DOL Encourages Employees To Track Their Hours
The United States Department of Labor, long an agency that advocates for employees to the chagrin of employers, continued that trend by just releasing its first free application for smart phones to help employees in claims against their employers.
The app, for iPhone, allows employees to track work hours, overtime and breaks, all in an effort to discredit the records kept by the employer in any kind of wage and hour dispute. In times past, the employer kept the time clock or time sheets and paid accordingly. Employees can now easily record what they believe their working hours were and sue for more compensation, including overtime.
The app allows employees to send a copy of their time sheets via email to their own private email accounts, so that they can easily keep a paper trail with which to confront their employers. The app also includes summaries of the wage and hour laws and contact information for the DOL for employees to report violations.
This is another example of the adversarial relationship between the DOL and businesses across the country. This is the same mentality that accuses employers of “stealing” their employees wages (click here for a blog entry about that subject). As an employment attorney who regularly represents companies being sued by the DOL, I resent this generalization about employers.
Most of the companies I work with are diligent about trying to follow the law, which is often unclear where overtime requirements and exemptions are concerned. The DOL used to be very good about helping employers to understand the myriad regulations and to become more compliant.
Now, the attitude seems to be that all employers are guilty until proven innocent. The free app provided by the DOL just reinforces that attitude and will increase wage and hour litigation and the already overwhelming regulatory burden on small businesses.
If you want to assure that your business won’t be the victim of expensive unpaid overtime claims by your employees, have your employees sign and verify the accuracy of each time card or time sheet they turn it. In addition, add a policy to your employee handbook that encourages employees to come to you immediately with any concerns about incorrect paychecks, reassuring your employees that any payroll mistakes will be corrected.
Follow Your Lawyer’s Advice
The case every lawyer has been waiting for was decided last month in the United States 10th Circuit Court of Appeals. A company trying to get out of an overtime violations case defended itself by saying it relied on the advice of its lawyer. But the court pointed out that the company had only selectively followed the attorney’s advice. The company ignored the second part of the legal advice it received and made no real changes in its compensation policy in response to the lawyer’s opinions. So the company’s defense failed. Mumby v. Pure Energy Services (USA), Inc., (10th Cir.)(Feb. 22, 2011).
Why is the case so meaningful to employment lawyers like me? Because too often, clients who pay me for my legal opinion decide to dismiss some or all of my advice if it means they will have to change the way they do business. So many companies are slow or unwilling to adapt and change, even when new employment laws or regulations require employers to rewrite their policies or update their procedures. They resist change even when it means they will be penalized or sued when they get caught. But they never believe they will get caught, despite statistics that show even small companies face an adverse claim by an employee or former employee at least once every five years.
Teenagers often use similar risky thinking when making bad decisions, such as “I won’t get caught if I drive home, even though I’ve been drinking beer all night. It was only a six-pack, after all!” Employers tell me all the time that they believe their employees are like a family and won’t sue them, the company doesn’t have the money to change their procedures, or they just can’t find the time to comply with all these silly regulations. My favorites are the employers who tell me, “By God, this is my company. I built it with my own hands and I’ll be damned if the government is going to tell me what to do”.
I sympathize with the independent spirits and time-crunched lives of these business people. I am a small business owner myself and I understand the time and money constraints that we all face. But I accept that the government can tell me some things about running my business. So I am still going to pay my employment taxes, compensate my employees for overtime if they work more than 40 hours in a workweek, check the employment eligibility documents of new employees to make sure they are legal to work in the United States, and protect my employees from discrimination and harassment.
In the 24 years I have been practicing law, the employment laws have changed dramatically. When I started practicing, the Family and Medical Leave Act, the Americans with Disabilities Act, the Fair Pay Act, and many other laws and regulations didn’t even exist. Sexual harassment claims were almost unheard of before the Clarence Thomas/Anita Hill fiasco in 1991. Times have changed and employers have to change with them. But no one expects companies to stay up to date on every shift in policy in the employment law arena. That’s my job and the job of thousands of other lawyers across the country. Trust us to help you as an employer adapt to this ever-changing area of the law.
Employer’s Liability for New Employees
Bob Smith started working for you four weeks ago. He has already missed two days of work, been tardy, left early one day and when he is at work, his production is mediocre. You have a 90-day probationary period in your employment policies and it is becoming clear to you that Bob is not going to make it through that probation. Can you fire this four-week employee without any unemployment or discrimination liability?
Unfortunately, the answer in Texas is “no”. As soon as Bob became your employee, he became your problem. This is one reason that the hiring process ought to be very demanding, including checks of all of his past employers, criminal records, drug screening, etc. to discover at least the most obvious problems before you put him on the payroll. But many past employers won’t tell you anything about Bob’s dependability, so it is not surprising that he got through the hiring hurdles.
So if you decide to fire him today, what kind of liability can you face as an employer? In Texas, you will probably be charged back for his unemployment benefits by seeing an increase in your unemployment tax rate on all of your employees for the next three years. That is a stiff price to pay. There is a chance you will get lucky and not get the charge back if Bob falls into a narrow category based on how much he worked before you hired him. The explanation for that can be found on the Texas Workforce Commission website (click here).
Assuming that you don’t get that lucky or you don’t want to count on luck, you can document Bob’s problems, give him a written warning and then fire him for misconduct as you would any longer-term employee so that you have a way to fight the unemployment claim. This will go better for you if your policy manual makes it clear that absenteeism during the probationary period is not allowed. There is nothing wrong with requiring your new employees to show up every day for the first three months. You would think that most new employees would want to do that just to prove themselves, but I am constantly amazed by the slackness that many new employees bring to the workplace.
What about discrimination? Surely you can’t be held liable for something that happens to a new employee in the first few weeks? Think again. The United States Sixth Circuit Court last year upheld a $1.2 million sexual harassment claim for an employee who had only worked for five weeks at the company. In her third week of employment, she complained to her trainer and supervisor about the comments, touching, whistles and lewd gestures she was receiving. The supervisor moved her, but unwisely said, “That’s just how they treat their women over there,” and requested that she not tell the human resources department.
After another two weeks without improvement, the new employee told the human resources manager about the problem. He promised to investigate, but didn’t, so she filed a charge with the EEOC and later, a lawsuit. The trial court and the appellate court found that the employer’s response to the employee’s sexual harassment complaints showed reckless indifference to the new employee’s federally protected rights, supporting not only a judgment against the employer, but also an award of punitive damages.
There are all kinds of problems with the supervisor and the human resources manager’s responses to the sexual harassment complaint that have been discussed in other entries on this blog, but suffice it to say here, the fact that the employee only worked five weeks did not insulate the employer from any liability in this case. Your responsibility as an employer to protect your employees from discrimination kicks in on their first day of work and continue throughout their employment.
Employer’s Guide to Social Media
Sally Sassy, one of your best customer service representatives, posts pictures on her Facebook page that show her drunk, in a skimpy bikini and kissing many different men, even though she is married. Several of your customers are her “friends” on Facebook.
Derek Downer, likes to post negative comments on My Space about everything, including his job with your company as a bookkeeper. He often talks about how he hates his boss, disapproves of his coworkers, and thinks your company’s latest project is doomed.
Gail Gossip has a personal blog where she chronicles all of her feelings about work, including stories about her coworkers’ professional and personal struggles. Her blog is open to anyone who wants to read it.
Hayden the Human Resources director at your business uses Linked In to network with others in your industry, including finding well-qualified candidates for openings at your company.
All of these employees are using social media on the internet, in some ways that benefit your company but in other ways that can damage your business’ reputation or even your profits.
As the employer, you can adopt a policy to instruct your employees as to which posts on the internet are appropriate and professional and which are not. The only legal restriction comes from the National Labor Relations Board, which prohibits employers from adopting policies that restrain employees from engaging in concerted activity or from forming unions. The NLRB says that you cannot impose blanket restrictions, such as “employees cannot post any negative comments about this company.” Employees are free to discuss salaries, working conditions or terms of employment in person or on the internet.
However, you can expect your employees to use good judgment on the internet. You can direct your employees to protect your company’s trade secrets and confidential business information. You can prohibit the use of your logo. You can also require them to be professional and respectful towards your customers and your other employees. You can require them to get the permission of others before mentioning them on the internet as a way of protecting the privacy of your other employees, vendors and customers who might be appalled to find their personal business posted without their permission.
You can also remind employees that your other policies should not be violated on the internet. For example, an employee who posts sexual comments on a coworker’s blog or Facebook page may be violating your company sexual harassment policy and can be disciplined for that. Your company ethics and values policies may also prohibit certain inappropriate actions.
You can also limit the use of company computers, networks and company time for social media activity. You do not have to allow your employees to spend hours per day on your business computer updating their personal blogs.
As with any employee activity that could turn ugly, the best advice is that you as an employer adopt a written policy now, publish it to all of your employees, and prevent the problems before they happen.
Pitfalls of Misclassifying “Contract Labor”
If you are a business owner or manager, you may have had this great idea at one time: “I can save my company lots of money if I hire ‘contract labor’ instead of employees to do this job.”
The hope of every business person is that hiring a contract laborer will allow the company to avoid the headaches that accompany being an employer.
Employer anticipate a savings by not paying the employer’s portion of federal payroll taxes, worker’s compensation premiums, retirement and health benefits, as well the cost savings of avoiding state and federal unemployment taxes. Also, refusing to put another employee on the payroll is believed to help prevent the liability for discrimination and overtime wages.
Unfortunately, if you decide to take a bite of this poisonous fruit that the serpent is offering and hire a contract laborer, you could face regrets and costs much greater than anything you incur by accepting the responsibilities of being an employer.
You can’t just choose to classify a worker as a contract laborer when he is performing work for you. Chances are very high that all of the people who perform work for your business are actually your employees, whether you call them that or not and even if they agree to the arrangement. The IRS and the Department of Labor will see this as the tax dodge that it really is.
There is someone called an “independent contractor”, but he performs work for your company as well as others. You exercise no control over where, when and how the specific job for which you hired him gets done. This could be your lawyer, your accountant, your plumber, or other workers who are usually self-employed or employed by another company and are not economically dependent on you.
But if you dictate the manner and means by which work is done for you, provide training, supervise the worker, set the hours, provide the tools and equipment or make a profit off of the labors of the worker, he is an employee and cannot be classified as contract labor.
If you misclassify an employee as an independent contractor, there are already significant penalties, and those may soon increase.
A bill was filed in both houses of the United States Congress on April 22, 2010, aimed at insuring that workers are classified as employees, making them eligible for the legal protections and tax benefits provided to employees by law.
If passed, the Employee Misclassification Act will require employers to keep records of every worker classified as an independent contractor along with the analysis of the reasons that the worker was classified that way.
If you are wrong in that analysis, the Act will also increase the penalties for employers who misclassify their workers, including double damages for any violation.
Even if this new legislation doesn’t pass, regulators in President Obama’s executive branch are already on the lookout for companies who misclassify workers as contractors rather than employees.
The United States Department of Labor has increased its resources, investigators and emphasis on enforcement against employers who misclassify workers as contractors. The DOL estimated in 2000 that 30% of companies are guilty of this error.
The DOL’s 2011 proposed budget adds $25 million and 100 investigators just to focus on the “Misclassification Initiative”.
In addition, the IRS announced in February that it will audit 6000 businesses at random over the next three years to determine if any of them have misclassified employees as contractors. So you could get investigated by two federal agencies who have the power to impose significant penalties on your company.
Industries that often have problems with misclassifying their employees include the home health industry, construction, trucking, shipping and delivery, security, spas, technology and media companies. Even a group of strippers sued their club owner in 2009 for making them “pay for the pole” and earn only tips, when the women claimed they were regular employees who were due hourly wages and overtime.
So as a responsible business owner or manager, what can you do to avoid being one of those companies that faces federal enforcement of the regulations prohibiting you from classifying an employee as an independent contractor?
- Assume that everyone who works for you is an employee. Don’t classify someone as contract labor unless you have a legal opinion specifically addressing whether that person really is an independent contractor.
- If any worker actually is an independent contractor, you need a written agreement spelling out the terms of service with that worker.
- Keep careful records of your classification of all workers and how you compensated them for each day’s work.
- Annually review the duties of anyone who works for you and make sure that your initial classification of that worker, whether employee or contractor, still applies.
Wage Issues Keep Biting Employers
In the human resources and employment law trade journals that I regularly read, the headlines proclaim repeatedly that employers are paying their employees incorrectly and getting in legal hot water because of those mistakes. The penalties range from the expensive for any small business owner to the absurd for Wal-Mart.
At the lower end of the spectrum is the nearly $90,000 that a Houston landscaping company paid in February to settle an audit by the Department of Labor for misclassifying office staff and others as exempt from overtime and minimum wage laws. The company also got in trouble because they apparently weren’t paying workers for the time spent loading and unloading materials and tools at the start and end of each workday. These activities generated overtime hours for the workers, but they weren’t paid overtime. In addition, the DOL found recordkeeping problems.
At the high end of the scale, this month Wal-Mart agreed to pay as much as $86 million for a wage and hour class-action suit in California involving about 232,000 former and current employees who weren’t paid correctly for overtime and vacations. This is separate from a 2008 agreement that Wal-Mart made to settle 63 other wage-related suits for $640 million.
Whether you are a large or small employer, you must pay your employees correctly to avoid costly litigation by the Department of Labor, or worse, the employees and their attorneys looking for double damages and attorneys fees.
I have written other blog entries on paying overtime correctly (click here and here), keeping proper compensation records (click here), the new enforcement efforts by the DOL (click here) and the pitfalls of compensation mistakes (click here). I don’t want to sound like a broken record, but I constantly find companies who still don’t take wage and hour issues seriously and who haven’t conducted an audit to determine if they are paying their employees correctly (when in doubt, pay hourly and overtime). Please invest the time and effort to correct these issues now so that your company will not face costly overtime litigation.
There Are Better Ways to Enforce A Dress Code
Why do these kinds of cases only happen in Texas? In a head-scratching act of stupidity, the president of hatmaking company near Wichita Falls, Crowell Contract and Design, pulled a female employee’s pants down in front of her coworkers.
The Equal Employment Opportunity Commission was not amused. It sued on the female employee’s behalf, claiming that the president created a sexually hostile work environment. The company had to pay $21,500 to the employee to settle the case, as well as agreeing to provide training to all of its employees on preventing sexual harassment. The EEOC characterized the action of the president as an abuse of power.
I’m guessing that at the time of the incident, the president of the company probably thought of it as a prank, not an abuse of power. I know that I have been tempted to do the same thing when walking behind teenagers in the mall wearing baggy jeans that show their boxer shorts (I never thought I would be pleased to see tight, skinny jeans make a comeback)! But as an adult, I have always resisted following through on that temptation. That’s what responsible people do.
Although the reports of the Crowell settlement don’t explain the company president’s motivation, I’m guessing he thought his employee’s pants were too baggy. The reports do say that he had previously threatened several times to pull her pants down.
Maybe the president didn’t know that in Texas, employers are free to write dress codes and enforce them based on the company’s expectations of professionalism and community standards. If he didn’t like baggy pants, he could have prohibited his employees from wearing them. As long as your dress code doesn’t single out one gender or one race and discriminate against that group, it is not illegal.
His “prank” appears to me as a passive/aggressive way of handling a pretty simple dress code problem. If the president of the company thought his employee was inappropriately dressed, he should have verbally warned her that her clothes violated the company dress code and sent her home to change clothes. If she continued to wear the baggy pants, he should have given her a written warning, a suspension and then fired her. That is the standard progressive discipline policy that every savvy employer in this country understands and enforces.
The president unwisely resorted to a fraternity prank instead of good management. It was an expensive decision. It reminds me of an incident a few years ago when a Dallas producer on the Barney show (purple singing dragon, remember?) decided that he would discipline a female employee by spanking her! Maybe he had worked in children’s television too long. That one resulted in a sexual harassment suit also.
Come on, Texas! We can do better.
What is the Maximum Leave an Employee Can Take?
Sears Roebuck & Co. recently settled with the Equal Employment Opportunity Commission a class-action lawsuit for $6.2 million, the largest monetary award for a single Americans With Disabilities Act (“ADA”) suit in EEOC history.
The accusation against Sears was that the company discriminated against the disabled because it had an inflexible policy that allowed injured employees to take off of work for one year before they were automatically terminated for exhausting all leave. The EEOC said that this apparently neutral policy did not provide injured employees with reasonable accommodations in violation of their ADA rights.
With this suit, the EEOC is signaling an end to maximum leave policies. So if an employee has a serious health condition and uses all of his Family and Medical Leave but still cannot return to work, the employer now has to determine whether it would be a reasonable accommodation to allow the employee to miss more work. This is the EEOC position even though the courts have held that regular attendance is an essential function of most jobs and that indefinite, open-ended leave requests are not reasonable.
Texas courts have long held that maximum leave policies, neutrally applied regardless of whether the employee suffered an on-the-job injury, had a heart attack or wants to extend her maternity leave, are valid in Texas. The EEOC is undercutting those holdings in an attempt to impose a different standard (or no standard at all). From the settlement with Sears, the EEOC apparently wants all employers to follow these steps when an employee has been on leave and is unable to return at the prearranged time:
- The employer must notify the employee 45 days in advance of the date her leave expires.
- The employer must engage in the interactive process with the absent employee to determine whether part-time work, modified duties or a move to another position would reasonably accommodate the employee and allow him to return to work.
- If none of the previous options work, then the employer should consider offering additional leave beyond what the policy calls for.
What this means to even a small employer (15 or more names on the payroll) is that there will be no bright-line cutoff to an employee’s leave. If the EEOC’s position prevails, employers will have to hold all jobs open indefinitely for an employee who must take time off for an injury or illness.
At this point, my only advice is to wait and see how the courts react to the EEOC’s position. The Sears suit was a pretrial settlement, so we don’t know how this unreasonable position of the EEOC will hold up in court.
In Texas, it is still the law that an employer can enforce a neutral leave of absence policy by automatically terminating an employee who has exceeded the maximum leave offered. Just be aware that that law could change at any time if courts begin to side with the EEOC.
EEOC Ordered to Pay Employer’s Attorneys’ Fees
Many employers have felt victimized by the federal government’s sometimes overzealous enforcement efforts on behalf of employees against the companies they work for. For example, the current trend regarding any compensation mistake by the employer is to label it “wage theft” and prosecute the employer like a common purse snatcher. (Click here for more information on “wage theft” enforcement efforts).
Obviously, some businesses do discriminate and some purposefully fail to pay required overtime. But the company is not always the bad guy and it is nice to know that occasionally a judge will side with the company instead of the government.
This happened recently in Iowa, where a trucking company had spent $8.5 million in attorneys’ fees, expenses and costs to defend itself against allegations by the Equal Employment Opportunity Commission that the company had a pattern and practice of sexual harassment. The federal judge dismissed the EEOC’s suit against trucking company after the company filed a motion for summary judgment. The female judge also issued scalding criticism of the EEOC’s pursuit of the case.
To punish the EEOC, the judge used her discretion to award money to the prevailing party to cover attorneys’ fees, which in this case was the trucking company. She ordered the EEOC to pay $4.56 million to the company to help with some of their legal fees.
For someone who always represents employers and who constantly has to tell them that the chance of getting reimbursed for attorneys’ fees is slim to none, I found this case as a small glimmer of hope that the small business owners whom I represent could receive justice in an egregious case like this one. However, I must point out that no matter how nice the $4.5 million judgment against the EEOC seems, there are two caveats to consider: (1) the company spent $8.5 million defending itself against these scurrilous claims and will only get half of that back; and (2) the EEOC has already said it will appeal the $4.5 million attorneys’ fee award, meaning the trucking company is not through spending money on legal proceedings yet.
For most of us small business owners, the idea of spending $8.5 million in defending our companies is laughable. Most of us couldn’t spend 1/100th of that on attorneys without bankrupting ourselves. That’s why I harp so often on preventative measures that an employer can take to avoid employee litigation. It is far better to never be sued at all than to win a very costly victory like the Iowa trucking company did.
Attempting to Prevent Workplace Violence
Amy Bishop, a 42-year-old biology professor at the University of Alabama-Huntsville (UAH), walked into a biology faculty meeting on Friday, February 12, and according to eyewitnesses, opened fire on her colleagues, killing three and wounding three others. She is charged with capital murder and the death penalty may be sought. Obviously this a nightmare for the victims’ families and friends, the university and the community of Huntsville.
As the shock of this gruesome event settled in to my brain, the questions about workplace violence prevention arose. Could this horrific mass shooting have been prevented by policies, background checks, or alert coworkers? The question is unanswerable, of course, but trying to answer it is the only way we can learn something from this tragedy.
One method that an employer can use to prevent workplace violence is to thoroughly check the criminal and employment background of any prospective employee. There is speculation about Amy Bishop’s background, including suspicion that she was involved in the killing of her own brother and in sending of a mail bomb to a former boss. However, no criminal convictions were recorded in these incidents so they would have been of no help to a human resources professional trying to check Bishop’s background.
A much clearer sign of a potential problem was her guilty plea to misdemeanor assault and disorderly conduct in 2002 for punching a woman in the head at an IHOP after the victim took the last booster seat just as Bishop arrived with her children. The victim told officers that Bishop started a profanity-filled argument and at one point shouted, “I am Dr. Amy Bishop”. Some of the news stories now say that Bishop was put on probation and ordered to take anger management classes. If so, a criminal record would exist. Any employer who finds violent crimes on a prospective employee’s criminal record, even if they are misdemeanors, should think carefully about whether that applicant’s abilities are worth the risk to others in the workplace.
A thorough reference check with Bishop’s past employers might have revealed some personality issues that could have raised red flags. Granted, many past employers will only give out dates of employment, rate of pay and job titles. But if a prospective employer will fax to the former employer a release signed by the applicant absolving the former employer of any liability for giving out real information during the reference check, the conversation will usually be much more revealing.
In Bishop’s case, UAH might have discovered that Bishop, as one FBI profiler said, was “wired in a way that any rejection, either real or imaginary, is seen as an insult against her very existence and self-esteem. Her narcissistic ego was impugned and threatened.” People like Bishop, who have a tendency to blame others whenever things go wrong in their lives, who show anger often and who retaliate aggressively, may have left an indelible impression on past employers. The trick is to get them to relate those personality problems to you as a prospective employer so you can reject that applicant before he or she becomes an irritant, or worse, an aggressor, in your workplace.
Of course, as an employment attorney, I would be remiss if I didn’t point out that the Americans with Disabilities Act protects those with mental illnesses from discrimination in hiring if the applicant is qualified and can perform the job with or without reasonable accommodation. However, you will not know that the applicant has a mental illness from just a reference check. You simply will have identified some negative behaviors that are unacceptable in your workplace. This is always a good reason to pass over that applicant in favor of someone equally well qualified who doesn’t have poor reports from past employers.
Finally, after you have hired an employee, your best protection from violence occurring in your workplace is a policy that makes it very clear that even threats of violence are prohibited and may cost an employee her job. Training of all employees, but particularly supervisors, to recognize and identify certain suspicious behavior can be helpful. Granted, in academia as in other work environments, the line between eccentricity and madness may be a very thin one. But no one should be allowed to make specific threats, carry a weapon (even in a car in the company parking lot), or physically fight with a coworker without the employer taking serious disciplinary action, including possible termination.
The truth is that no employer can make a workplace 100% safe from someone as irrational and violent as Amy Bishop appears to be. However, that doesn’t give you license as an employer to fail to do everything you can to prevent such an occurrence in your workplace.