At the end of 2009, the Equal Employment Opportunity Commission (EEOC) settled a class action lawsuit against Outback Steakhouse for $19 million. What kind of claim was worth so much money? It was an old-fashioned glass ceiling sex discrimination suit.

The EEOC said that Outback denied women equal opportunities to advance within the corporation’s restaurants, particularly denying them kitchen management experience, which was considered a requirement for a move into top management.

Thousands of women were affected by this discriminatory promotion practice, according to the EEOC. So as part of the settlement, Outback agreed to set up a new management hiring system, employ a new vice-president who will oversee human resources and hire an outside consultant to look over the company’s shoulder for the next two years and make sure that the discrimination has been corrected.

Last year, Dell Computer settled a similar suit alleging systemic discrimination against women attempting to advance at the computer company. Dell agreed to pay $9.1 million to settle the glass ceiling case and agreed to bring in an outside consultant to review its compensation, hiring and promotion practices and assure that the company is providing pay equity to women.

What I find interesting about these cases is that many women, particularly younger women, assume that the glass ceiling has been shattered and that they have an equal opportunity to advance if they want to. That’s why sex discrimination suits based on systemic discrimination seem so old-fashioned. Many women my age are a bit more skeptical, as is the EEOC, which claims, “There are still too many glass ceilings left to shatter in workplaces throughout corporate America. . . . Hopefully this major settlement will remind employers about the perils of perpetuating promotion practices that keep women from advancing at work.”

What about in your own workplace? Do you have women in top management positions? Are the women you employ paid as well as the men? If not, what are the reasons for that? A little self-analysis now could keep your company from facing a sex discrimination suit in the future.

If you have employees who you believe are exempt from being paid overtime or the minimum wage (and who doesn’t?), your company is vulnerable to being accused of “wage theft” by the Department of Labor and being faced with repayment of wages, liquidated (double) damages, interest, penalties and attorneys’ fees. “Wage theft” is the new inflammatory term, coined by an activist named Kim Bobo, author of Wage Theft in America, to describe any failure to pay workers in strict compliance with federal and state law.

Bobo’s thesis is that the DOL has not been properly funded in many years and has focused on helping employers comply with the laws rather than targeting those same employers for vigorous enforcement efforts and collection of the wages which have been “stolen” from low-income workers. She advocates greatly increasing the number of investigators employed by the DOL, which my earlier posts (click here and here) have said is exactly the plan that the Obama administration is following.

The areas in which an employer is most vulnerable to being investigated and prosecuted for wage theft are:

1. MInimum wage payment.
2. Misclassification of workers as “contract labor”.
3. Overtime pay.

The employers in the Texas Panhandle who come to me with compensation questions are not committing wage theft. They are generally confused, or are using common sense instead of knowledge of the law, or are doing what they’ve always done in times when the government wasn’t so rabid about enforcement. They often don’t know they have done anything wrong until a disgruntled former employee complains to the DOL and an investigator comes to audit the business. Now with the present enforcement efforts, the employer is too late to correct the problems and is faced with significant costs and penalties.

So how can you make changes now to avoid an accusation of wage theft and an investigation of your pay practices?

The easiest way to avoid being investigated for the minimum wage violations is to make sure every worker is earning at least $7.25 during each pay period for every hour he spends at work, even if he is paid on commission and hasn’t really produced any sales, even if he is an agricultural worker and it is harvest time so he is working 18 hour days but barely works at all in the winter, and/or even if he is not at work, but is still on call or answering work calls on his cell phone during his personal time.

To avoid liability for misclassifying an employee as contract labor, make sure every person who performs any work for you is on the payroll and all taxes are being withheld from each paycheck. Don’t ever buy into the myth that you can choose to make a worker into a contract laborer. Anyone who performs work for you is probably an employee other than the self-employed plumber who shows up once per year to fix your sink or the lawyer who drafts your personnel policies and reviews them annually.

To avoid overtime liability, you may want to forget about the “administrative exemption” to the Fair Labor Standards Act. This is a catch-all white collar exemption that many businesses use to classify these types of employees: tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, internet and database administration; legal and regulatory compliance; and similar activities.

The problem is that just having one of these job titles is not enough. The exempt administrative employee must also have significant independent discretion and judgment, a requirement that the DOL is interpreting more and more narrowly. Now, even employees who work without much supervision will not be considered exempt if the employer has provided specific instructions on how he wants the job performed. Therefore, an administrative employee who you have always considered to be exempt in the past may not pass the DOL’s scrutiny now.

A careful employer will now get a legal opinion on each employee that he wants to exempt from the overtime and minimum wage laws. As extra protection, even if you believe that your employees are clearly exempt, have every single employee clock in and out every day so that inflated claims can never be made on the hours that a particular employee worked if your exemption determination is questioned in the future.

I’ve been trying to get the word out to employers for the last several months that the executive branch of the federal government has employers who violate any of the federal employment laws in its sights (click here for an earlier blog post on enforcement efforts). Money for enforcement is pouring into federal agencies like OSHA, which enforces health and safety regulations, the Department of Labor, which enforces compensation requirements like the overtime and minimum wage laws, and the EEOC, which enforces the discrimination laws.

Within the 2011 fiscal year budget proposed by President Obama last week, there is money for the hiring of 358 more Department of Labor employees, including 177 investigators and other enforcement staff, bringing the total proposed DOL workforce to nearly 18,000.

OSHA will add 25 more employees to inspect workplaces for safety violations, meaning that 42250 businesses will be subject to these inspections in FY 2011. “Today’s budget affirms this administration’s strong commitment to vigorous enforcement,” U.S. Secretary of Labor Hilda Solis said. “We are sending a strong message throughout industry that we will not tolerate the endangerment of workers.”

The budget also supports a joint effort of the Treasury Department and the DOL to identify employers who hire “contract labor” in an effort to avoid payroll taxes and skirt the overtime and minimum wage laws. For years, employment lawyers like me have been trying to warn employers that “contract labor” is illegal and that there is a very difficult test for employers to prove that any worker is actually an independent contractor. Those employers who still misclassify employees as contract laborers could face increased possibilities of federal investigators reviewing their books, requiring repayment and charging the businesses large fines.

As an employer, it is your responsibility to assure that you are complying with all the federal laws that will be enforced even more stringently if the 2011 budget passes. You are taking a grave risk if you believe that you are in compliance just because your pay, safety or firing practices are the same as everyone else’s in your industry (who often are doing it wrong too), or if you believe you are proceeding correctly because “that is the way we have always done it,” or if you believe that your employees are not dissatisfied so you must be doing something right. Many of these laws are counter-intuitive, meaning you are probably doing them wrong even if you are using common sense! Don’t assume that you are operating within the bounds of federal employment law unless you have a legal opinion from an experienced employment attorney confirming that.

As a follow up to yesterday’s post on employer liability for employees who cause an automobile accident while using a cell phone, it is worth noting that the federal Department of Transportation just announced a prohibition of texting while driving for all interstate truck drivers, commercial bus drivers and van drivers who carry more than eight passengers. The law will be enforced with civil or criminal penalties, including fines up to $2750.

The Federal Motor Safety Administration’s research shows that drivers who send and receive text messages are distracted for 4.6 seconds out of every 6 seconds. So these drivers have their eyes off the road more than three-quarters of the time they are driving and texting.

The federal government has set an example for private employers not only by banning texting while driving for interstate truckers, but also for all federal employees. President Obama signed an executive order at the end of 2009 directing federal employees not to text while driving government-owned vehicles or while operating government-owned equipment. That is exactly the kind of written policy that all private employers should have.

Debra Ford was driving on Interstate 16 in Georgia when her car was hit by a sedan driven by Vanessa McGrogan, an International Paper Company employee who was driving a company-owned car with the cruise control set at 77 mph in a 70 mph zone and according to a witness, talking on her company-issued cell phone at the time of the accident.

Ford’s car was overturned and slid along the asphalt and Ford’s arm got trapped between the car door and the pavement, leading to an amputation of her arm up to the shoulder.

Who do you think had to pay to settle the lawsuit that inevitably followed this horrific accident? International Paper, of course.

The employer-issued cell phone and company vehicle guaranteed that the party with the deepest pockets would be sued. McGrogan’s employer settled the case for $5.2 million in 2008.

Cell phone use also led to a woman who was severely injured by a salesman involved in an accident while he was talking on his cell phone being awarded $21 million by a Miami jury in a suit against lumber wholesaler Dykes Industries in 2001. The salesman was driving on company business at the time and talking on his cell phone.

In January 2010, a lawsuit in South Carolina was settled for an undisclosed amount just hours before trial. At stake was $55 million in insurance carried by the employer of Sharon King, who was not working at the time of the incident, but was driving a company vehicle and talking on her cell phone when she allegedly hit two bicyclists riding in a charity event. King pleaded guilty to a reckless driving charge.

The King case has received so much publicity in South Carolina that the legislature there is fast-tracking legislation to ban texting and talking on hand-held cell phones while driving. Some of that urgency may have resulted from the brilliant (and inflammatory) pretrial statement of one of the attorneys for the cyclist’s estate who called cell phone use in cars “the new DUI”.

Texas does not ban hand-held cell phone use for anyone other than bus drivers. What that means is that as a Texas employer, you have to take responsibility for training and monitoring your own employees who could put the company’s assets at risk by driving and talking or texting.

A texting driver is 23 times more likely to have an accident or come close to having an accident than a driver who is paying attention to her driving, according to a Virginia Tech study.

The National Highway Traffic Safety Administration says that 25% of all crashes are caused by distraction. Talking on a hand-held cell phone while driving has been shown to be significantly more distracting than eating or talking to a fellow passenger. And we can all agree that texting while driving is idiotic.

So how does an employer prevent its employees from exposing the company to enormous liability while driving?

Reconsider whether the liability associated with issuing company vehicles and company cell phones is worth the perk. Many companies would rather reimburse an employee his mileage for using his own car during work hours or pay a cell phone allowance than to assume the 24-hour per day liability that is associated with a company vehicle and a company cell phone.

You also need a written policy and extensive training of every employee followed by strict disciplinary enforcement of the policy prohibiting any use of a hand-held cell phone while driving on company business. Although a complete ban of cell phones in cars would be the safest policy, if that is impractical, you can at least buy Bluetooth headsets for your employees to discourage any hand-held cell phone use.

Finally, check your company liability insurance policies to make sure you are well covered if anything as horrendous as the King case happens to one of your employees.

As if you didn’t have enough to worry about as an employer this year (health care reform, COBRA subsidies, the broad amendments to the Americans with Disabilities Act, and, oh yes, the economy), here is one more thing to keep you up nights.

Have you issued a cell phone to some of your employees? Do you expect those employees to take calls on it while they are away from work? What about smartphones that access email? Are your employees checking their work email account at all hours of the day? If so, you may have overtime problems.

Your exempt white-collar employees can answer the phone or check emails at any time and their salaries will cover that time. But if you expect or allow non-exempt employees, such as sales associates, service technicians, and administrative assistants to answer their phones or check their work email after hours, you have to pay them for that time “worked”.

Plaintiffs’ employment lawyers are salivating over the class action possibilities that off-the-clock smartphone use present. The Fair Labor Standards Act, which regulates overtime and minimum wage, allows employees when suing for overtime violations to collect double damages and attorneys fees. Multiply even occasional after-hours smartphone use by thousands of nonexempt employees and you can see the appeal to plaintiffs’ lawyers of these kinds of suits.

What can you as an employer do to avoid facing such a suit yourself?

1. Have a very clear idea of which of your employees meet the FLSA exemptions and which ones don’t.
2. Don’t issue phones to or expect after-hours attention from your non-exempt employees.
3. Have an off-the-clock policy that explains that if nonexempt employees do consult their work email or take work-related calls after hours, that they must report that time to the timekeeping system so they can be paid for that time.
4. Explain what types of calls and issues are emergency issues that can be handled after hours. Limit in writing the employees’ need to take any other type of call or email while not on the job.
5. If you want your nonexempt employees to be reachable after work, then expect to pay overtime for that privilege and don’t make your employees reluctant to report that time worked.

If you have fired or laid off an employee since September 2008, you know about the group health insurance continuance provisions related to COBRA that allow an employee to only pay 35% of the premiums due, while the federal government subsidizes the rest of the premium. That subsidy was supposed to expire at the end of 2009, so that employees laid off after that date would not receive the subsidy. In addition, the subsidy was only supposed to cover the first 9 months after the employee lost his job.

On December 21, 2009, President Obama signed a COBRA subsidy extension that extends the expiration date to February 28, 2010. What that means is that if you involuntarily terminate the employment of one of your workers in the next two months, that employee will also be eligible for the COBRA subsidy.

Even more important, the new legislation extends the subsidy for 15 months rather than just 9 months after the employee loses his job. And yes it is retroactive, meaning that any employee who has used up the 9 months is eligible to receive 6 more months of subsidies and a refund of overpayments.

By February 19, you have to send out written notices of this opportunity to any employee who was involuntarily terminated on or after October 31, 2009. You also have to send notices to anyone who stopped paying COBRA premiums after 9 months or anyone who overpaid by continuing their premiums after the 9 month subsidy expired. So it is best to go back and review the COBRA files for any employee involuntarily terminated since September 30, 2008.

Your group health insurance agent should be able to help you with the required notice language and information on who has been receiving COBRA continuation coverage and for how long. Just don’t ignore this issue. You only have 60 days to get your paperwork in order and start paying subsidies to be reimbursed by the federal government through your payroll taxes.

The Bush administration made significant changes in the laws affecting employers, most significantly to the Americans with Disabilities Act, which now treats almost every employee as disabled and provides enormous protection from discrimination to employees. I’ve written before about the laws that were changed during the Bush years and what employers should do to protect themselves from missteps. (Click here for that article).

The Obama administration has not yet passed as many significant pieces of legislation in the area of employment law, other than the Lilly Ledbetter Fair Pay Act. However, the new president has put a much greater emphasis on enforcing the laws that are already on the books. Employers can no longer expect an understanding and cooperative investigator when the Department of Labor, the EEOC, the immigration service or another federal agency comes to call on your business.

President Obama’s executive branch, which is charged with enforcement of the existing employment laws, is pouring money and personnel into enforcing laws that protect employees. For example, the administration’s budget for the Department of Labor included a $104.5 billion increase, some of which the Secretary of Labor explained would be used to hire 500 additional full-time enforcement personnel in the areas of worker safety and wage and hour investigations. In Amarillo, that means that the number of investigators has doubled from one to two local field officers auditing your pay practices for overtime and minimum wage violations.

After Congress appropriated an extra $15 million to the Equal Employment Opportunity Commission in March 2009, the EEOC began actively filing many more cases against employers. In September 2009 alone, the EEOC filed 90 cases, with 22% of those filed against Texas employers. These 90 cases in one month should be compared to the 325 cases that the Bush administration’s EEOC filed in all of fiscal year 2008. The EEOC did not back off in October 2009, continuing to file multiple suits in Texas and nationwide against employers accused of sexual harassment, disability discrimination, age discrimination and other violations of federal employment law.

Other agencies are also beefing up their enforcement efforts. As far as worker safety is concerned, OSHA is conducting comprehensive safety inspections for nearly 4000 high-hazard worksites, including nursing homes, animal processing facilities and manufacturing plants. The Department of Justice is hiring more than 50 new civil rights attorneys to prosecute violations of criminal civil rights statutes.

Finally, U.S. Immigration and Customs Enforcement (ICE) announced on July 1 that it issued notices of inspection to 652 businesses nationwide, beginning the involuntary inspection and auditing of those companies’ hiring records. The purpose was to determine whether the businesses are complying with the immigration laws, particularly the requirement that companies have an I-9 employment eligibility form completed on each employee and that the documentation used by the employee reasonably appears genuine. ICE recently announced that this effort revealed that 16% of the I-9s reviewed were suspect, which could lead to civil penalties.

On November 19, another 1000 businesses were notified that they would be audited by ICE. These businesses were selected because they had a connection to public safety and national security.

How should you react as an employer to all of these upgraded enforcement efforts by the federal government? You must pay special attention to all of your employment practices to eliminate any liability. This attention should be focused on your pay practices (to avoid overtime and minimum wage violations), your hiring practices (particularly accurate completion of the I-9 forms), your supervisory practices (to eliminate illegal discrimination of any kind), your medical and leave policies (to prevent FMLA and ADA claims), and most importantly, your firing practices, because more than half of all federal employment law claims occur because of or after the employee is terminated.

The Associated Press published a story on October 26, 2009, that confirmed that racism is still alive and well in the United States and there is still a need for the workplace discrimination laws.

It seems that Larry Whitten bought a dilapidated hotel in Taos, New Mexico and quickly discriminated against his employees and enraged the town of Taos. So here is an object lesson in what not to do as an employer:

• Whitten, described as a Texan who last lived in Abilene, met with his new employees and says they were hostile. So he banned the speaking of Spanish in his presence because he was paranoid that they might start talking about him and he wouldn’t be able to understand what they were saying. So he enforced a type of English-only workplace rule, which is often one of the first red flags of discrimination that the Equal Employment Opportunity Commission looks for when investigating racial discrimination in the workplace.
• Then Whitten told some employees with “Hispanic-sounding” first names that they would have to Anglicize their names while at work. So “Marcos” would have to be “Mark” to satisfy Whitten’s deluded belief that hotel guests would otherwise find their names difficult to understand or pronounce. Whitten’s defense? “It has nothing to do with racism. I’m not doing it for any reason other than the satisfaction of my guests, because people calling from all over America don’t know the Spanish accents or the Spanish culture or Spanish anything,” Whitten said. I don’t know what century Whitten is living in, but according to the United States Census Bureau, Hispanics are projected to make up 15.5% of the nation’s population by next year’s census. Spanish names, language and culture are certainly not unfamiliar to Americans. In New Mexico, Hispanics make up more than 40% of the population and in Taos, Hispanics are the majority. Just doing a little people-watching while Whitten was visiting Taos should have clued Whitten into the fact that a little more racial sensitivity was going to be required in his new workplace.
• One of Whitten’s fired employees, Martin Gutierrez, summed up the racial insult from the employees’ perspective: “I don’t have to change my name and language or heritage. I’m professional the way I am.” That’s the point that Whitten obviously missed somewhere in his 63 years. He wasn’t judging his employees on their professionalism, their performance or their customer service abilities. He was making employment decisions based solely on his stereotypical beliefs about race. It is classic racial discrimination to assume you know something about an individual’s merits, motivations or abilities when all you really know about that employee is the color of his skin or the sound of his accent.
• Whitten fell into a trap by believing that providing what he perceived his customers wanted would be a good excuse for his racist decisions. However, the ignorance or racism of your customers, if it even existis, cannot prevent an employer’s liability for violating the discrimination laws in the workplace. If Whitten’s hotel guests had preferred only good-looking female employees or only energetic, young employees under 40, would he have violated the gender and age discrimination laws also? Maybe he would have, but if you are an employer, don’t follow his example.

There is an old Hollywood story that warns of family-run businesses:

Despite their joint ownership (with Albert and Sam) of Warner Brothers studios, little love was lost between Jack and Harry Warner (who once chased Jack around the Warner Brothers lot brandishing a lead pipe, threatening to bludgeon him).

Albert Einstein was given a tour of the Warner studios. “This is the great Professor Albert Einstein,” an executive declared by way of introduction to Jack Warner. “He invented the theory of relativity.”

Warner suddenly perked up. “Well, Professor, I have proved a theory of relatives, too,” he remarked.

“Really?” Einstein replied.

“Yes,” Warner declared. “Don’t hire them!”

In my law practice, I often advise businesses in which several of the owner’s family members are employed. While many families are able to successfully avoid stepping on the landmines that are planted just below the surface of family businesses, others seem to blow up either the family or the company by forgetting to follow a few simple principles to avoid the explosives:

• Make sure your family members are qualified to work in the role they are fulfilling in the company. I know of a successful entrepreneurial husband who wasn’t interested in worrying about the day-to-day tax, employment, accounting and management details of his business. He was a salesman and a very good one. So he left all those other details to his wife. She had no MBA, no training and no experience with the technical and financial aspects of running a business. Their business eventually suffered several large setbacks because neither spouse was qualified to manage the niggling but necessary details with which every business has to deal. The moral: either hire qualified non-family members to do the jobs which you and yours cannot perform, or require immediate and extensive training for any family member whom you expect to perform unfamiliar job duties.
• Don’t discriminate between family and non-family members. If you have a policy manual that prevents all employee from smoking in the building, prohibits the use of alcohol while on duty or pornography on the company computers or requires all employees to show up on time, do not allow family members to break these rules. In fact, in my experience, the family members should meet even higher standards to set a good example and because they are always under more scrutiny by employees to determine whether there is a double standard applied.
• Be careful about practicing your family’s faith in the workplace. I never advise an employer to cut out all references to faith in a business, particularly since following the tenets of your faith can create a much more ethical and wholesome workplace. However, the more family members or others of the same faith you have working in your business, the greater the possibility that applicants or current employees will feel like they have to pass a faith test to work in your business. This would of course be discriminatory, so you will have to be even more diligent about enforcing your equal employment opportunity policies, hiring employees of varying faiths, and making disciplinary decisions without regard to an employee’s beliefs.
• Watch out for apparent authority problems. In Texas, those with apparent authority to speak for the company can bind the company to contacts and get the company in legal hot water for employment decisions. If it is well-known to your vendors and employees that your daughter is working at the company and is being groomed to one day take over the business, don’t be surprised if she is treated legally as having authority to make all decisions for the company, even if, as the owner, you don’t believe she is experienced or mature enough yet to actually make those decisions.
• Family dysfunction can really cripple your business. If your son and daughter-in-law both work at the business, what will happen if their marriage starts to fall apart and they eventually divorce? Will you automatically fire your soon to be ex-daughter-in-law? Could this create a sexual discrimination issue? Could she make a claim in the divorce for part of the ownership of the business as community property? Those business owners who plan for the worst and hope for the best address these kinds of issues long before problems arise by requiring buy/sell contracts, pre-nuptial agreements and employment contracts with family members.