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The Express Lane

Fall 2013

Retailer's Recap

Don't try this at home: Private FLSA settlements rarely work. If you're a retailer who thinks you can settle a claim under the Fair Labor Standards Act on your own, think again. The U.S. Court of Appeals for the Eleventh Circuit (Alabama, Florida, and Georgia) rejected a resolution reached between the owner of a motel and his employee in an unpaid overtime dispute because the resolution wasn't a "stipulated judgment" as required by applicable case law. As the court pointed out, "[The parties] attempted to settle the litigation without the advice and assistance of attorneys, which only led to the involvement of more attorneys and more litigation." Generally, settlement of an FLSA wage claim must be supervised by the U.S. Department of Labor or a court.

Fast food strikes the beginning of a new "organizing" era for retailers? As the summer's fast food strikes show, workers are using non-traditional tactics in industries that are not usually considered "union," including fast-food restaurants, retail chains (especially Walmart), and car washes. According to one commentator, the workers are exercising their rights under the National Labor Relations Act but "without some of the restrictions that unions have to deal with . . . It's unclear how employers are going to handle this."

Should you offer harassment training to temps and independent contractors? Here are some reasons why doing so might be in a retailer's best interests.

Noteworthy Numbers


Race Discrimination Charges Sex Discrimination

Retaliation ChargesDisability Charges

Age Discrimination Charges

SOURCE: U.S. Equal Employment Opportunity Commission

News and Analysis

EEOC and big cases: Not yet ready for prime time?

The U.S. Equal Employment Opportunity Commission has taken some serious hits from the courts lately. Although the agency says it plans to plow ahead undeterred, the decisions are encouraging for retailers – especially as they affect the use of criminal and credit background information.

In 2011, a federal court in Michigan found the EEOC's claims in a criminal background case "were without foundation from the very beginning" and ordered the EEOC to pay $750,000 in attorneys' fees to the company defendant. EEOC v. Peoplemark, Inc., had dragged on through the EEOC and the court system for approximately six years and was finally thrown out after the court found that 22 percent of the 286 applicants supposedly "not hired" because of their criminal records had, in fact, been hired.

Then, in 2012, the EEOC issued an Enforcement Guidance on use of criminal background information, taking a fairly hard line against the solicitation or use of such information, and also unleashed a four-year plan calling for increased emphasis on "systemic discrimination." The plan required the EEOC to maintain a baseline number of "systemic" cases in the litigation docket, and that number must increase by a certain percentage each year until 2016.

The EEOC has brought a number of class actions since 2012, including recent criminal background lawsuits against BMW and Dollar General stores. Those cases are in the earliest stages, but employers are prevailing in quite a few other "systemic" cases. And another employer has recently sued the EEOC over tactics that it used in recruiting employee-litigants.

In EEOC v. Freeman, a federal court in Maryland granted summary judgment to an event planning company because the EEOC had failed to prove that the company's criminal background and credit check policies had a disparate impact on African-American and male applicants. In doing so, the judge had harsh words for the EEOC's statistical expert and his analysis, calling the latter "flawed," "skewed," "rife with analytical errors," "laughable," and "an egregious example of scientific dishonesty." The judge claimed that the expert had 'cherry-picked" from the available data to support the agency's theory.

The judge explained that the EEOC's reliance on national statistics showing racial disparities with respect to credit ratings, arrests and convictions was not enough – the EEOC was required to provide evidence that a specific element of the company's background check process caused a disparate impact. The court also noted that the EEOC itself conducts pre-employment criminal background investigations for all new hires, and credit checks for roughly 90 percent.

Earlier this year, a federal court granted summary judgment to Kaplan in a case where the EEOC had challenged the company's use of credit information in hiring decisions.

Outside the context of background information, the EEOC was sanctioned in a sexual harassment class action, EEOC v. CRST Van Expedited, Inc. A federal court in Iowa ordered the agency to pay the employer approximately $4.7 million in attorneys' fees and expenses. According to the court, the EEOC failed to conduct a reasonable investigation, did not have a basis for bringing its claims, and refused to identify the members of the classes.

And one employer has taken the offensive after the EEOC sent a solicitation through employees' business email accounts. Wisconsin-based Case New Holland and its affiliate CNH America, LLC, have sued the agency and an individual investigator in federal district court in the District of Columbia, alleging that the EEOC violated the Administrative Procedure Act and the company's constitutional rights. According to the lawsuit, the EEOC's investigators sent more than 1,000 unsolicited emails to Case New Holland's employees (without prior notice to the company and before the EEOC had determined that there was reasonable cause to believe that discrimination was taking place) using the company email system. The lawsuit alleges that the emails, sent by the investigator in Baltimore, Maryland (who reported to the EEOC's Philadelphia District Office), said that the companies were under investigation without specifying the type of discrimination. The emails allegedly contained a link to an online questionnaire soliciting employee feedback on the company's employment practices and policies. Some of the emails were sent to current and former managers, whose responses and statements could arguably legally bind the company. The companies seek to enjoin the EEOC from communicating with employees through the company's email system, and from disclosing the information gathered in this way "to any third party" or in any way against the companies. The companies also seek to force the EEOC to turn over all of the information that it gathers "through their illegal mass business email distribution."

According to the lawsuit, when a Congressional representative from Pennyslvania asked the District Director of the Philadelphia Office to justify the investigator's actions, he responded that the mass email was "efficient."

U.S. Department of Labor extends spousal FMLA leave to same-sex marriage

In June, the U.S. Supreme Court struck down Section 3 of the Defense of Marriage Act in United States v. Windsor. Section 3 of the DOMA defined "marriage" for federal benefits purposes as being between one man and one woman. Now, the Department of Labor has taken steps to extend the protections of the Family and Medical Leave Act to same-sex married couples. The DOL has not issued any new guidelines, but it has revised existing guidance documents to remove references to the DOMA. The DOL has also released a new Field Operations Handbook that includes a section on the FMLA that indicates that FMLA spousal leave entitlements extend to same-sex spouses in states that recognize same-sex marriages.

As we went to press, there were 13 states that recognized same-sex marriage: California, Connecticut, Delaware, Iowa, Maine, Maryland, Massachusetts, Minnesota, New Hampshire, New York, Rhode Island, Vermont, and Washington. In addition, the District of Columbia recognizes such marriages, as well as some counties and Native American tribes. Retail employers in these jurisdictions must be prepared to extend FMLA protection to same-sex spouses and should modify their FMLA policies accordingly.

Retail employers will also need to be aware of the same-sex marriage laws in their neighboring states. As an example, an employer in Missouri (which does not recognize same-sex marriage) might have an employee who is in a same-sex marriage and who lives in Iowa (which does recognize same-sex marriage). Under the DOL's new interpretation, the Missouri employer would probably have to grant spousal FMLA leave to the Iowa employee because it is the state of residence that controls whether the marriage is recognized.

Finally, even retail employers in states that do not recognize same-sex marriage and that do not have conflicting laws in neighboring states will need to keep informed about this ever-growing trend.

Be wary of asking Faceook "friends" to spy on your employees

Does the federal Stored Communications Act, which generally prohibits unauthorized access to electronic communications, apply to an employer who gets an employee's Facebook posts from a "friend" who discloses them without permission?

Not if the employer didn't ask for them, said a federal district court in New Jersey in Ehling v. Monmouth-Ocean Hospital Service Corp., but the decision implies that it could be a different story if the employer had "solicited" the information in any way. Although the case arose in a health care setting, the court's holding applies to retail employers, as well.

The plaintiff in Ehling was a nurse and paramedic who had a Facebook account with private settings. She was "friends" with a number of co-workers, but not with any of her supervisors. One of her co-worker "friends" disclosed her postings to her employer, including one that implied that paramedics should have killed an elderly gunman who was shot by security guards, or at least "allowed" him to die. The post stated as follows:

An 88 yr old sociopath white supremacist opened fire in the Wash D.C. Holocaust Museum this morning and killed an innocent guard (leaving children). Other guards opened fire. The 88 yr old was shot. He survived. I blame the DC paramedics. I want to say 2 things to the DC medics. 1. WHAT WERE YOU THINKING? and 2. This was your opportunity to really make a difference! WTF!!!! And to the other guards . . . . go to target practice.

After the co-worker showed the posting to an administrator, the Plaintiff was suspended with pay and given a memo indicating that management was concerned that her comment reflected a "deliberate disregard for patient safety." She then sued the employer and several individual executives, claiming among other things violation of the Stored Communications Act.

First, the court said that the SCA could apply to Facebook posts because the posts are (1) electronic communications, (2) that were transmitted via an electronic communication service, (3) that are in electronic service, and (4) that are not public. However, the court found that the SCA's "authorized user" exception applied because the co-worker making the disclosure was a "friend" of the Plaintiff and was authorized to see her posts. Moreover, the hospital administrator – who was not a Facebook "friend" – did not direct, pressure, or encourage the co-worker to disclose the Facebook material. The court granted summary judgment to the defendants on the Plaintiff's SCA claim.

Ehling illustrates the importance to employees of watching what they post on Facebook and other social media, but also a caution for employers: employers should never ask employees to access private social media information that the employer is not already authorized to access itself. This court strongly implied that doing so could violate the SCA.

If interns aren't "part of the solution," you may not have to pay them, court says

We reported in 2010 about the U.S. Department of Labor guidelines on when "unpaid" interns had to be paid wages. Although employers have a fairly demanding standard to meet if they want to avoid payment, a decision earlier this year from the U.S. Court of Appeals for the Eleventh Circuit shows that it's not hopeless.

Essentially, if the interns are more or less worthless to your company, then you may not have to pay them.

In Kaplan v. Code Blue Billing & Coding, Inc., the court held that students doing unpaid "externships" met all six of the DOL's criteria for being "non-employees" and therefore were not entitled to wages under the Fair Labor Standards Act.

The students were in a medical billing and coding program and were required to complete the externships to graduate. The employers presented evidence that the students were not helpful to their operations and, to the contrary, actually caused the employers' regular employees to take time away from their normal duties, causing their "businesses to run less efficiently" and causing "at least some duplication of effort." This, coupled with the fact that the students received the benefit of "hands-on" work experience and the ability to graduate, meant that the students were not "employees."

Retailers using unpaid interns should make sure that they meet the six criteria in the DOL guidance, including a clear understanding that the interns are not going to be paid and are not entitled to a job when they complete the internships.

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