Labor & Employment Telebrief

LABOR & EMPLOYMENT TELEBRIEF

By

Howard B. Kurman, Esquire

November 8, 2017

Howard Kurman:Okay, its 9:02 by my clock we are going to get started,Annecan you mute the line please. All right well, good morning everybody. It is November 8 the first telebrief in November as we move along through the year and always, always there is stuff to talk about which is a good thing.

The first thing is something happened yesterday in the House of Representatives so the House voted 242 to 181 in favor of a bill called the “Save Local Business Act” and the essence of the “Save Local Business Act,” and I have talked about this when it was first proposed, is that it would amend the National Labor Relations Act and the Fair Labor Standards Act. To in essence state that the theory behind joint liability and joint employer liability that was popularized under the Obama administration would be gutted. You may remember under the Obama administration there was a case called Browning Ferris that was passed by the National Labor Relations Board in which the board found joint employment between two employers where a second employer had theoretically the obligation or the opportunity to exert indirect control over another employee. For instance if you were using a staffing agency and the staffing agency sentyou temporary employees and the temporary employee filed some sort of action against the temporary agency and the employer that engaged the services of the staffing agency the labor board or the Department of Labor under the FLSA would say that theoretically that second employer has indirect control or the opportunity to exert indirect control over the terms and conditions of employment; therefore, would be deemed to be jointly liable with the primary employer. This got a lot of heat across the country among employer groups and so yesterday the House of Representatives passed this act which would go back to a pretty practical test which is whether or not the putative second employer had direct control over the terms and conditions of employment of the particular person or employee that was offered up by that first employer. Now, it still has to go through the Senate and as we have seen with numerous proposed bills during the first 10 or 11 month of the Trump administration really nothing of substance has passed and they do have big items on their agenda primarily the tax revisions and of course health care. I do not know when or if this thing will find its way through the Senate but it did pass the House so more to come on this but it certainly would be an employer friendly piece of legislation and probably would do away with this ambiguity of who has indirect control over a particular employee which I find to be a very ambiguous and unworkable standard.

Okay, I wanted to bring out two cases one that was settled and one that has been filed having to do with misclassification of employees. The reason that I want to bring it out is because this seems to be coming up with frequency and I wanted to address sort of from an educational standpoint two of the issues involved. One company is JP Morgan and this was announced yesterday that it agreed to pay a group of assistant branch managers $16.7 million to end lawsuits in which they were accused of misclassifying these people as overtime exempt employees. Another big employer and big company Facebook has been hit with a lawsuit by an employee who is purportedly suing on behalf of a class in Illinois Federal Court alleging again that the company has misclassified workers and deprived them of overtime. I know I have had some clients in the last month who have faced not lawsuits but big issues as to whether or not they are appropriately classifying individuals as exempt or non-exempt and I thought it would be a good opportunity this morning to briefly go over what the DOL looks at for the two that are the most problematical and the ones that pose issues many times for those of you out there who are classifying people as either executive exempt or administrative exempt.

First with regard to the executive exemption obviously we know that there is a salary test which is presently being litigated and probably legislated administratively through the Department of Labor as to what the ultimate outcome will be what level. I have told you in past telebriefs my best guess is that the salary test will go from 24/5 you know in change to probably between $30,000 and $35,000 a year when they get around to finalizing that. But you all know that in addition to the salary test, there is a duties test and so for the executive exemption in addition to the employee meeting the salary test these three things have to be in place and I am going to go through them as they are articulated by the Department of Labor. The first is that the so called executive exempt employee has to have his or her primary duty, primary duty, managing the enterprise in which the employee is employed or a customarily recognized department or subdivision thereof so that the primary duty of the executive exempt person is either managing the entire company or subdivision thereof and by primary duty generally the department of labor means where more than 50% of his or her job duties and time are spent on managing this particular department or operation. If you have somebody who is spending 10% of his or her time managing it is going to be doubtful as to whether or not you can establish that person as an executive exempt employee.

Secondly, in addition to managing the enterprise or department of it that employee in order to be exempt as an executive has to customarily and regularly direct the work of two or more other employees. This is important in order to be an executive exempt employee you have got to have somebody who is regularly directing the work of two or more employees not once a month, not as a substitute but on a regular basis.

Thirdly, the person has to have the authority to hire and fire other employees or make suggestions and recommendations that are given particular weight as to hiring, firing advancement, promotion or any other change of status of other employees. Now clearly, it’s easier to establish that the person actually hires or fires employees. It becomes a little more difficult to establish when you are saying that the person can make suggestions or recommendations that are given particular weight. But that often does happen and I think if you are looking at for instance your job description for an executive exempt employee you really should be looking to track the language that the Department of Labor mandates so you want to have in your job description the three elements that I just articulated for you in some form or fashion. Not that is dispositive but it certainly is persuasive to a DOL investigator if your job description is out front and expressly mimics the wording that is contained in the regulations for an executive exempt employee.

The second problem area that I often face with clients is the administrative exemption. Okay, now, obviously you have a salary test for the administrative exemption as well but the DOL says that in order for the employee to be correctly identified and classified as an administratively exempt employee they have to meet two factors. One is that the person has as his primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. He has primary duty again that means a significant period of the persons time is spent doing this office or non-manual work directly related to the management of the business and secondly that the person has as his primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance. So its not enough that the person maybe able to exercise discretion in independent judgment on minor matters in order to be administratively exempt the person needs to be exercising that discretion and judgment on matters of major significance. The Department of Labor goes through and identifies certain bulleted items, which again in your job description you should attempt to mimic if you are attempting to justify a person as an administratively exempt employee.

I will run quickly through them, they include whether the employee has authority to formulate, effect, interpret or implement management policies or operating practices; whether the employee carries out major assignmentsin conducting the operations of the business. Third, whether the employee performs work that affects business operations to a substantial degree even if the employees assignments are related to a particular segment of the business. Four, whether the employee has authority to commit the employer in matters that have significant financial impact, significant financial impact. Five, whether the employee has authority to waive or deviate from established policies and procedures without prior approval, again this gets to the point of independent judgment and discretion. Next, whether the employee has authority to negotiate buying the company on significant matters in other words does this employee really have the authority to be looked upon by the outside world as an agent of your company who can bind your company by his or her decisions. Next, whether the employee provides consultation or expert advice to management and last whether the employee is involved in planning long or short term business objectives. Again you are going to have to take a good look at the actual duties of those people that you classify as executive or administratively exempt. As a minimum make sure that your job description mimic what the Department of Labor is looking for, again that is not dispositive but it certainly is helpful and in some cases persuasive as to the status of these people as exempt. Of course if you misclassify people either as exempt on the basis of the executive exemption or administrative exemption and you were wrong and those individuals work more than 40 hours in a week you potentially face liability not only for their overtime but for all of those people who are similarly misclassified in that particular job classification. I will say one more thing and then we will move on, with regard to executive assistants,it’s frequently the object of questions that I get, typically executive assistants even to the CEO of your company would not be administratively exempt. Unless, they really are exerting independent judgment and discretion in many significant matters as opposed to performing merely ministerial duties like calendaring or scheduling or doing things like that for the CEO. Pay close attention to those people who you may be currently classifying as administratively exempt. If you think that there are mistakes that have been made obviously there are ways to correct that but you got to be careful about that too and I certainly could advise you on that.

All right, I want to move on because last week I got a question from a client which really I think invoked the intersection between a couple different statutes. Those statutes being the FMLA [23.04 to 24.15 NO AUDIO] sorry about that folks I am not sure what happened hopefully we are still on. Anna are we still on?

Anna:Yeah you are okay.

Howard Kurman:Okay, sorry about that guys I apologize I am not sure exactly what happened I got thrown off. Anyway let me go back to what I was saying a minute ago about the intersection between Workers’ Compensation and the ADA and the FMLA because there is some misunderstanding about this. Take a typical example of somebody who is injured on the job, obviously that invokes a Workers’ Compensation statute. The Workers’ Compensation statutes are intended to be wage replacement statutes and medical treatment statutes so that if an individual is injured on the job that person goes out and depending on the severity of his or her injury would be entitled to either temporary total disability or other kinds of wage replacements but the Workers’ Compensation statutes are not job protection statutes like the ADA or FMLA and that is really important to understand. If an individual goes out on a Workers’ Compensation injury the first thing that you wantto do assuming that the person is eligible for FMLA leave that is he has worked the requisite number of hours and you have the requisite number of employees. You want to notify that employee that in addition to being out on Workers’ Compensation that his absence will be considered an FMLA absence because it is obviously a qualifying injury or a serious medical condition. What you do not want is you do not want to have the individual go out on a Workers’ Compensation injury then come back and say that he wants or she wants to use his or her 12 weeks of FMLA leave for another reason. It is critical that if a person is going out on a Workers’ Compensation situation that you notify that individual that he or she is going to be using his FMLA entitlement or what is left of it if he has used it for a different reason during that particular 12 month period of time.

The second misconception that a lot of people have and you may have even gotten letters from attorneys from time to time is that a person goes out on a Workers’ Compensation absence and you get a letter from an attorney saying hey this person is entitled to be job protected during the period of time that that person is out on a Workers’ Compensation absence. That is not the law in most states and in Maryland it is not the law. The only thing in Maryland and most other states that you cannot do with regard to the individual who goes out on a Workers’ Compensation injury is to fire that individual solely because the person has filed a Workers’ Compensation claim. If a person files a Workers’ Compensation claim or one is filed on his behalf on May 20, 2017 and you go ahead and you fire that person on May 21st, obviously prima facia it looks like you may have retaliated against the individual. But if the person goes out on a Workers’ Compensation injury on May 20thand the person is out for five months and has exhausted his or her FMLA leave there is no guarantee under most Workers’ Compensation statutes that that person is entitled to his or her job back or an equivalent one like you would have under the FMLA nor are you really required to engage in an interactive process as you would if the person was covered under the ADA and asks for a one or two week extension or short extension of his or her FMLA leave. You have to be careful in understanding the intersection between these statutes and what an employee is entitled to or not.

Another issue that comes up frequently is the age old battle of light duty when a person is out on a Workers’ Compensation injury or illness. Many times your comp carrier will say we want the person to come back on light duty but you may not have light duty in your company and under many cases decided under the ADA and the FMLA under the FMLA you cannot compel a person to work light duty and under the ADA you are generally not required to create a light duty job, so you know you need to be pretty careful about how you deal with the intersection of these statutes and frequently the answer may not be apparent to you. If it is not certainly seek the advising counsel of your employment attorney on this because you can easily misstep with these three statutes.

The last thing that I wanted to cover was the intersection sort offof trade secret law and confidentiality agreements. I do not know how many of you out there utilize on a regular basis non-disclosure agreements or confidentiality agreements at the time that you employ individuals. I would say that they are good idea for many employees because the two words trade secrets get bandied about frequently in the work place or by attorneys. You may think that everything that you would consider to be confidential or proprietary is a trade secret and therefore protectable irrespective of whether or not you have a confidentiality agreement within an employee and that’s not the case. Trade secrets either under state law or federal law connote something that is very secretive within your company, is not generally available for instance by the internet or by other means that you could look up and easily get access to and where you have taken action to protect that information within your company and to market a secret or proprietary or confidential. From a practical standpoint what you really wantto do is for those employees who are going to have access to confidential or proprietary information even if it would not necessarily satisfy the legal requirements of a trade secret make sure that you have confidentiality and non-disclosure agreements with those key employees or even those employees you may not consider to be key but nevertheless who have access to that information and internally mark the information and protect the information as confidential so that even if it does not necessarily fall into the category technically of a legal trade secret nevertheless after an employee’s departure you may be in a situation where you can nevertheless protect that information because the employee has agreed as a condition of employment to hold that information confidential and to not disclose it either during the course of his employment or after the termination of his employment for any reason. That is why these agreements have become so popular they are not all that complicated they can be as really brief as one page or they can go on for two pages or three pages, it really is up to you but it is a good idea to have those and the mere fact that you might have confidentiality provisions in your handbook is not necessarily going to save you; particularlyfor the employee who leaves your company because again in most cases your employee handbook is going to have a provision which says that there is no contractual obligation on the part of the company or that the handbook does not constitute a contract of employment and that is why in many cases you are going to have a separate agreement with your employees separate and apart from your employee handbook.