New Department of Labor proposed rule addressing calculation of employee’s regular rate of pay

For the first time in 50 years, the Department of Labor is proposing a rule to address the calculation of an employee’s regular rate of pay; an employee’s regular rate is used to determine the applicable overtime rate, and the calculation of the regular rate can be an issue in DOL audits, and litigation.

The DOL’s proposed rule includes clarification that the following forms of compensation are not required to be included in the regular rate:

the cost of providing wellness programs

payments for unused paid leave

reimbursed expenses that are not “solely” for the employer’s benefit
certain reimbursed travel expenses

Employers will want to take this opportunity to review existing pay practices, and determine if changes can be made.

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Citing Third Party Disclosure, Court Rules Attorney-Client Privilege does not Protect Certain Emails

Communications between attorneys and their clients are generally thought to be confidential under the protection of attorney-client privilege and work product doctrine.  On May 6, 2019, however, the United States District Court Southern District of New York ruled that attorney-client communications, in the form of emails, shared with a public relations firm were neither privileged nor protected by attorney work-product doctrine. In the trademark case of Universal Standard Inc. v. Target Corp., S.D.N.Y., No. 18 Civ. 6042, 5/6/19, Magistrate Judge Gabriel W. Gorenstein demonstrated the narrowness of circumstances in which a company can assert privilege after sharing information with third parties. The court held that since the PR firm hired by Universal Standard was not necessary to the emails between Universal Standard and its attorneys, was not an agent of the company, and was not hired to aid in legal tasks, privilege and work product did not apply to the communications.

 

Universal Standard creates women’s apparel with “size-inclusive” clothing brands and in 2018 brought suit against Target alleging that Target’s “Universal Thread” line of women’s clothing willfully infringed upon its trademark.  During a deposition for the case, Target’s attorney questioned one of Universal Standard’s witnesses about the email chains between Universal Standard, their PR firm, BrandLink, and their attorneys.  Universal Standard objected that the emails were privileged.

 

The court ruled the emails aren’t protected by attorney-client privilege as disclosure to a third party generally eliminates that privilege.  While Universal Standard argued three separate exceptions applied, the court disagreed with their conclusions:

 

  1. BrandLink was not necessary to the understanding of facts between attorney and client: The court said the emails in question involved the public relations strategy relating to the lawsuit; which could have been relayed directly to the attorneys alone to invoke privilege.
  2. BrandLink was not a “functional equivalent” of an employee or agent of Universal Standard: The court cited that BrandLink did not represent the company to third parties, maintain an office at the company, nor seek legal advice from Universal Standard’s counsel, failing the “functional equivalent” standard.
  3. BrandLink was not hired to complete legal tasks: The court noted a distinction regarding privilege in that there is a difference between when a client hires a third party versus when an attorney hires a third party to implement a legal strategy.  As BrandLink was hired for business purposes, the court held this exception did not apply.

 

The Court also rejected Universal Standard’s for work product doctrine protection as “conclusory” when they stated all the emails were created in anticipation of litigation and reflected the opinions of their counsel, as these statements were confined to a single sentence, and, as the court stated, a mere recital of the law.

 

Thus, when communicating with an attorney and the utilizing the convenience of email, it is important to be diligent on who you are including in your communications and what necessity they bring to the privileged conversation.

Observations on LB400

LB400 was introduced in the Nebraska Unicameral, in January of this year to raise the minimum wage of tip earners.  The current minimum wage in Nebraska for tip earners is $2.13 an hour with restaurants ensuring tipped staff obtain at least $9.00 per hour combined standard wage and tips.  The bill was to raise the minimum wage to $4.50 an hour, without indexing the wage to the regular minimum wage.

The bill includes raises the following questions to assure compliance with wage laws:

  1. Are the restaurants actually ensuring that the employees receive the $9.00 an hour combined standard wage plus tips or are they “gaming” the system to ensure more profits for the company?
  2. Can the employees genuinely rely on the tips of the patrons?
  3. Can “standard tips” accurately be reflected in the $9.00 per hour combined minimum standard wage plus tip?

As business owners, employers should consider reviewing current pay policies, including the often-used practice of tip pooling and/or tip splitting, in order to remain in compliance. Another compliance approach to consider would be the modification and reclassification of employees to non-tipped personnel.

 

https://trackbill.com/bill/nebraska-legislative-bill-400-change-the-minimum-wage-for-persons-compensated-by-way-of-gratuities/1636386/

 

The legislation is not finalized so there will be updates on the status of this bill.

Hair Based Discrimination

Expansion of protected classes to include hair in New York City; given the examples cited in the article, it seems that this sort of discrimination is already largely covered by existing law prohibiting discrimination on the basis of race. Employers in Nebraska and elsewhere should be aware of those issues, and establish clear policies regarding dress code and grooming standards, with uniform and consistent enforcement.

https://www.linkedin.com/feed/update/urn:li:activity:6503319813669167104

FCRA Disclosure Requirements

Two federal court decisions out of California should serve as reminders to employers that the requirements of the Fair Credit Reporting Act will be strictly interpreted and applied. In a class action against Walmart, and also in a Ninth Circuit Court of Appeals decision, FCRA disclosure requirements were at issue; the Ninth Circuit’s holding reaffirms the FCRA’s requirement that disclosures be in a standalone document, without including additional state-mandated disclosures. The Walmart case allowed claims that its disclosures were similarly faulty to move forward as a class action. To avoid potential liability, employers would do well to closely adhere to the disclosure requirements, as required by the explicit language of the Act; guidance on the issue can be found at the FTC’s website: https://lnkd.in/gtVY2Jq

Preventing Third Party Harassment

By Matthew G. Dunning

While most employers are aware of their legal obligation to protect employees from harassment by co-workers, supervisors, and managers, a recent case from Mississippi highlights the need to prevent harassment by third parties, including patients and customers. Previous cases have involved harassment by customers at restaurants and casinos, with differing results based on the specific facts.

The plaintiff from the case in Mississippi worked as a CNA for an assisted living center, and was assigned to care for a patient with dementia who had a history of violent and sexual behavior toward patients and employees. The plaintiff alleged that the patient repeatedly made sexual comments and requests, and that he would physically grab her. Management was aware of the behavior based on employee complaints, documentation in the patient’s chart, and firsthand observation. The plaintiff was ultimately terminated for allegedly taking a swing at the patient in a particularly abusive incident during which she was groped and punched repeatedly. Following another incident with a fellow resident, the patient was moved to a nearby all-male facility. Based on affidavits, deposition testimony, and other documentation, the lower court granted summary judgment to the assisted living center, and dismissed the case.

On appeal, the Fifth Circuit noted that Title VII does not prohibit all harassment; a plaintiff must subjectively believe there is severe and pervasive harassment, and the plaintiff’s belief must be objectively reasonable. Previous cases involving repeated verbal sexual harassment by home health and nursing home patients were determined not to be sufficiently severe and pervasive when the conduct was not “physically threatening or humiliating, and did not pervade the work experience of a reasonable nursing home employee.”  That is, potential liability must be considered in light of the specific environment, and the “unique circumstances involved in caring for mentally diseased elderly patients.”  The appeals court held that, contrary to the lower court’s opinion, the allegations of persistent and often physical harassment in this case were sufficient to send the case to a jury.  “The ultimate focus of Title VII liability is on the employer’s conduct; in the case of alleged harassment by a third party, “a plaintiff needs to show that the employer knew or should have known about the hostile work environment, yet allowed it to persist.”

Regardless of potential legal liability, employers should take care to protect employees from this type of behavior. Mandatory training regarding sexual and other harassment should be provided to all employees, and a clear and effective policy and complaint mechanism should be in place so an employee has the opportunity to make allegations, and have them addressed. Supervisory and management personnel should receive separate training on how to recognize harassment and other discrimination, and human resources personnel should be trained on conducting investigations and recommending action by management that will prevent the harassment from continuing.

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