Employment Law Watch : Employment & Labor Lawyer & Attorney : Reed Smith Law Firm

This post was written by Daniel J. Moore and Eugene K. Connors.

A little-noticed provision of the 2010 health care reform legislation requires employers to provide nursing mothers with "reasonable break time" to express breast milk for one year after a child's birth.  Section 4207 of the Patient Protection and Affordable Care Act (P.L. 111-148), 29 U.S.C. § 207(r)(1) ("PPACA"), which became effective March 23, 2010, amends the Fair Labor Standards Act ("FLSA") to require employers to provide a break each time an employee needs to express milk, in a location other than a bathroom that is "shielded from view and free from intrusion by coworkers and the public."

The Department of Labor ("DOL") has yet to issue regulations defining a "reasonable" break or what sort of location may be used for lactation.  In July 2010, the DOL did release a "Fact Sheet" that says employers should provide break time to express milk "as frequently as needed by the nursing mother," and that the frequency and duration of the breaks will "likely vary" among mothers.  The Fact Sheet also says that the location provided must be a "functional space" for expressing milk, but need not be dedicated solely for a nursing mother's use, as long as it is available whenever needed.  The Fact Sheet, however, is only intended for general information and is not an official statement of the law, like federal regulations.

Although the new law applies to employers of any size, those with fewer than 50 employees need not provide such breaks if doing so "would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer's business."

Under the new law, these breaks may be unpaid.  That is an exception to the FLSA's rule that breaks of fewer than 20 minutes be paid as compensable time.  But employers should look out for more "generous" state or local laws that "trump" that unpaid exception.  This law does not preempt state laws that offer greater protection for nursing mothers who work, and 24 states and the District of Columbia have laws that apply to such employees.

The law itself contains no penalties for violations.  Both penalties and remedies available to aggrieved employees are likely to be in forthcoming DOL regulations.

Feel free to contact a Reed Smith attorney with any questions or concerns about break times for nursing mothers.  Additional information and the full Fact Sheet are accessible through the DOL Wage and Hour Division website.

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A new law will make it much more costly for Illinois employers that fail to pay employees their earned wages, including final compensation such as accrued but unused vacation pay.  The Illinois Wage Theft Enforcement Act, S.B. 3568 (the "Act"), signed into law July 30, 2010, increases both civil and criminal penalties for violating the state's wage payment law, imposes new risks for employers who ignore or unsuccessfully challenge employees' wage claims, and creates a new cause of action for employees who face retaliation for having complained about unpaid wages.  The Act will take effect January 1, 2011.

Illinois Wage Payment and Collection Act

The Illinois Wage Payment and Collection Act (the "Wage Payment Act") requires employers to pay employees their earned wages no later than a specified period following the date on which the wages are earned, and to pay employees who resign or are terminated all wages they earned through their last day of employment, no later than the first regular payroll date thereafter.  The law applies to every employee in Illinois, exempt or non-exempt, regardless of the employer's size or location.  "Earned wages" includes not only an employee's salary or hourly pay, but also any earned bonuses or vacation pay.  With some limited exceptions such as tax withholdings and authorized deductions for benefits, the Wage Payment Act also prohibits employers from deducting anything from an employee's wages, unless the employee signs an authorization at the time of the deduction.  The law also allows employees to recover damages from any corporate officer or agent of an employer who knowingly permits the employer to violate the Wage Payment Act.

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Tracking the trend of increased federal and state focus on the misclassification of workers, the U.S. Court of Appeals for the Ninth Circuit recently applied California law to hold that plaintiffs were entitled to a trial on the merits against their former employer for improperly classifying its California drivers as independent contractors, notwithstanding that the drivers had all signed independent contractor agreements that provided that Texas law controlled.  Narayan v. EGL, Inc., Case No. 07-16487 (9th Cir. July 13, 2010).

EGL - an international transportation, supply chain management, and information services company headquartered in Texas - retained drivers to pick up and deliver freight in California, classifying them as independent contractors rather than as employees.  EGL required each driver to sign a "Leased Equipment and Independent Contractor Services" agreement that, among other things, referred to the driver as a "Contractor," provided that the parties intended to "create a vendor/vendee relationship," and in which each driver acknowledged that neither the "Contractor nor any of its employees or agents shall be considered to be employees of" EGL.  The agreements also contained a provision requiring that they be interpreted under Texas law.

Several California drivers sued EGL, claiming that they had been misclassified as independent contractors, and demanding damages for unpaid overtime wages, business expenses, missed meal breaks, unlawful deductions from wages, and other relief under the California Labor Code.  Applying Texas law per the agreement, the district court found that the drivers were independent contractors and granted summary judgment in favor of EGL.

The Ninth Circuit reversed.  As a starting point, the court refused to apply Texas law to the dispute.  Noting that the drivers sought entitlement to employment benefits under California's Labor Code and that state's statutory and regulatory scheme, the court held that it was not required to interpret the agreements to decide the case.  The court instead found that California law should apply to determine whether EGL could be liable for violating the California Labor Code.

Turning to the merits of the case, the Ninth Circuit again disagreed with the district court, finding that the drivers had established a prima facie case that they were employees rather than independent contractors.  The appellate court applied California's multifactor test in analyzing whether the drivers worked as employees or independent contractors, citing, among others, the following facts as supporting the drivers' claim that they were employees:

• The delivery services provided by the drivers were integral to the regular business operations of EGL
• EGL's Safety and Compliance Manual and Driver's Handbook instructed the drivers on how to conduct themselves
• The drivers were ordered to report to the EGL station at a set time each morning
• EGL controlled other aspects of the details of the drivers' performance, such as requiring that they wear EGL-branded shirts, safety boots, and EGL identification cards
• EGL supplied branded equipment, such as boxes and packing tape
• The agreement provided for automatic renewal clauses and could be terminated on 30 days' notice, which was a substantial indicator of an at-will employment relationship
• The drivers' occupation did not require a high level of skill
• The indefinite and lengthy duration of the drivers' relationship with EGL (some of whom had worked for EGL for several years)

The court noted that in light of these facts, the drivers' acknowledgment that they were independent contractors was not significant under California law.

In reaching its conclusion, the Ninth Circuit found that once a plaintiff presents evidence that he provided services for the "employer," the plaintiff is presumed to be an employee unless the employer can prove that the individual was in fact an independent contractor.

In light of this case, and the continuing scrutiny by federal and state agencies on the misclassification of workers as independent contractors, companies should audit and analyze their independent contractor agreements with vendors, owner-operators, or contractors, as well as the practices of its contractors, to determine whether the relationship is truly one of independence.  Where there are any questions or concerns about possible misclassification,  experienced employment counsel should be consulted to determine how best to address the situation before any company is forced to defend time-consuming and expensive litigation.

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Reed Smith is proud to have been named one of the top employment and labor firms in the United States by Legal 500, a leading legal industry publication. The firm was highly ranked for both Labor and Employment Litigation and Labor Management Relations. Legal 500 cited in particular Reed Smith’s national reputation for experience in the areas of wage and hour and employee benefits class action defense, as well as our strong reputation for advising employers on traditional labor-law matters in diverse industries on a multi-state, regional and national basis.

Chambers USA also ranked the firm’s labor and employment practice in Pennsylvania and California as being industry leaders. In addition, seven of our U.S. attorneys were highly ranked by Chambers USA for their practices.

To learn more about the firm’s Legal 500 rankings, please click here.

To learn more about the firm’s rankings, Chambers USA, rankings or the methodology behind the rankings, please click here.

For more information about Reed Smith's Labor and Employment practice, please contact Karl Fritton, Casey Ryan, Linda Husar, Jim Burns, or the Reed Smith attorney with whom you regularly work.

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This post was written by Samantha M. Clancy, E. David Krulewicz and Robert M. Jaworski.

The United States Department of Labor (“DOL”), Wage and Hour Division, recently published an Administrator’s Interpretation that takes the position that mortgage loan officers with certain “typical” job duties are not subject to the administrative employee exemption of the Fair Labor Standards Act. The DOL reasoned that mortgage loan officers’ primary duties are to make sales, and these are not administrative functions as defined by federal regulations. As a result, mortgage loan officers are not exempt from the FLSA’s minimum wage and overtime compensation rules under the administrative employee exemption. The DOL based its new interpretation on the statutory and regulatory framework, as well as on a thorough review and analysis of recent case law. With this determination, the DOL reverses its previously held position and explicitly withdraws Opinion Letters from February 2001 and September 2006, which stated that mortgage loan officers could be considered exempt administrative employees. 

The administrative exemption applies to employees whose job duties and qualifications meet all of the following tests: (1) the employee is compensated on a salary or fee basis as defined in the regulations at a rate of not less than $455 per week; (2) the employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 

The DOL’s interpretation focuses on the second test. The DOL noted that a mortgage loan officer’s typical duties include contacting and gathering financial information from customers, entering data into computer programs to determine which loan products may be offered to a customer, assessing the loan products identified, and trying to match the customer’s needs with one of the company’s products. Those duties, combined with other factors, led the DOL to conclude that mortgage loan officers’ primary duty is to make sales, rather than administrative functions.     

In reaching its conclusion, the DOL also relied on the following factors:

• In lawsuits brought by mortgage loan officers, mortgage companies have typically conceded that the officers’ primary duty is sales.
• Mortgage loan officers are usually paid commissions based on sales, and their performance is evaluated based on sales volume.
• The DOL could not find any reported case holding that a mortgage loan officer, whether working inside or outside, had a primary duty other than sales.
• A primary duty to make sales is not directly related to the management or general business operations of an employer or an employer’s customers, a necessary part of meeting the administrative exemption. 

Although Wage and Hour Administrator Interpretations do not have the force of law, they are given considerable weight by the courts.  This new interpretation, therefore, will significantly affect financial institutions and other related organizations that currently consider their mortgage loan officers to be exempt from overtime pay. Such employers should take immediate steps to address this new interpretation, such as by engaging outside counsel to audit current practices and to otherwise ensure full compliance with all parts of the FLSA. And given that the DOL’s new approach does not limit application of other FLSA exemptions to mortgage loan officers, employers should also consider whether other exemptions may apply. For example, mortgage loan officers may qualify as exempt employees pursuant to the FLSA’s exemption for outside sales staff, i.e., employees who are primarily responsible for sales or for obtaining contracts for services, and who are customarily and regularly engaged away from their employer’s place of business in performing such duties. Counsel familiar with FLSA issues can provide valuable assistance in this process. It may also be necessary to reorganize compensation plans or reclassify employees to ensure compliance.

Whatever approach is chosen, in light of the real potential for class action lawsuits seeking double damages and attorneys’ fees on behalf of all mortgage loan officers who an employer has employed going back as far as three years, this Administrator’s Interpretation cannot be safely ignored.

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As employers seek to avoid substantial exposure for alleged violations of wage and hour laws, including the continuing flood of class actions, many are asking outside counsel to review or audit their pay practices so that any problems can be fixed to minimize such risks. In a welcome development, the California Supreme Court recently rejected an effort to force an employer to disclose the results of such a review to managers who had sued, affirming that such advice is protected by the attorney-client privilege.

For more information on this recent ruling, please see the following client alert.

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This post was written by John A. DiNome, Remy Kessler, Joel S. Barras and Marytza J. Reyes.

A series of wage and hour collective actions initially filed in New York and Pennsylvania have begun to swell across the country. Plaintiffs’ attorneys are targeting health care facilities over their alleged failure to comply with meal break rules. Specifically, such suits claim that employers have automatically deducted 30 to 60 minutes of time for employees’ meal periods, even if employees never took the breaks. The plaintiffs allege that by failing to provide unpaid meal periods free of interruptions from work, or by failing to fully compensate the employees for the time they were not relieved of duty, health care facilities have violated the Fair Labor Standards Act (“FLSA”) and other laws. Because employees can recover for violations that took place as many as three years before suit is filed, damages in these cases can be substantial. Employers may be liable for double the employees’ overtime rate of pay for the unpaid meal breaks that were improperly deducted. In addition, plaintiffs are entitled to recover their attorneys’ fees and costs, which often exceed the actual damages. 

Not surprisingly, the Internet has become an effective tool for plaintiffs’ lawyers seeking to identify deep-pocket defendants. Some attorneys have even gone so far as to set up websites to provide information to employees about their investigations of health care employers. (See, e.g., www.hospitalovertime.com or www.overtimecases.com.) Such websites have become an easy way for a plaintiffs’ counsel to gather information about a particular health care employer’s practices, reach employees throughout the country, and publicize large settlements in wage and hour lawsuits.

Health care facilities throughout California have experienced a recent wave of wage and hour lawsuits. In 2008, at a time when registered nurses were in high demand and hospitals across the country were struggling financially, California completed implementation of landmark legislation passed almost a decade before, mandating minimum nurse-to-patient ratios. Not surprisingly, the shortage of nurses and other medical professionals has made it increasingly difficult for employers to comply with California laws requiring them to provide employees who work more than six hours with an uninterrupted 30-minute meal period. While many nurses acknowledge that the demands of their positions do not always permit an uninterrupted meal period, they uniformly object to not being compensated when they are unable to take the breaks to which they are legally entitled. 

In addition to requiring payment of overtime when an employee works more than 40 hours per week, California law requires overtime pay when an employee works more than eight hours per day. Depending on the length of the shift, California employees who are denied meal periods may be entitled not only to overtime, but also to an additional hour of a “premium wage” for each missed meal period. California law permits employees to seek damages for meal period violations going back three years before suit is filed; but if the same allegations are brought under California’s Unfair Competition Law (Business & Professions Code Section 17200), the statute of limitations is four years.

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