keys-minFor nearly 35 years, automobile dealers relied on the U.S. Department of Labor’s position that service advisors fell within the Fair Labor Standards Act’s exemption from overtime for “salesmen, partsmen, or mechanics primarily engaged in selling or servicing automobiles.” In 2011, the DOL “upended” this interpretation by issuing regulations specifying that the exemption did not apply to “sales personnel” unless they sell vehicles.  Thus, service advisors were deemed non-exempt.

In June 2016, in Encino Motorcars, LLC v. Navarro, No. 15-415, 2016 WL 3369424 (2016), the Supreme Court held that the 2011 regulation was not entitled to deference because it was issued without the requisite reasoned explanation for a change.  The Court did not decide whether service advisors are, or are not, exempt.  The U.S. Supreme Court remanded the case to the U.S. Court of Appeals for the Ninth Circuit (which had decided the case below) with instructions that the appellate court not give any deference to the DOL’s regulations.  In other words, the appellate court should review the duties of the position (the sale of repair and maintenance services) and decide if the duties fell within the statutory exemption.

Continue Reading Automobile Service Advisors: Exempt or Non-Exempt

I admit I am addicted to Starbucks coffee, particularly the concentrated brew that I can get for extra money on the Clover machine at my local joint. My husband insists I have a store locator chip in my brain (this before I had my i-Phone app with the actual – and BRILLIANT – store locator).IMG_1447

But, I am worried about my coffee joint. It is importuning me to discuss the issue of race in the U.S. with my barista. Indeed, as many news outlets have reported, I am not alone. We don’t want “race together” scrawled on our cardboard coffee cups (we non-ecological folks) or, as apparently my local Starbucks determined to be the middle-ground, written on a tiny whiteboard on the counter area in front of the barista “stage.”

Race matters, in many, many ways in the U.S., but here is why I fear for my beloved Starbucks when it decides to interject open discussion of this unresolved topic into my morning coffee.

  1. I am an employment lawyer. Let me refine that. I am an employment litigator. I defend employers when they are sued. This concept is beyond “diversity training gone wrong” where some “luminary” decides that the males in the office need to decide how it feels to be groped and ogled by the other sex (and so makes that one of the diversity training exercises, resulting in lawsuits). Asking your average barista to field discussions about race is above their pay grade and may lead to situations in which THEY feel harassed based on a protected characteristic/view (let’s just say divergent views on any number of topics – such as Ferguson and the propriety or lack thereof of the police conduct – do not neatly align with coffee house conversation).
  2. My parents schooled me that there are certain conversations that you save for people whom you know – politics and religion among them. I thought my parents were bourgeoisie when I was 21. I now understand at 54 how spot-on they were.  It is not low-brow to appreciate that certain debates are not appropriate in certain contexts (such as a commercial transaction when all I really want to do is wake up my mind, not debate the origins of oppression).
  3. I believe that conversations about important topics should be generated by thoughtful, deliberate dialogue.  I truly respect each and every person who provides me service. I was them 40 years ago. But I was not qualified to mediate discussions of race when I was a waitress and I think asking that of these folks is just not fair.

So, please, Starbucks, “stay in your lane.” You are fulfilling my need for superb coffee that gets me going each day. I have your app on my phone. I am happy whenever you are there in a faraway place that I travel to (although, candidly, not so much in Italy – you don’t cut it there).  But I worry for you when you try to extend yourself – and your unwitting staff – into discussions that are bound only to alienate your loyal clients and, even more troublingly, result in your staff filing claims that they were subjected to racially hostile working environments when they are subjected to “divergent views on race” that simply do not belong in the workplace. With that, I would like a tall Brazil in a Grande cup on the clover (and please, write nothing but “tall” on my cup). Thanks loads!

Red GrouperThis case, Yates v. United States, is outside our usual employment law zip code, but it’s such a wacky one, it lured us in. It involves a fisherman who failed to preserve, as evidence, undersized fish that he had caught in violation of federal law. A federal agent found the undersized fish during an offshore inspection of a commercial fishing vessel in the Gulf of Mexico. The agent instructed the ship’s captain to keep the undersized fish separate from the rest of the catch until the ship returned to port.  After the agent left, however, the captain told his crew to pitch the fish overboard.

Casting a wide net, the government charged the captain with violating a provision of the Sarbanes-Oxley Act (SOX) dealing with the destruction of evidence. (Perhaps you remember that SOX was enacted by Congress following the Enron scandal, which made waves in the financial industry by involving massive accounting fraud and the destruction of documents). Under SOX , a person can be fined or imprisoned for up to 20 years if he “knowingly alters, destroys, mutilates, conceals, covers up, falsifies or makes a false entry in any record, document, or tangible object with the intent to impede, obstruct, or influence” a federal investigation. The captain was found guilty of destroying a “tangible object” – i.e. the fish.  He was found guilty and sentenced to 30 days. The U.S. Court of Appeals for the 11th Circuit affirmed the conviction, and the captain appealed to the U.S. Supreme Court.

The Supreme Court found that the charges against the captain were fishy. It held that SOX was meant to address destroyed records and information, not red grouper!  In the context of the statute, the destruction of evidence provision immediately follows corporate fraud and financial audit provisions. The term “tangible object” comes at the end of a list of terms that begins with “any record [or] document.” Given the context and placement, a “tangible object” under SOX “is one used to record or preserve information” and does not include the entire universe of objects. As Justice Alito (somewhat whimsically) noted in his concurring opinion,

[T]he term “tangible object” should refer to something similar to records or documents. A fish does not spring to mind – nor does an antelope, a colonial farmhouse, a hydrofoil, or an oil derrick. All are objects that are “tangible.” But who wouldn’t raise an eyebrow if a neighbor, when asked to identify something similar to a “record” or “document,” said “crocodile”?

Now, the Supreme Court wasn’t united in this opinion. Justice Kagan wrote a dissenting opinion, which was joined by Justices Scalia, Kennedy and Thomas. She looked to the ordinary meaning of “tangible object” as “a discrete thing that possesses physical form.” She then went on (even more whimsically) to state:

A fish is, of course, a discrete thing that possesses physical form. See generally Dr. Seuss, One Fish Two Fish Red Fish Blue Fish (1960).

Well, as for this case, I guess it’s the one that got away (from the feds).

Sometimes court decisions read like blues songs.  Such is the case with Dolan v. McQuaid

Effie Dolan and Christopher McQuaid met in 1997 and fell in love.  Eventually they were engaged to be wed.  It is unclear whether Chris bought Effie a diamond ring.  They did, however, acquire a Diamond Car Wash and Effie worked with Chris to build this business venture for three long years.  Effie wrote a business plan, drew up contracts, devised a logo; she even created a website.  She was sure she would be the future Mrs. McQuaid and benefit from the fruits of this Diamond. 

Well, being a blues song, you know what happened.  Effie’s man done her wrong.  Chris did not follow through on the wedding plan or the business venture.  He refused to share the profits of Diamond Car Wash with Effie or to compensate her for her efforts.  She sued, claiming that Chris made an enforceable promise to her (for the benefits of the car wash, not the marriage). The trial judge ruled against Effie and threw out her case. She appealed. 

The Court of Appeals ruled that Effie had no enforceable contract – oral or written.  Effie worked for an indefinite thing called love – the terms of the business plan at Diamond were not clear and defined.  She bargained for marriage not dollars.  And a contract must be a clear, bargained-for exchange. The Court also ruled promissory estoppel – the legal theory that can provide a recovery in the absence of a contract based on a definite promise – was equally unavailable to Effie.  Again, there was no definite promise in Diamond Car (and the definite promise – marriage – was unenforceable).

But, “not so fast” said the Court.  The tort of unjust enrichment permits a party to recover for the value of a benefit that was conferred upon another, retained, and by right should be repaid.   Unjust enrichment arises from actions, and the measure of recovery is to disgorge the defendant from the value of the benefit that was conferred upon him which should, says the law, leave him no better or worse off than he otherwise should be.  So the case was remanded.  Effie may now argue to a jury her value to Diamond Car Wash – and Chris.

So, how would this blues song go?   I’ll call it “The Tale of Diamond Car Wash (or Don’t Mess With a Smart Gal)”

Chris McQuaid, Chris McQuaid, he done his Effie Wrong.

Chris McQuiad, Chris McQuaid, he done his Effie Wrong.

Bought a Diamond Car Wash. Made Effie work all day long.

 

Effie Dolan was a smart gal, she made that Diamond Shine.

Wrote a bunch of contracts. She raised the bottom line.

But book smarts don’t mean nothing, when you been two timed.

 

Effie sued for justice; she sued to make Chris pay.

Trial judge said “no contract.”  Told Effie, “go away.”

Effie wouldn’t take it. She had to have her day.

 

High Court rescued Effie, Told Chris, “She has a case”

“What you took from Effie, she asks that you replace.”

Diamond ring may be the answer, to make this go away.

 

The moral of the story: don’t mess with a smart gal.

She’ll chase you ‘til she gets you; you may end up in jail.

So watch out what you promise, ‘cause Effie will not fail.

 

 

 

 

Do you wonder why a large inflatable rat stands nearby when a union is picketing?  In the building trades, “rat” is a term that unions sometimes use to refer to a non-union contractor.  A union typically sets up its inflatable rat (or, in some cases, a skunk) at its picket line at a site (e.g., an office building) where the non-union contractor is performing services.  The inflatable vermin is used to embarrass either the office building owner or tenants in the office building, and make them uncomfortable.  The hoped-for effect is to cause the office building owner or tenant to cease its business relationship with the non-union contractor in order to make the rat go away.  Whether the rat is protected “First Amendment Free Speech” or a violation of the National Labor Relations Act as an impermissible tool in a confrontational union campaign depends on the surrounding circumstances.

If an employee asks for time off from work rather than pay for overtime hours worked, can a company grant this request?

It depends.  Generally, overtime is due whenever an employee who is not overtime exempt works more than 40 hours in a workweek.  (A few states require the payment of overtime if an employee works more than 8 hours in a workday).  Overtime is paid at one-and-one-half time the employee’s regular hourly rate (i.e., an hourly employee who is paid $10 per hour would be entitled to $15 for each hour worked in excess of 40).

Because Federal law and most states base the right to overtime pay on the workweek rather than the workday, an employer could give an employee time off during the same workweek (such as a late arrival or early departure) to ensure that the employee does not work more than 40 hours in the workweek.  This doesn’t apply, however, to those states requiring payment of overtime based on the workday.

But if the employee wants to take off time in a different workweek, the answer is “no.”  Private sector employers are not permitted to give employees compensatory or “comp time” in lieu of overtime pay.  (This is unlike in the government employment context where comp time is permitted under certain conditions.)

 

Yesterday, the U.S. Court of the Appeals for the Third Circuit held that the NLRB lacked jurisdiction to take action where it lacked three Board Members who had been properly appointed.  In NLRB v. New Vista Rehabilitation and Nursing, a majority of the panel held that President Obama’s appointment of Craig Becker to the Board during an “intra-session recess” (i.e., a break during a session of the Senate) violated the Constitution and thus, the Board lacked the necessary three-member panel to act. The Court construed the Recess Appointments Clause to the Constitution as permitting appointments by the President unilaterally only during recesses “between sessions” of the Senate (i.e., the formal break when a Session ends before another begins). 

Lawyers – particularly wonky Constitutional scholars – will in the coming months extensively analyze the majority and dissenting judge’s scholarly decisions.  But, I will give you the “bottom line” on this.  The majority’s holding is of great significance for three main reasons. 

·        First, the majority concluded that the long presumed power of the President to make recess appointments during an intra-session break of 10 or more days was not supported by the Constitution.  Thus, only appointments made when the Senate recesses between sessions are valid “recess appointments.”   This is consistent with the decision by the D.C. Circuit in Noel Canning (which was discussed in our January 2103 Eupdate).  As such, actions taken by this or any prior President that were taken by an improperly constituted agency could conceivably be challenged, although NLRB cases involve litigated matters rather than rulemaking so the time limits for challenges will limit the impact to current labor cases.  Notably, President Obama had made 26 recess appointments as of January 2013; George W. Bush made 141 in his eight years in office.

·        Second, in finding that the recess appointment of Craig Becker in March of 2010 to be invalid, the panel majority’s decision opens the door to challenges to far more decisions than did that of the D.C. Circuit. Noel Canning concerned only the appointments made by President Obama in January of 2011 during the weeks between Christmas and New Year’s when certain members of the Senate continued to hold pro forma sessions in order to avoid a recess.

·        Third, the conclusion that the improper appointments deprived the Board of jurisdiction to act means that any employer or union at any stage of a case – whether before the NLRB or on appeal — can now raise the defect as a reason to vacate Board action. Jurisdiction can be challenged at any stage without being raised earlier as it goes to the fundamental power of a tribunal to act. The D.C. Circuit did not analyze the issue as jurisdictional (the panel majority of the Third Circuit noted that its sister circuit had “conflated” the analysis; that is, missed this step.)

Finally, I will share a couple of observations that are less “practical” (I do get to be a little “wonky” now and then).  The majority’s decision focused on the principle that separation of powers was of paramount importance to the framers of the Constitution.  The NLRB’s extreme position – that the President had the power to make appointments without the advice and consent of the Senate during any break during a Senate session regardless of duration – would permit the exception (recess appointments without Senate approval) to swallow the rule (the President must obtain Senate approval for appointments).  The intermediate position – that breaks of a not-insignificant duration constitute “recesses” – was not in the text of the Constitution or supported by surrounding evidence from the time of its drafting. 

In addition, the Court –quite properly in my view – rejected the position taken by the Board and its supporting “friends of the court” briefs that the issue was “nonjusticiable,” meaning that only the President could decide what the power entailed and that the judiciary’s respect for the Executive Branch required it to stay out of the matter.  The notion that one branch of government (here the Executive) should have unreviewable discretion to decide the scope of its power simply is not tenable.  As the majority stated, “Defining ‘recess’ in the Recess Appointments Clause does not express a lack of respect for coordinate branches of government because defining the word is merely an exercise of our judicial authority  ―to say what the law is, which sometimes requires an evaluation of whether one branch is aggrandizing its power at another’s expense.”

 

A departing employee accesses the company’s computer system on his way out without authorization and takes data.  What remedies can the company pursue?

The company can contact law enforcement officials, as that conduct likely constitutes a crime.  In addition, the company can file a civil complaint in court against the ex-employee, asserting claims such as trespass, conversion, or even a breach of the duty of loyalty.

The company can also take advantage of the civil remedies available under the Computer Fraud and Abuse Act.  This law has been found to apply where an employee continues to access a company’s computer system without authorization or for an illicit purpose after the employee accepts a job with another employer. For example, where an employee sends confidential information to his new employer before leaving the current position, the employer can bring an action in federal court against the disloyal employee and the new employer for losses caused by the unauthorized access, as well as consequential damages that include costs associated with security updates or enhancements to the company’s computer systems.  Because companies that knowingly receive another firm’s data may be held liable under this law, new hires should be instructed not to take any information from their former employers without express written permission from that employer.

What should a company consider in deciding whether to engage in electronic workplace monitoring of employees?

Companies, concerned with the abuse of workplace technologies, are increasingly considering electronic monitoring programs.  Motivating considerations include the prospect of liability for sexual harassment lawsuits arising from inappropriate emails or web site usage, concerns about employee transfers of proprietary company data to unauthorized recipients, or the loss of productivity from employee web usage.

Before deciding to engage in monitoring, companies should consider whether the cure might be worse than the problem.  For example, undertaking monitoring as a means for avoiding harassment claims may have the opposite effect if an employer becomes aware of a potential problem and fails to act.  The specter of monitoring can also have a negative impact on employee morale.

If an employer decides to proceed with monitoring, it should provide employees with notice that monitoring will take place prior to initiating monitoring.  This is required by law in some states, such as Connecticut, and is a good practice even if not required by law.  Notice should be through a written policy or computer sign-on notification, to avoid legal claims.  Finally, monitoring should not be undertaken without consulting legal counsel.

Almost every nonunion company’s employee handbook has the standard clause: employment is at-will.  This indisputably is a permissible term of employment, right?  The answer to that question depends on how the policy is phrased.   According to recent pronouncements from the NLRB, if a “reasonable employee” could read such a policy as making unionization futile, then it is an illegal term of employment under the NLRA.  So, how should you craft your at-will disclaimer to withstand such a legal challenge?

Do not promulgate an at-will disclaimer in which employees agree or warrant that their at-will status cannot be amended, modified, or altered in any way.  According to an Administrative Law Judge,  the disclaimer essentially was a waiver of the employees’ Section 7 right to “advocate concertedly” to change their at-will status.  In the case before the ALJ, although the policy did not expressly target protected concerted activity, nor was it promulgated in response to a union drive, a “reasonable employee” could read the policy this way so it violated the law.

Do make clear that the employee is at-will but that at-will status is subject to modification by certain designated officials, and then only in a signed writing.  The NLRB Division of Advice rejected challenges to two at-will disclaimers because, with this language, “reasonable employees” would understand that their status could change through a collective bargaining agreement signed by a designated company official, such as the president.

The NLRB General Counsel’s office has stated that nonunion employee handbooks, including at-will disclaimers, will be scrutinized for labor law violations when claims are filed.  As our prior blog posts have explained, many standard employment policies are being challenged.  Knowing what a company can say – and how to say it – is key to avoiding such challenges, or ending up on the winning end.