated in the ACLU release. A candidate’s refusal is not grounds for disqualification.”

Not surprisingly, MDOC recently suspended its Facebook-password policy for job applicants following the negative publicity resulting from the ACLU blog post in opposition to the practice. Maryland Public Safety Secretary Gary Maynard notified the ACLU that he had suspended the social-media password requirement for 45 days pending a review of the policy.

“Working” Tavern Owner Not Entitled to Share in Tip Pool

Posted on March 21, 2011

In a recent case of first impression in the Fourth Circuit, the Court ruled that the owner of a restaurant/tavern, who is also a bartender, may not lawfully participate in his employee bartenders tip pool under the Fair Labor Standards Act. In Gionfriddo v. Zink, the court observed that [e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.

While the general rule is that employees must be paid minimum wage, i.e., $7.25 per hour under the FLSA, an exception exists for tipped employees such as bartenders and waitstaff. Tipped employees are those who customarily and regularly receive more than $30 a month in tips. For employees who can legitimately be classified as tipped employees, an employer satisfies the FLSA if it pays tipped employees at least $2.13 per hour, and that wage, combined with tips, equals or exceeds $7.25 per hour.

In its ruling, the Court held that it would be an anathema to the purpose behind the FLSA to simultaneously allow [an owner] to take tips from a collective tip pool that was set up to allow him to pay his employees at a rate substantially below the minimum wage and that a contrary finding would broaden the FLSA s tip credit provisions to a point where they would become meaningless.

Court Enters $1.3 Million Dollar Judgment In Favor Of 2 Employees For Unpaid Wages

Posted on February 18, 2011

On February 18, 2011, Judge John McDowell, a Washington County Circuit Court Judge, entered judgment in favor of two clients who were former employees of Defendant IOT Systems. As described in our Complaint (a copy of which can be found here), during the course of our clients’ employment, IOT missed its weekly payroll on a number of occasions. Indeed, by the time our clients resigned last year, one client was owed over $250,000 in unpaid wages and the other was owed over $180,000.

At a hearing conducted this morning, Judge McDowell awarded both clients all of their back pay and awarded nearly treble (triple) damages under Maryland’s Wage Payment and Collection law. One client was awarded over $700,000 in back pay and additional damages under the Wage Payment and Collection law, and the other client was awarded over $500,000.

The Court also imposed personal liability on the president and owner of the company for violating the provisions of the Fair Labor Standards Act. In this regard, the Court accepted our argument that for the weeks our clients were not paid, IOT Systems violated the provisions of the Fair Labor Standards Act (“FLSA”) by not providing our clients with at least minimum wage. Accordingly, Judge McDowell imposed personal liability and entered judgment against the president and owner of IOT Systems (as authorized by the FLSA) for nearly $90,000 of the unpaid wages sought in the lawsuit.

Using Employer’s Email To Communicate With Attorney May Lead To Loss Of Attorney-Client Privilege

Posted on January 22, 2011

In an interesting recent case, an employee who had sued her employer claiming discrimination was not entitled to assert the attorney-client privilege with respect to her email communications with her attorney in the litigation because they were sent from her work email account, a California appeals court has ruled.

According to the court, the email was not a protected confidential communication because the employer, the Petrovich Development Co., had warned that employee emails were not confidential and were subject to monitoring. According to the court, “the emails sent via company computer under the circumstances of this case were akin to consulting her lawyer in her employer’s conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him,” the court said.

Not all courts have agreed with the California court. Last March, the New Jersey Supreme Court protected emails sent from a personal account on a work computer to a lawyer. The court noted that the emails weren’t clearly covered by the employer’s policy, and they contained the standard warning that they were confidential attorney communications.

The lesson here is avoid communicating with your attorney while using your employer’s email. Employees should be aware that employers can and often do monitor their employee’s emails. Some employers even have the capability of monitoring emails sent/received by employees on private email accounts like Yahoo and Hotmail if they access those emails using company computers.

Overtime Compensation — Myths and Realities

Posted on December 15, 2010

If you keep up with legal news, you will almost certainly have noticed the proliferation of litigation concerning entitlement to overtime compensation, including collective actions where large numbers of employees sue their employers for unpaid overtime. Liability for unpaid overtime can be staggering, especially in cases involving collective actions, because employees can potentially reach back three years for unpaid overtime and may be able to recover liquidated (double) damages and attorney’s fees.

Over the years, I have handled a large number of cases involving alleged unpaid overtime on behalf of both management and employees. While some cases are novel and may turn on an arcane exemption (i.e. a classification of jobs for which no overtime is required) or a unique position that does not fall neatly within any of the numerous exemptions recognized under the Fair Labor Standards Act (the federal law governing the payment of overtime) and/or Maryland law, I have seen employers stumble on many of the same issues time and time again.

Characterizing Employees as Independent Contractors. Characterizing workers as “independent contractors” has long been a favorite device used by employers to avoid overtime, provision of benefits and other privileges traditionally provided to employees (just ask Microsoft). Unfortunately, while true independent contractors are not entitled to overtime, based upon my experience, employers are usually on the wrong side of the law when they attempt to classify workers as independent contractors. One of the problems is that different agencies, like the IRS and Department of Labor apply different tests to determine whether a worker is truly an independent contractor. One of the keys is whether the worker is under the control of the employer and receives direction concerning how the work is to be performed. Other questions include whether the worker is performing a service that is part of the employers core business, whether the worker works at the employer’s site using tools provided by the employer and whether the worker works exclusively for the employer. If the answer to these questions is “yes,” then the worker is very likely an employee and is entitled to overtime and other benefits provided to employees.

Mischaracterizing Employees as Exempt. The Fair Labor Standards Act and Maryland law provide overtime exemptions for employees who are considered “executives,” “professionals,” “administrative employees,” computer professionals, outside sales professionals and a number of other exemptions for certain occupations — some quite arcane. The determine of whether an employee falls within any given exemption depends upon an employees actual job duties — i.e. titles are virtually irrelevant. In my view, correctly classifying employees is one of the more difficult tasks confronting employers and one that has generated abundant litigation. For example, not every administrative employee falls within the “administrative” exemption (i.e. your receptionist and secretary are probably NOT exempt). Likewise, your inside telesales representative is not exempt (ask Dan Snyder, the owner of the Redskins) nor is your employee whose duties are limited to setting up computers for new employees. This is one area where it makes sense to obtain qualified legal advice in situations where proper classification is unclear.

Paying by Salary to Avoid Overtime. This is another very common misperception of the law. An employer CANNOT avoid overtime obligations simply by paying workers by salary rather than by an hourly wage. While paying a salary is a requirement to maintain a worker’s “exempt” status, the provision of a salary does not create an exemption. Rather, as set forth above, it is the worker’s actual job duties that govern whether he or she is entitled to overtime.

Paying “Straight-Time” for Overtime Hours. Over the years, I have seen countless employers pay their hourly, non-exempt workers their regular hourly wage, even when the worker works more than 40 hours per week — the threshold at which the obligation to pay overtime kicks in. In reality, employers are required to pay non-exempt employees “time and one-half” the worker’s regular hourly rate of compensation for each hour over 40 worked in any given work week. This means that an employee earning $20 per hour would be entitled to $30 for each hour of overtime worked.

Refusing to Pay Overtime When it is Not “Approved.” Another myth. Any hours of overtime worked by an employee must be paid at the overtime premium, regardless of whether the worker complied with company policy requiring approval for overtime. That is not to say you cannot take appropriate remedial action against the employee with disciplinary measures or, in extreme cases, termination.

Agreements with Workers Not to Pay Overtime. While courts usually respect the concept of “freedom of contract” and provide parties wide latitude about the terms of their contractual arrangements, the courts afford no such freedom in the context of overtime. If a worker is exempt, the courts will strike down any attempt by an employer to contract out of the obligation to pay overtime.

There are many more examples to be sure. Understanding and applying the Fair Labor Standards Act can be a daunting task. This is one of those areas in which an ounce of prevention is most certainly worth a pound of cure.

Marc J. Smith Appears on “Law School for the Public” on Wage and Hour Segment

Posted on December 8, 2010

Recently, I was invited to participate as a guest commentator on a segment of “Law School for the Public,” an educational program appearing on cable television in Montgomery County, Maryland. Rick Vernon, a partner at the Bethesda, Maryland firm of Lerch, Early & Brewer, Chtd., also appeared as a guest on the show hosted by his law partner, Lori Cleary. The half hour show, which focused on many of the Wage and Hour laws applicable to Maryland employers, includes commentary concerning overtime compensation, vacation pay, unpaid interns, independent contractors and other issues from both the employer’s and employee’s perspectives.

The show aired on December 1, 2010 on Comcast cable.

Congress Considers Extension of Emergency Unemployment Benefits

Posted on December 8, 2010

As you may have seen in the news, the United States Congress is currently considering an extension of the Emergency Unemployment Compensation (EUC) Program as part of President Obama’s compromise legislation. At this time, the legislation has not been passed and the EUC Program has not been extended.

As noted by the Maryland Department of Labor, Licensing and Regulation (“DLLR”), if the legislation is passed and signed by the President, the DLLR will take immediate action to reinstate the program. According to the DLLR, if the EUC Program is extended it will not add any additional weeks of benefits. If you have exhausted your EUC benefits, no additional benefits will be available.

For more information, check out the DLLR website.


Extended Unemployment Benefits Expire

Posted on December 2, 2010

On November 30, 2010, extended unemployment benefits, which had been expanded by the federal government by a period of 73 weeks (normally individuals can collect a maximum of 26 weeks), expired potentially leaving several million people without a source of income over the holidays. The fate of a further extension has become a political battle between Democrats and Republicans, with the Republicans refusing to consider legislation without a quid pro quo.

Economists say dropping the extended benefits, could reduce annual economic growth by nearly one percent and could cost up to one million jobs. That’s because the nearly 10 million people relying on an average $290 a week tend to spend the money immediately on necessities like food and shelter. A yearlong reauthorization of the benefits would cost roughly $60 billion — money that would reverberate quickly throughout the economy.

Arbitrator Awards Attorney’s Fees to Client In Severance Dispute Against Local Financial Company

Posted on November 15, 2010

Early in March 2010, we initiated an arbitration action against a local financial firm that purchases structured settlements and lottery winnings. Our client was employed as an executive with the firm. When filed, the case was premised on the firm’s anticipatory breach of a severance agreement with our client. Subsequently, the firm admitted liability and the only issue that remained was their liability for the costs of arbitration and our client’s attorney’s fees. Rather than settle the dispute, as it should have, the firm chose to continue the fight and cause our client to more than triple his attorney’s fees. The hearing was held on November 4, 2010 and the arbitrator issued her decision several days later, holding that firm had indeed anticipatorily breached the severance agreement and awarded our client his fees and costs incurred during the arbitration.

Court Orders Facebook to Produce “Private” Information

Posted on September 27, 2010

In an interesting recent case, Romano v. Steelcase, Inc., an employee alleged she had suffered a workplace injury that caused significant physical harm, including an injury to her neck and back and “pain and progressive deterioration with consequential loss of enjoyment of life.” As part of its defense, the employer sought to obtain copies of its employee’s Facebook and MySpace profiles—both the portions that were publicly available and those that the employee had marked as private using the sites’ privacy settings.

After the employer served subpoenas on Facebook and MySpace, Facebook objected to the request on the basis that it cannot release a user’s profile information without the user’s consent because to do so would be in violation of the Stored Communications Act. The employee refused to provide her consent and sought to quash the subpoena.

The employer argued that the public portions of the employee’s Facebook and MySpace profiles showed, contrary to the claims asserted in her lawsuit, the employee actually had an “active lifestyle and can travel and apparently engages in many other physical activities inconsistent with her claims in this litigation.”

The employee claimed that she “possesse[d] a reasonable expectation of privacy in her home computer” and that her employer’s attempt to gain access to her private information would give her employer access to “wholly irrelevant information as well as extremely private information.” Nonetheless, the New York Supreme Court wasn’t buying the employee’s theory. Instead, the court ruled, precluding the employer from accessing its employee’s profiles “would condone [her] attempt to hide relevant information behind self-regulated privacy settings.” he court found that the fact that, based on the publicly available portions of the employee’s profiles, it was reasonable to conclude that the private portions of her profiles “may contain further evidence such as information with regard to her activities and enjoyment of life, all of which are material and relevant to the defense of this action.”

The court also rejected the employee’s argument that the release of the information would violate her Fourth Amendment right to privacy because, by joining the sites, she consented to the possibility that her personal information would be shared with others, notwithstanding her privacy settings. Indeed, that is the very nature and purpose of these social networking sites or they “would cease to exist.”

Another reason to be cautious about what you post on Facebook and other social networking sites.

Arbitrator Rules In Favor Of Client’s 401(k) Plan In ERISA Breach Of Fiduciary Duty Case

Posted on September 23, 2010

In July 2010, I handled a three-day arbitration in Denver, Colorado on behalf of an employer and its 401(k) Plan in an ERISA breach of fiduciary duty case. In a nutshell, my clients had engaged the services of an outside third party administrator and registered investment advisor to handle the administration of their 401(k) Plan and to provide investment advice for the company’s 401(k) Plan participants. Unfortunately, the administrators and investment advisor failed to notify my clients and the Plan participants of a “market value adjustment” that occurred when a certain investment held in the Plan was liquidated, and the Plan participants suffered a significant loss as a result.

Following the three-day arbitration, the arbitrator ruled that the administrator and investment advisor were chiefly responsible for the loss incurred by the Plan participants and ordered them to substantially reimburse them for the loss incurred as a result of their failure to inform the participants of the market value adjustment.

Are Employees Entitled to FMLA Leave For Cosmetic Surgery?

Posted on August 24, 2010

The Family and Medical Leave Act of 1993 (“FMLA”) provides for up to 12 weeks of job protected, unpaid leave each year for certain employees for reasons that include the employee’s own serious health condition. Are employees entitled to leave under the FMLA for cosmetic surgery? The answer depends upon whether the procedure is related to a medical condition that otherwise qualifies as a “serious health condition” under the FMLA. If so, then the answer is yes. For example, reconstructive surgery following a serious injury or illness would likely qualify for FMLA leave.

However, the applicable regulations provide that conditions for which cosmetic treatments are administered (such as most treatments for acne or plastic surgery) are not “serious health conditions” for which FMLA leave is available unless inpatient hospital care is required or unless complications develop. Accordingly, FMLA leave is generally not available for purely outpatient cosmetic procedures. However, the regulations suggests that FMLA leave would be available for a purely cosmetic procedure if the procedure involves an overnight stay in the hospital or results in complications that otherwise meet the definition of “serious health condition.”

Common Missteps To Avoid When Making Federal Sector EEO Complaints

Posted on August 10, 2010

Over the course of my career, I have litigated hundreds of employment cases.  Most of these cases have involved private sector employers, but I have handled a number of federal sector EEO claims over the years as well.  There are significant differences in the manner in which private vs. public sector EEO claims are handled.  In my opinion, there are many more “opportunities” for federal employees to damage their case or lose their rights altogether.  Here are some of the more common missteps to avoid:

  1. Failure to seek EEO counseling.If you feel you have been discriminated or retaliated against for engaging in protected activity, you must seek EEO counseling within 45 days of the discriminatory event.  Failure to seek EEO counseling in a timely manner usually means you lose your right to pursue that particular claim.
  2. Failure to Timely file your EEO Complaint.If EEO counseling is not successful (and it is usually not — “counseling” is a bit of a misnomer as my experience has been that little effort is made to “counsel” or resolve the EEO complaint at this stage) and you intend to continue to pursue your claim, you must file a formal complaint of discrimination within 15 days of receiving notice of your right to do so.  Again, failure to timely file your complaint results in a loss of your rights.
  3. Sloppy and Incomplete Complaints.  Only the issues identified in your EEO complaint will be investigated.  Be sure to include all issues underlying your complaint and identify the type of discrimination your are complaining about.  If you are asserting a retaliation complaint, be sure to identify the protected activity you claim spurred the retaliation.
  4. Failure to Remain Engaged During the Investigation.After the timely filing of a formal EEO complaint, the Agency will use an investigator (an Agency employee or contractor) to conduct an investigation of your complaint.  Unfortunately, there are times when the investigator assigned to your case is lazy, not thorough or perhaps even biased.  It is therefore critical that you remain engaged during the investigation and identify all witnesses for the investigator, carefully review the affidavit the investigator prepares for you for inclusion in the “Report of Investigation,” and prepare rebuttals to all affidavits that contain allegations that you take issue with.
  5. Failure to Request a Hearing in a Timely Manner.Upon completion of the investigation, federal employees have a period of 30 days in which to request a hearing before an EEOC administrative judge. Failure to request a hearing in a timely manner will result in the loss of the right to a hearing and will allow the agency to issue a “final agency decision” on the merits of the employee’s complaint — in other words, the agency will decide the merits of your claim and determine whether it is guilty of discrimination or retaliation.

DOL Expands Coverage Under FMLA To Include Same-Sex Partners (Among Others)

Posted on August 5, 2010

The Family and Medical Leave Act of 1993 (“FMLA”) provides eligible employees with up to 12 weeks of job protected leave each year for certain covered events, including for the birth or placement of a child for adoption, or because of a child’s serious health condition.  More information regarding FMLA can be found on this site here.

On June 22nd, the Department of Labor (“DOL”) expanded coverage under FMLA as it applies to a person standing “in loco parentis” to a child.  According to the DOL, there is much confusion as to the question whether FMLA applies when there is no legal or biological parent-child relationship.   The FMLA regulations define “in loco parentis” as including those with day-to-day responsibilities to care for and financially support a child. 29 C.F.R. § 825.122(c)(3).

According to the DOL’s most recent interpretation, the regulations do not require an employee who intends to assume the responsibilities of a parent to establish that he or she provides both day-to-day care and financial support in order to be found to stand in loco parentis to a child.   For example, according to the DOL, examples of persons standing “in loco parentis” who would be entitled to leave under the FMLA, include “an uncle who is caring for his young niece and nephew when their single parent has been called to active military duty,” “a grandmother who assumes responsibility for her sick grandchild when her own child is debilitated,” and “an employee who intends to share in the parenting of a child with his or her same-sex partner.”

Court Rules Drug Representatives Not Exempt from Overtime Requirements

Posted on July 22, 2010

Several weeks ago, the Second Circuit Court of Appeals paved the way for pharmaceutical sales representatives to pursue overtime claims against their employers.  The decision in In re: Novartis Wage & Hour Litigation vacated a lower federal court decision that had dismissed a class action lawsuit by 2500 pharmaceutical representatives who claimed that they were improperly classified as exempt from overtime.  The decision allows the class action to continue and will likely spur other class actions and individual claims by drug reps.

The Novartis decision hones in on the “outside salesperson” exemption that exists under federal law. If an employee is properly classified as “outside salesperson”, then they are not entitled to overtime regardless of the number of hours worked in any given workweek.  According to the court in Novartis, there is a significant distinction between obtaining commitments to buy and promoting sales.   In the Second Circuit’s view, merely promoting sales isn’t enough — the reps have to actually sell product or services in order to fall within the outside sales exemption.

In its decision, the court relied on both the regulations and arguments made by the government that “make it clear that a person who promotes a product that will be sold by another person does not in any sense intended by the regulations, make the sale.”  According to the court, the interaction between “physicians and the Reps [is] less than a ‘sale.'”

As noted by the court:

[W]here the employee promotes a pharmaceutical product to a physician but can transfer to the physician nothing more than free samples and cannot lawfully transfer ownership of any quantity of the drug in exchange for anything of value, cannot lawfully take an order for its purchase and cannot lawfully even obtain from the physician a binding commitment to prescribe it, we conclude that it is not plainly erroneous to conclude that the employee has not in any sense, within the meaning of the statute or the regulations, made a sale.

The Second Circuit also rejected the notion that the drug reps fall within the administrative exemption as well because of the ability to bind the company with some financial commitments.

Clearly, this case has significant implications for the pharmaceutical industry and their employees. Pharmaceutical companies now need to reevaluate whether the Novartis decision justifies a reclassification of their drug reps.  For employees who make their living as drug reps and who are working more than 40 hours a week, a door has opened for overtime claims.

Maryland Amends Wage Payment and Collection Law to Include Overtime Compensation

Posted on June 14, 2010

The Maryland General Assembly recently passed several important amendments to Maryland’s Wage Payment and Collection Law — which requires employers to promptly pay employees for their services or be subject to treble damages and attorney’s fees.

First, the General Assembly amended the definition of “wage” to include “overtime wages.”  Consequently, if a court finds that an employer improperly withheld overtime wages, the employee may be entitled to treble damages in some circumstances.  Effectively, this means the employee may be able to recover his overtime wages (i.e. time and one-half of the employee’s regular hourly rate) plus the treble damage penalty.  For example, an employee earning $15 per hour could recover as much as $540.00 for 8 hours of unpaid overtime.

Prior to the amendment, there was existing court precedent that held an employee could sue for overtime wages under only the federal Fair Labor Standards Act and the Maryland Wage and Hour Law. This amendment should cause employers to take a second look at their overtime policies to ensure that they are properly and timely paying overtime compensation to their non-exempt employees.

The General Assembly also created a new administrative procedure for individuals who have wage claims for up to $3,000.  Instead of going to court, employees with such claims may now file a claim with Maryland’s Department of Labor, Licensing and Regulation which will then give the employer written notice of the claim and 15 days to respond.  The Commissioner of Labor and Industry will then review the claim, conduct an investigation if necessary, and will issue an order requiring the employer to pay the wages if a determination is made that the law was violated.

DOL Aims To Curtail Overtime Abuses Through Mandatory Reporting Requirements

Posted on May 21, 2010

The U.S. Labor Department has announced its intention to issue a Notice of Proposed Rulemaking (“NPRM”) proposing significant amendments to the FLSA recordkeeping regulations aimed at educating employees as to their eligibility for overtime. As of yet, there are scant details. But DOL says that its new rules will, among other things, seek to require employers:

  • To notify workers of their FLSA rights (apparently, the longstanding requirement to display DOL’s prescribed poster somehow does not accomplish this);
  • To provide “information” about hours worked and wage computation; and
  • To perform and document a “classification analysis” for employees who are allegedly not entitled to overtime which will require the employer to disclose this analysis to the worker, and to provide the analysis to a DOL investigator upon “request”.

Stay tuned as these proposals raise a host of substantial and troubling questions and will likely be highly controversial.

Waitress Fired For Negative Comments Posted on Facebook

Posted on May 20, 2010

In yet another example of an employee fired for materials posted on a social media site, a 22-year-old waitress employed at a pizza restaurant in North Carolina, was abruptly terminated after posting negative comments about one of her customers on Facebook (the customers apparently lingered in the restaurant for hours and left her a meager tip).  Surprisingly, the restaurant, Brixx Wood Fired Pizza, had the foresight to implement a policy banning workers from speaking disparagingly about customers on social-networking sites.

All of us have observed unhappy restaurant employees complaining about difficult customers to their co-workers — the difference in this case is the size of the audience and the ability of the employer to electronically eavesdrop on its employee. This case highlights important issues for both employees and employers. For employees, it is another example of the importance of considering the potential impact of online posting of seemingly harmless “venting.” For employers, this is a good example of the importance of periodically updating policies that address potential issues that may arise from the current social norms. Although the employer would likely have the right to terminate the employee even if it did not have a policy banning this sort of conduct, it is better for a number of reasons to have a clear and well defined policy in place prior to taking action against the employee.

As a side note, the restaurant is apparently receiving sone negative feedback on Facebook about its decision.

Employees Beware — Your Facebook Posts or Blog Can Result in Termination

Posted on May 17, 2010

With the explosive popularity of social media sites like Facebook, MySpace, YouTube and Twitter, an ever expanding segment of the population is taking advantage of the opportunity to connect with old friends and family members by broadcasting pictures and details of their daily lives.  “Blogs” — basically a personal website that anyone can easily develop and publish on the internet — make it possible to publish a commentary, complete with pictures and videos, on any subject at all.

As recently learned by one unfortunate employee, there are sometimes serious consequences for using social media sites and blogs.  As reported by Inc.com, a single mother in St. Louis “TBK,” worked during the day for a non-profit but at night, wrote what she thought was an anonymous “sex blog” called “The Beautiful Kind.”  She’d managed to keep her online identity a secret until Twitter came along.

When she created her Twitter profile, she used her real name, thinking that only her handle would be visible. When she realized that her name actually appeared in her profile, she immediately removed it and adjusted the name field of her handle accordingly.  Immediately, however, was not quickly enough. Thanks to Topsy, a Twitter search engine, her original profile was cached and her real name was displayed next to her user handle. According to the blogger, senior management suggested that supervisors search the web for information about their employees.  When the blogger reported to work, she was fired by her boss, who had found out about her extracurricular “activities” on Topsy. The nonprofit claimed that it could not justify the risk to its public image caused by an employee’s racy blog.

The fact is, employers and management-side attorneys routinely use the internet to conduct informal “background checks” on applicants as well as employees.  While most of the searches do not reveal negative information, sometimes they do, as “TBK” recently discovered.  Expressing your opinions and thoughts, publishing your pictures and simply trying to be entertaining to your group of “friends” may seem like a great idea, but folks who work for a living should consider the possible consequences before clicking the “upload” button.

Policy Banning Overtime Work Does Not Provide Blanket Protection

Posted on May 11, 2010

The Fair Labor Standards Act requires the vast majority of employers in this country to pay overtime (one and one-half times a non-exempt employee’s regular hourly rate of compensation) for any hours worked over 40 in any given workweek.  For example, an employee with a regular rate of $20 per hour would be entitled to overtime compensation at the rate of $30 per hour.  Very commonly, employers attempt to control costs by banning overtime altogether or by requiring non-exempt employees (i.e. entitled to overtime compensation) to obtain advance supervisory approval prior to working overtime.  Such policies are certainly an effective way to regulate and maintain some degree of control over the hours worked by non-exempt employees and the corresponding overhead associated with paying overtime compensation.

Banning overtime or requiring advance approval does NOT relieve employers from the obligation to pay overtime compensation to non-exempt employees who work more than 40 hours per week in defiance of corporate policy.  In other words, if a non-exempt employee works more than 40 hours in any given work week, the employee is entitled to receive overtime compensation for all such hours.  Employers can discipline or even terminate policy offenders, but the obligation to pay overtime remains.

Proposed Legislation Threatens New FLSA Penalties

Posted on May 5, 2010

As reported by the Fisher & Phillips, LLC employment blog, both the Senate and House have proposed bills that would, if passed, provide for expansive changes in the Fair Labor Standards Act’s (“FLSA”) civil monetary penalties.

Today, the FLSA permits the Department of Labor (“DOL”) to impose a civil penalty of up to $1,100 for each violation of the minimum wage or overtime provisions, but only if the violation was either repeated or willful. The law also currently authorizes penalties for “each such violation” and the DOL tends to apply these on a per-employee basis, and the total fines can be more than the wage underpayments. If the pending proposals are adopted, the potential exposure will increase substantially.

Under the proposed legislation, fines of up to $1,100 could be imposed for violations that are neither repeated nor willful — accordingly, violations would be punishable in this way even if the employer had never before violated the FLSA and was acting in good faith. Further, the employer would be exposed to the penalty “for each employee or other individual who was the subject of” a violation. If violations were repeated or willful, then the per-person penalty ceiling would jump to $5,000. And adding a new wrinkle, civil penalties would apply to violations of DOL’s recordkeeping requirements. Employers can be fined even if the recordkeeping violation resulted in no FLSA wage underpayments or child-labor problems.

FLSA Amended To Mandate Breaks For Nursing Mothers

Posted on May 3, 2010

Although it has largely flown under the radar, a section of the Patient Protection and Affordable Care Act recently signed by President Obama amended the Fair Labor Standards Act (“FLSA”) to require employers to provide rest breaks and space for employees who are nursing mothers to express breast milk.   Employers need not pay for the break. No minimum break length is specified, but the break must be a “reasonable” length of time. Employers are required to provide places for the breaks that are “shielded from view and free from intrusion from coworkers and the public,” and the location cannot be a bathroom.   The employee must be permitted to take a break each time she needs to express milk. The break requirement extends for one year after the child is born.

An employer with fewer than 50 workers would be excluded from the requirement if allowing the breaks would cause “undue hardship.” This condition is met only if the employer will face significant difficulty or expense in light of the employer’s size, financial resources, nature or business structure — a fairly rigorous standard.

Until this amendment, rest breaks were regulated by state law and the FLSA did not require employers to provide breaks or meal periods to workers. The amendment to the FLSA (29 U.S.C. section 207(r)(1)), changes that.

The amendment is effective immediately.

Proposed Legislation Targets Misclassification of Workers

Posted on May 3, 2010

In an effort to remedy what is a pervasive problem across the United States, Congress has introduced “The Employee Misclassification Prevention Act” that would amend the Fair Labor Standards Act (the federal law governing overtime and minimum wage) by imposing record keeping and notice requirements designed to identify workers misclassified as “exempt” (i.e. not entitled to overtime and sometimes even minimum wage) or as independent contractors. Specifically, employers would have to provide each hired individual written notification of the following:

  • that individual’s classification (employee or non-employee);
  • a statement directing the individual to the Department of Labor website;
  • the contact information for the local Department of Labor office;
  • for any person classified as a non-employee, a statement that: “Your rights to wage, hour, and other labor protections depend upon your proper classification as an employee or non employee. If you have any questions or concerns about how you have been classified or suspect that you may have been misclassified, contact the U.S. Department of Labor”; and
  • any additional information prescribed by the Secretary.

Additionally, employers would be required to keep records, similar to the work and wage records kept for employees, for each contractor hired.   The Act provides employers six months from the bill’s effective date to notify current employees/contractors of their classification. Future workers would be informed of their status at the time of hire. Failure to comply with notice requirements would result in a presumption that non-employees, such as independent contractors, are in fact, employees. To rebut this presumption, an employer would have to show clear and convincing evidence establishing otherwise.

Violations of this Act will be subject to civil penalties of at least $1,100 up to $5,000 per violation.

COBRA Subsidy Extended Through May 31, 2010

Posted on April 29, 2010

In an earlier article posted on this blog, we reported that the COBRA subsidy benefit under the American Recovery and Reinvestment Act of 2009 (“ARRA”) (which provides a 65% subsidy for COBRA premiums) expired on March 31, 2010.

On April 15, 2010, President Obama signed H.R. 4851 into law extending the subsidy through May 31, 2010.  Congress has now extended the subsidy eligibility period a number of times, and the most recent extension may not be the last.  By virtue of the latest extension, employees who are involuntarily terminated on or before May 31, 2010 may be eligible for the subsidy.

The text of the legislation can be found here.

Docking Time From an Exempt Employee’s Leave Bank — Is It Permissible?

Posted on April 27, 2010

Under the Fair Labor Standards Act (“FLSA”), which governs the payment of minimum wage and overtime compensation, certain employees are considered “exempt” from the FLSA’s overtime and minimum wage requirements.  In order to qualify for “exempt” status, an employee must not only fit within one of the recognized exempt job classifications (such as executive, professional or administrative employees), but also must be paid on a salary basis.

Under the FLSA, an employee is paid on a salary basis if the employee regularly receives each pay period a predetermined amount that is not subject to reduction because of variations in the quality or quantity of work performed.  Subject to certain narrow exceptions, an exempt employee must receive his or her full salary for any week in which the employee performs any workregardless of the number of days or hours worked.

Despite these restrictions, employers can make deductions for absences from an exempt employee’s leave bank (i.e. vacation or PTO) in hourly increments, so long as the employee’s salary is not reduced.  If an exempt employee receives his or her full salary, deductions from the employee’s leave bank, whether in full or partial day increments, do not affect exempt status.  Caveat:  Once an employee’s leave bank is exhausted, it is NOT permissible to dock the employee’s salary.         

Withholding Compensation Can Be A Costly Proposition

Posted on April 21, 2010

Our clients frequently seek advice concerning their rights when a departing employee owes money to the company.  This issue presents itself in many different contexts — an employee refuses to return a laptop or other company property, has borrowed money from the company, received tuition assistance or costly training, received a payroll advance or leaves with a negative vacation balance.  Withholding an employee’s final paycheck may seem like an easy and painless solution, but the fact is, this is appropriate in Maryland only if the employee has provided prior written authorization for such a deduction.   It is a relatively simple matter to obtain appropriate written authorization, however, most employers don’t consider the issue until it is too late.

Unauthorized wage deductions violate Maryland’s Wage Payment and Collection Law, which provides for up to treble (triple) damages (i.e. you may end up owing your former employee triple the amount you withheld) plus attorney’s fees.   When making loans, providing advances or entrusting expensive equipment to employees, employers should protect themselves with appropriate documentation in the event it becomes necessary to withhold wages.

Firm Bows to EEOC and Drops Mandatory Retirement Policy

Posted on April 9, 2010

Bowing to pressure from the Equal Employment Opportunity Commission, Kelley Drye & Warren, a large law firm with offices in New York, Washington and other cities in the U.S. and abroad, has dropped its mandatory retirement policy after facing pressure from an EEOC age discrimination suit, which alleged that the firm’s retirement policy discriminated against older partners.  In a reversal of its previous policy, the firm apparently recently amended its partnership agreement to allow equity partners to continue on past age 70.  Senior partners will now be judged solely on performance, like other partners.

A number of the country’s larger firms have similar policies — its success with Kelley Drye may well prompt the EEOC to target other firms with similar mandatory retirement policies.

Eligibility for COBRA Subsidy Under ARRA Expires

Posted on April 8, 2010

As most employers and employees know, COBRA is the federal law that allows certain individuals to extend employer-provided group health coverage if they would otherwise lose the coverage due to certain events such as loss of a job. The premiums for continuing coverage are borne by the employee or other person electing coverage, and can be quite costly.

The American Recovery and Reinvestment Act of 2009 (“ARRA”), part of the economic stimulus package, temporarily reduces the premium for COBRA or comparable State continuation coverage for eligible individuals. In a nutshell, the individual electing coverage had to pay 35% of the premium and the employer was responsible for the remaining 65%. Subsequent Acts extended both the period to qualify for the COBRA premium reduction, as well as the maximum period for receiving the subsidy (from nine to 15 months). The last extension just recently expired on March 31, 2010.

Thus, individuals who are eligible for COBRA coverage because of their own or a family member’s involuntary termination from employment that occurred during the period from September 1, 2008 through March 31, 2010 and who elect COBRA may be eligible to pay a reduced premium. Eligible individuals pay only 35% of the premium for COBRA coverage under their plans for up to 15 months. This premium reduction is generally available for continuation coverage under the Federal COBRA provisions, as well as for group health insurance coverage under comparable State continuation coverage laws.

“Association Discrimination” Under the Americans with Disabilities Act

Posted on April 8, 2010

The Americans with Disabilities Act (“ADA”) is a federal law that prohibits discrimination on the basis of disability.  In a nutshell, the ADA makes it unlawful for any employer with 15 or more employees to discriminate against a qualified applicant or employee because of a disability with respect to any term or condition of employment.

Several years ago, I handled an ADA case involving “association” discrimination where my client claimed she was being discriminated against because her husband was disabled.  While not well known, this type of protection is explicit under the ADA, which, in addition to protecting qualified applicants and employees with disabilities from employment discrimination, protects applicants and employees from discrimination based on their relationship or association with an individual with a disability, whether or not the applicant or employee has a disability.

The purpose of the “association” provision of the ADA is to prevent employers from taking adverse actions based on unfounded stereotypes and assumptions about individuals who live or associate with people who have disabilities.  For example, the ADA prohibits an employer for refusing to hire an individual who has a spouse or child with a disability based on an assumption that the applicant will be away from work excessively or be otherwise unreliable.

Department of Labor Reverses Course on Mortgage Loan Officers

Posted on April 1, 2010

On March 24, 2010, the Department of Labor abruptly reversed its position on the exempt status of mortgage loan officers for purposes of eligibility for overtime compensation.   Less than four years ago, the Department of Labor issued an Opinion Letter in which it determined that mortgage loan officers were exempt “administrative” employees and thus ineligible for overtime.  In its new ruling, the Department of Labor concludes that mortgage loan officers are primarily responsible for the sale of mortgage loans, and therefore they are “production” workers and do not qualify for the administrative exemption.

The Department of Labor’s newly revised position with respect to the exempt status of mortgage loan officers is a very significant development for employers who must now face the task of reclassifying their mortgage loan officers as non-exempt employees and come up with an appropriate strategy of how to deal with any overtime its loan officers may have logged in the past two to three years.  Employers also face the prospect of collective actions or individual claims from mortgage loan officers who worked, but did not receive overtime pay during the past three years.