Posts Tagged: court cases

Comcast v. NAAAM: Law of Causation in 1981 Claims

In Comcast Corp. v. National Association of African American-Owned Media, No. 18-1171, __ U.S. __ (March 23, 2020), the Supreme Court held that race-discrimination claims brought under the Civil Rights Act of 1886, 42 U.S.C. § 1981, are subject to a but-for standard of causation.

Background

The Civil Rights Act of 1886, now codified at 42 U.S.C. § 1981, provides that “[a]ll persons … shall have the same right … to make and enforce contracts, to sue, be parties, give evidence, and to the full and equal benefit of all laws and proceedings for the security of persons and property as is enjoyed by white citizens[.]” The law has been interpreted as, inter alia, prohibiting discrimination because of race in employment and other kinds of contractual relationships.

A similar discrimination law, Title VII of the Civil Rights Act, specifically provides for a “motivating factor” causation standard — that is, an employee can prevail on a Title VII race discrimination claim by proving that her race was a “motivating factor for any employment practice, even though other factors also motivated that practice.” 42 U.S.C. § 2000e-2(m).

The statutory language of 42 U.S.C. § 1981, however, does not specify the causation standard for proving race discrimination under § 1981.

The causation standard under § 1981 is important for employees because this law is, in some ways, more powerful than Title VII. For example, while Title VII race discrimination claims are subject to caps on compensatory and punitive damages, see 42 U.S.C. § 1981a, race discrimination claims under § 1981 are not subject to damages caps.

Facts

An African-American-owned television-network operator (ESN) sought to have Comcast carry its channels. Comcast refused, citing lack of programming demand and various other reasons. ESN sued Comcast for race discrimination under 42 U.S.C. §1981, alleging that Comcast’s refusal to carry ESN’s channels violated the law, which guarantees “[a]ll persons . . . the same right . . . to make and enforce contracts . . . as is enjoyed by white citizens.” 42 U.S.C. § 1981.

The District Court dismissed ESN’s complaint for failing plausibly to show that, “but for” racial animus, Comcast would have contracted with ESN. The Ninth Circuit reversed, holding that ESN needed only to plead facts plausibly showing that race played “some role” in Comcast’s decisionmaking process. Comcast appealed.

The Court’s Decision

The Supreme Court vacated and remanded, holding that a § 1981 plaintiff bears the burden of showing that the plaintiff’s race was a “but-for” cause of its injury.

In so holding, the Court observed that a tort plaintiff typically must prove but-for causation — meaning that the plaintiff’s injury would not have happened in the absence of the offending conduct (in this context, racial animus). See University of Tex. Southwestern Medical Center v. Nassar, 570 U. S. 338, 347 (2013) (discussing tort principles and holding that but-for causation applied to Title VII retaliation claims).

ESN argued that § 1981 creates an exception to this general principle, such that a § 1981 plaintiff only bears the burden of showing that race was a “motivating factor” in the defendant’s challenged decision. No. 18-1171 at 3-12. The Court rejected this argument.

First, the court determined that “several clues, taken collectively,” made clear that a but-for causation standard applied to § 1981. For instance, the Court noted that the statute’s text suggested but-for causation: An ordinary English speaker would not say that a plaintiff did not enjoy the “same right” to make contracts “as is enjoyed by white citizens” if race was not a but-for cause affecting the plaintiff’s ability to contract. Id. at 4-8.

The Court went on to discuss the larger structure and history of the Civil Rights Act of 1866 as providing further clues in support of a but-for causation standard. For example, when § 1981 was first enacted, it did not provide a private enforcement mechanism for violations. That right was “judicially created,” decades later, in Johnson v. Railway Express Agency, Inc., 421 U. S. 454, 459 (1975). The Court observed that during the era of Johnson v. Railway Express, the Court usually insisted that the legal elements of “implied” causes of action be at least as demanding as those found in analogous statutory causes of action.

The Court found this rule useful, as a neighboring section of the 1866 Act uses the terms “on account of” and “by reason of,” and these phrases are often held to indicate but-for causation. Another provision provides that in cases not provided for by the 1866 Act, the common law shall govern. The Court noted that back in 1866, the common law usually treated a showing of but-for causation as a prerequisite to a tort suit. The Court further cited some of its own precedents as confirming its assessment that the statute’s language and history called for but-for causation. See, e.g.Johnson, 421 U.S., at 459–460Buchanan v. Warley, 245 U.S. 60, 78–79 (1917)No. 18-1171 at 4-8.

Second, the Court rejected ESN’s argument that the “motivating factor” causation test in Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(m), should also apply to § 1981 cases. The Court observed that it had already rejected attempts to extend Title VII’s “motivating factor” standard to other laws. See, e.g., Gross v. FBL Financial Services, Inc., 557 U.S. 167 (2009) (Age Discrimination in Employment Act). The Court saw no reason to think the motivating factor standard would fit § 1981 claims any better.

Third, the Court further supported its conclusion by discussing the history behind Title VII’s motivating factor standard. The Court emphasized that when the motivating factor test was added to Title VII in the Civil Rights Act of 1991, Congress also amended § 1981 without mentioning “motivating factors.” No. 18-1171 at 10. The Court therefore found that even if ESN was correct that the 1991 amendments clarified that § 1981 addresses not just contractual “outcomes” but the whole contracting “process,” its claim that a process-oriented right necessarily pairs with a motivating factor causal standard was mistaken. No. 18-1171 at 10-11.

Finally, the Court rejected ESN’s argument that the burden-shifting framework of McDonnell Douglas Corp. v. Green, 411 U.S. 792 (1973), supported the application of a motivating factor standard to § 1981 claims. Whether or not McDonnell Douglas has some useful role in § 1981 cases, the Court observed that case was decided in a context and at a time when but-for causation was the undisputed test, and it does not mention a motivating factor test. No. 18-1171 at 11-12.

Analysis

In short, Comcast v. NAAAM held that race-discrimination claims brought under 42 U.S.C. § 1981 are subject to a but-for standard of causation. Although but-for causation does not require a plaintiff to prove racial discrimination was the only cause of an injury, the but-for standard is a somewhat higher standard of causation than the “motivating factor” standard permitted by Title VII. To show but-for causation in the employment context, a § 1981 plaintiff must show that the employment action at issue would not have occurred in the absence of racial discrimination.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Genesis Healthcare v. Symczyk: Rule 68 and Collective Actions

In Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66 (2013), the Supreme Court held that a putative Fair Labor Standards Act collective action brought by one employee on behalf of others was no longer justiciable when, as conceded by the employee, her individual claim became moot before others joined the case.

Facts

Symzcyk worked for Genesis Healthcare as a registered nurse. In 2009, Symczyk brought a putative collective action under the FLSA on behalf of herself and “other employees similarly situated.” 29 U.S.C. § 216(b). She alleged Genesis violated the FLSA by automatically deducting 30 minutes of time worked per shift for meal breaks for certain employees, even when the employees performed compensable work during those breaks. Symcyzk, who remained the sole plaintiff throughout the case, sought statutory damages for the alleged violations.

After Symczyk filed suit, but before any other employees joined the suit, the employer sent Symczyk an offer of judgment under Federal Rule of Civil Procedure 68, which Symczyk ignored. The offer had proposed to pay all of her statutory damages, plus costs and reasonable attorney’s fees. The District Court, finding that no one else had joined the case, and that the Rule 68 offer fully satisfied Symczyk’s claim, concluded that Symczyk’s suit was moot. The court therefore dismissed the case for lack of subject-matter jurisdiction.

The Third Circuit reversed, holding that while Symczyk’s individual claim was moot, the collective action on behalf of other similar employees was not. The Third Circuit reasoned that allowing employers to use calculated Rule 68 offers to “pick off” named plaintiff-employees before certification would frustrate the goals of collective actions. The court therefore remanded the case to the trial court, with instructions to allow Symczyk to seek conditional certification of the collective action and move forward with the case on behalf of other employees who might join. See 569 U.S. at 69-71.

The Court’s Decision

The Supreme Court reversed. The Court held that because Symczyk had no “personal interest” in representing other putative, unnamed employees, nor any other kind of continuing interest that would render her suit not moot, the trial court properly determined it lacked subject-matter jurisdiction over the case.

At the outset, the Court declined to decide whether an unaccepted Rule 68 offer that fully satisfies a plaintiff’s individual claim is sufficient to render that claim moot. Symczyk, however, had conceded this point with respect to her claim and did not argue it on appeal. The Court therefore assumed, without deciding, that the employer’s offer to Symczyk mooted her individual claim. 569 U.S. at 72-73.

The Court then determined that “well-settled mootness principles” controlled the outcome of the case. Once Symczyk’s individual claim became moot, the Court determined that the suit became moot because she had no personal interest in representing others in the action. The Court rejected Symczyk’s contrary arguments because they relied on cases that arose in the context of Rule 23 class actions. The Court found those case inapposite, both because Rule 23 actions are “fundamentally different” from FLSA collective actions and because the cases were “inapplicable” to the facts in Symczyk’s case. 569 U.S. at 73-79.

The cases Symczyk rallied behind were Sosna v. Iowa, 419 U.S. 393 (1975) and United States Parole Comm’n v. Geraghty, 445 U.S. 388 (1980). Symczyk argued these cases meant she could seek certification of an FLSA collective action after her individual claim became moot. The Court determined Sosna and Geraghty did not support her position. In short, Sosna held that a class action is not rendered moot when the named plaintiff’s individual claim becomes moot after the class has been duly certified. Geraghty extended those principles to denials of class certification motions, and further provided that, where a putative class action would have acquired independent legal status but for the district court’s erroneous denial of class certification, a corrected ruling on appeal “relates back” to the time of the erroneous denial. See 445 U.S. at 404 and n. 11.

At first glance, these cases seemed like they supported Symczyk’s position. The Court observed, however, that Geraghty’s holding was explicitly limited to cases in which the named plaintiff’s claim remains live at the time the district court denies class certification. See 445 U.S. at 407 and n. 11. Symczyk, by contrast, had not yet moved for “conditional certification” when her claim became moot. Nor had the District Court anticipatorily ruled on any such request. Symczyk therefore had no certification decision to which her claim could have related back. More importantly, the Court emphasized that essential to Sosna and Geraghty was the fact that a putative class acquires an “independent legal status” once it is certified under Rule 23. By contrast, under the FLSA, “conditional certification” does not produce a class with an independent legal status, or join additional parties to the action. 569 U.S. at 73-75.

Second, the Court addressed a line of cases, like County of Riverside v. McLaughlin, 500 U.S. 44, 52 (1991), holding that an “inherently transitory” class-action claim is not necessarily moot upon the termination of the named plaintiff’s claim. The Court found these cases inapplicable. Symczyk argued that an employer’s use of Rule 68 offers to “pick off” a named plaintiff before the collective-action process is complete renders the action “inherently transitory.” But the Court observed the “inherently transitory” rationale was developed to address circumstances in which the defendant’s challenged conduct was effectively unreviewable because no plaintiff possessed a personal stake in the suit long enough for litigation to run its course. For this reason, the Court observed, the McLaughlin line of cases focused on the fleeting nature of the challenged conduct giving rise to the claim, not on the defendant’s litigation strategy. Unlike a claim for injunctive relief, a damages claim (like the FLSA claims at issue in Smyczk’s case) cannot evade review — the damage has been done, and can be measured and compensated. The Court further pointed out that an offer of full settlement cannot insulate such a claim from review. While dismissing Symzcyk’s case before certification would foreclose the putative other plaintiff-employees of Genesis from vindicating their rights in Symzcyk’s suit, those employees would remain free to do so in their own lawsuits. 569 U.S. at 75-77.

Finally, the Court addressed its decision in Deposit Guaranty Nat. Bank v. Roper, 445 U.S. 326 (1980), which Symczyk cited for her argument that the purposes served by the FLSA’s collective-action provisions would be frustrated by defendants’ use of Rule 68 to “pick off” named plaintiffs before the collective-action process has run its course. The Court found Roper did not support this argument. In Roper, the named plaintiffs’ individual claims became moot after the District Court denied their Rule 23 class certification motion and entered judgment in their favor based on defendant’s Rule 68 offer. The Roper Court held that the named plaintiffs could appeal the denial of certification because they possessed an ongoing, personal economic stake in the substantive controversy — namely, to shift a portion of attorney’s fees and expenses to successful class litigants. Symczyk, by contrast, conceded that her employer’s offer provided complete relief, and she asserted no continuing economic interest in shifting attorney’s fees and costs. Moreover, the Roper holding was tied to the unique significance of Rule 23 class certification decisions, distinguishing it from the FLSA collective action context. 569 U.S. at 77-79.

Analysis

In summary, Genesis held that a putative FLSA collective action brought by single employee was no longer justiciable when, as conceded by the employee, her individual claim became moot by an offer of judgment providing complete relief and no other employees had joined the case. The Court, however, declined to decide whether an unaccepted offer of judgment could render a plaintiff’s claim moot. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com. 

This blog was also published to TimCoffieldAttorney.com.

Falk v. Brennan: Law of Employment and Control

In Falk v. Brennan, 414 U.S. 190 (1973), the Supreme Court held that an entity is an “employer” under the Fair Labor Standards Act when it exercises substantial control over the terms and conditions of the work of the employees at issue.

Background

The Fair Labor Standards Act generally requires a covered “employer” to pay its covered nonexempt employees minimum wages for each hour worked and overtime wages for all hours worked in excess of 40 hours per workweek. 29 U.S.C. §§ 206(a) & 207(a). The FLSA defines “employer” as “includ[ing] any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). With some exceptions, the FLSA generally defines “employee” as “any individual employed by an employer.” 29 U.S.C. § 203(e)(1). The FLSA defines “employ” as including “to suffer or permit to work.” 29 U.S.C. § 203(g).

The FLSA also provides that for an employer to be covered under the Act’s dollar-volume “enterprise” coverage provision, the employer must receive “annual gross volume of sales made or business done [] not less than $500,000[.]” 29 U.S.C. § 203(s)(1)(A)(ii).

Facts

D&F operated a property management company in Virginia. It rendered management services for the owners of several apartment complexes. Under its contracts with the apartment owners, D&F agreed to perform, on behalf of each owner and under his “nominal” supervision, “virtually all management functions that are ordinarily required for the proper functioning of an apartment complex.” 414 U.S. at 192. Those functions included advertising the apartments; signing, renewing, and canceling leases; collecting rents; instituting and settling all legal proceedings for eviction, possession of the premises, and unpaid rent; making necessary repairs and alterations; negotiating contracts for essential utilities and other services; purchasing supplies; paying bills; preparing operating budgets for the property owners’ review and approval; submitting periodic reports to the owners; and “hiring and supervising all employees required for the operation and maintenance of the buildings and grounds.” Id. at n4.

As compensation, D&F received a fixed percentage of the gross rents collected from each project. D&F deposited the rents it collected in local bank accounts. From these accounts it paid all expenses incurred in operating and maintaining the buildings. After deducting its compensation, as well as other expenses, D&F periodically transmitted payments to the various apartment owners. If disbursements for any apartment complex exceeded the gross rental receipts, the owner was required to reimburse D&F. 414 U.S. at 192-93. D&F collected about $8 million dollars per year in rents for all the buildings it managed. Id. at n6. However, its gross commissions received on those rentals were less than $500,000 per year. Id. at n10.

The Secretary of Labor filed suit against D&F on behalf of the maintenance workers, alleging that D&F violated the minimum wage, overtime, and recordkeeping requirements of the FLSA with respect to those workers. Id. Significantly, these employees worked under the supervision of D&F and were paid from the rents received at the apartment complexes where they worked. Under the contracts between the apartment owners and D&F, the maintenance workers were considered to be “employees of the project owners.” Id.

A central question for the Court was whether the maintenance workers were also employees of D&F, such that D&F was responsible for complying with the FLSA’s minimum wage, overtime, and recordkeeping requirements with respect to those workers.

A secondary question was which figure should be considered in determining whether D&F met the $500,000 threshold for enterprise coverage: D&F’s gross rentals collected ($8M annually), or D&F’s gross commissions on those rentals (less than $500,000).

The Court’s Decision

The Court held that in addition to the apartment owners, D&F was also an FLSA “employer” of the maintenance workers — even though the owners and D&F had agreed that the workers were employees only of the owners. The Court reached this decision by interpreting the operative provisions of the FLSA as speaking to the extent of control a potential “employer” exercises over a worker.

First, the Court observed that Section 203(d) of the FLSA defines “employer” as ‘any person acting directly or indirectly in the interest of an employer in relation to an employee.’ 29 U.S.C. § 203(d). It further noted that Section 3(e) defines ‘employee’ to include ‘any individual employed by an employer.’ 29 U.S.C. s 203(e). Significantly, the Court interpreted these two provisions as providing an “expansive[]” definition of “employer” — meaning that whether an entity was an FLSA employer, with the attendant minimum wage, overtime, and recordkeeping responsibilities, could not be controlled by an agreement between entities that only one of them would be the “employer.”

The Court further indicated that the relevant inquiry, in answering the “employer” question, was whether the potential employer had “substantial control of the terms and conditions of the work” the employees performed. Id. at 195. D&F, for example, appears to have had supervisory powers with respect to the maintenance workers at the buildings it managed. See id. at 193 (“These employees work under the supervision of D&F”). The Court therefore determined that “in view of the expansiveness of [the FLSA’s] definition of ‘employer’ and the extent of D&F’s managerial responsibilities at each of the buildings, which gave it substantial control of the terms and conditions of the work of these employees,” D&F was pursuant to the FLSA an ‘employer’ of the maintenance workers Id.

With respect to the dollar-volume limitation question, the Court observed that D&F “sells” only professional management services, and therefore the gross rentals it collected as part of rendering those services to building owners did not represent sales attributable to D&F. Id. at 197-201. Based on this reasoning, the Court concluded D&F’s commissions were the relevant measure of its gross sales made or business done for purposes of the dollar-volume limitation in Section 203(s)(1). Thus, even though D&F was an “employer” under the the terms of the FLSA, and an “enterprise” under Section 203(r), the FLSA did not apply to D&F because its gross sales were below the Section 203(s)(1) dollar-volume threshold. Id. at 201.

Analysis

In sum, Falk v. Brennan held that an entity is an “employer” under the FLSA when it exercises substantial control over the terms and conditions of the work of employees at issue. This decision later became relevant to the Department of Labor’s development of regulations guiding the analysis of FLSA “joint employment” situations. In those situations, where more than one entity benefits from the work of employees, the extent to which each entity exercises control over the terms and conditions of the workers’ employment is an important consideration in determining the entities’ respective or joint responsibilities under the FLSA. For the DOL’s analysis of its most recent changes to the rule (29 C.F.R. § 791) regarding joint employment, effective March 2020, go here.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Christensen v. Harris County: Compelled Use of FLSA Compensatory Time

In Christensen v. Harris County, 529 U.S. 576 (2000), the Supreme Court held that the Fair Labor Standards Act does not prohibit public employers from compelling employees to use compensatory time.

Background

The Fair Labor Standards Act allows public employers (including states and their political subdivisions) to compensate employees for overtime work by granting them compensatory time instead of paying them a cash overtime wage. 29 U.S.C. § 207(o). Compensatory time is paid time off. To comply with this part of the FLSA, the public employer must provide the compensatory time at a rate not less than one and one-half hours for each hour of overtime worked. Id. Compensatory time can accumulate, like vacation time. Importantly, if employees do not use their accumulated compensatory time, under certain circumstances the FLSA requires the public employer to pay the employees cash compensation. 29 U.S.C. §§ 207(o)(3)-(4).

Facts

Employees in Harris County accumulated a great volume of unused compensatory time. This caused Harris County to worry that a budget crisis would result if it had to pay its employees for their accrued unused compensatory time. In an effort to avoid that situation, the county adopted a policy requiring its employees to schedule time off. The county’s reasoning was that requiring time off would reduce the amount of accrued compensatory time among its workers, thereby reducing the likelihood of a budget crisis from having to pay for unused compensatory time.

Ed Christensen was a Harris County deputy sheriff. He and a group of fellow deputy sheriffs sued the county, claiming the policy of requiring employees to use their compensatory time violated the FLSA. Christensen argued that the FLSA does not permit an employer to compel an employee to use compensatory time in the absence of an agreement allowing the employer to do so. The District Court ruled for Christensen and entered a declaratory judgment that the county’s policy violated the FLSA. The Fifth Circuit reversed. It held that the FLSA did not address the issue of compelling the use of compensatory time and therefore did not prohibit the county from implementing its policy.

The Court’s Decision

The Supreme Court affirmed, holding that neither the text of the FLSA nor its implementing regulations prohibits a public employer from compelling its employees to use their compensatory time.

First, the Court rejected Christensen’s argument that § 207(o)(5) of the FLSA implicitly prohibits compelled use of compensatory time in the absence of an agreement. That section provides that an employer must grant an employee’s request to use her compensatory time unless doing so would unduly disrupt the employer’s operations. 29 U.S.C. § 207(o)(5). Citing Raleigh & Gaston R. Co. v. Reid, 13 Wall. 269, 270 (1872) for the proposition that when a statute limits a thing to be done in a particular mode, it implicitly disallows any other mode, Christensen argued that because § 207(o)(5) allowed only an employee to require the use of compensatory time, that section implicitly prohibited an employer from requiring the use of compensatory time. Id. at 583-84. The Court disagreed with that conclusion. Instead, it found that the only “negative inference” to be drawn from § 207(o)(5) was that an employer may not deny a request for any reason other than that provided in § 207(o)(5). Id. Thus, the section did not prohibit employers from compelling the use of compensatory time.

The Court went on to explain that the purpose of § 207(o)(5) was to ensure that an employee receive “some timely benefit for overtime work.” Id. at 584. The FLSA’s nearby provisions reflect a similar concern. For example, § 207(o)(3)(A) provides that workers may not accrue more than 240 or 480 hours of compensatory time, depending upon the nature of the job. This provision “helps guarantee that employees only accrue amounts of compensatory time that they can reasonably use.” Christensen at 584. Similarly, the Court observed that § 207(o)(2)(B) conditions an employer’s ability to provide compensatory time (in lieu of paying cash overtime wages) upon the employee not accruing compensatory time in excess of the § 207(o)(3)(A) limits. Thus, these provisions, like § 207(o)(5), reflect a legislative concern that employees receive “some timely benefit in exchange for overtime work.” Christensen at 584.

The Court therefore concluded that the best reading of the FLSA is that it ensures liquidation of compensatory time. The law places restrictions on an employer’s ability to prohibit employees from using their compensatory time. But it says nothing about restricting an employer’s efforts to require employees to use the time. Id. at 585. Because the FLSA text is silent on this issue and because the county’s policy was compatible with § 207(o)(5), the Court held that Christensen could not, as § 216(b) of the FLSA requires, prove that the county violated the FLSA’s overtime provisions.

The Court further noted that two other features of the FLSA supported its reading that the FLSA did not prohibit employers from compelling the use of compensatory time. First, the FLSA allows employers to decrease the number of hours that employees work. Id. at 585 (citing Barrentine v. Arkansas—Best Freight System, Inc., 450 U.S. 728, 739 (1981) (“[T]he FLSA was designed … to ensure that each employee covered by the Act … would be protected from the evil of overwork …”). And second, the FLSA expressly allows employers to cash out accumulated compensatory time by paying the employee her regular hourly wage for each hour accrued. Id. at 585 (citing 29 U.S.C. § 207(o)(3)(B) & 29 CFR § 553.27(a)(1999). Thus, the FLSA allows an employer to require an employee to take time off work, and to use the money it would have paid in wages to cash out accrued compensatory time. Id. at 585. The Court concluded that Harris County’s policy of compelling the use of compensatory time “merely involves doing both of these steps at once.” Id. at 586.

Christensen also argued, unsuccessfully, that employers were prohibited from compelling the use of compensatory time pursuant a Department of Labor opinion letter. In that letter, the DOL concluded that an employer may compel the use of compensatory time only if the employee has agreed in advance to such a practice. Id. at 586-87. The Court observed that the opinion letter was not entitled to deference under Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), because interpretations contained in opinion letters — similar to policy statements, agency manuals, and enforcement guidelines, all of which lack the force of law — do not warrant Chevron deference. While “persuasive” interpretations in opinion letters are “entitled to respect” under Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944) the Court concluded DOL’s interpretation was not persuasive. Id. at 587.

While Chevron deference does apply to an agency interpretation contained in a regulation, the regulation at issue, 29 CFR § 553.23(a)(2), provided only that “[t]he agreement or understanding [between the employer and employee] may include other provisions governing the preservation, use, or cashing out of compensatory time so long as these provisions are consistent with [§ 207(o)].” Id.; Christensen at 587-88. The Court concluded that nothing in 29 CFR § 553.23(a)(2) “even arguably” requires that an employer’s compelled use policy must be included in an agreement. Id. 588. Thus, Chevron deference did not apply. Lastly, deference to an agency’s interpretation of its regulation is warranted under Auer v. Robbins, 519 U.S. 452, 461 (1997), only when the regulation’s language is ambiguous. The Court held that the DOL’s regulation was not ambiguous, and therefore the DOL’s interpretation of that regulation was not entitled to Auer deference. Id. at 588.

Analysis

In sum, Christensen held that the FLSA does not prohibit public employers from compelling their employees to use their accrued compensatory time. While this issue is not specifically addressed in the text of the FLSA, the law does not explicitly prohibit this practice, and the conclusion that public employers may compel the use of compensatory time is consistent with other aspects of the FLSA that allow an employer to require employees to take time off from work and to use the money it would have paid in wages to cash out accrued compensatory time.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Kasten v. Saint-Gobain: Scope of FLSA Protected Activity

In Kasten v. Saint-Gobain Performance Plastics Corp., 563 U.S. 1 (2011), the Supreme Court held that the anti-retaliation provision of the Fair Labor Standards Act protects employees who make oral (as well as written) complaints that their employer violated the FLSA.

Facts

Kasten worked for Saint-Gobain Performance Plastics. He complained orally to his superiors that the company located its timeclocks between the area where Kasten and his co-workers put on (and removed) their work-related protective gear and the area where they carried out their job duties. This location, Kasten complained, prevented workers from receiving credit for the time they spent putting on and taking off their work clothes — contrary to the requirements of the FLSA. Kasten complained only orally and did not make a written complaint. Saint-Gobain fired him. Id. at 5-6.

Kasten then sued his former employer, alleging that Saint-Gobain violated the FLSA’s anti-retaliation provision by terminating him for complaining orally about the legality of the location of the timeclocks. The trial court granted summary judgment for the employer, holding that the FLSA’s anti-retaliation provision covered only written complaints and did not cover oral complaints. The Seventh Circuit affirmed and Kasten appeals.

The Court’s Decision

The FLSA’s anti-retaliation provision makes it unlawful for employers “to discharge or in any other manner discriminate against any employee because such employee has filed any complaint or instituted or caused to be instituted any proceeding under or related to [the FLSA], or has testified or is about to testify in such proceeding, or has served or is about to serve on an industry committee.” 29 U.S.C. § 215(a)(3) (emphasis added).

The Court held that the scope of the statutory term “filed any complaint” includes oral, as well as written, complaints — and therefore the FLSA prohibits retaliation against employees who complain orally about violations of the wage and hour law.

As an initial matter, the Court cited its decision in Dolan v. Postal Service, 546 U.S. 481, 486 (2013) for the principle that proper interpretation “depends upon reading the whole statutory text, considering the [statute’s] purpose and context …, and consulting any precedents or authorities that inform the analysis.” The Court further explained that the text at issue — “filed any complaint” — taken alone, could not provide a conclusive answer as to whether it included oral complaints. Some dictionary definitions of “filed” contemplated a writing; others permitted using “file” in conjunction with oral material.

The Court noted that in addition to dictionary definitions, state statutes and federal regulations sometimes contemplate oral filings, and an analysis of contemporaneous judicial usage shows that when the FLSA was passed in 1938 oral filings were a known phenomenon. And even if “filed,” taken in isolation, might suggest a narrow interpretation limited to writings, the remainder of the phrase — “any complaint” — suggested a broad interpretation that would include an oral complaint. Thus, the Court concluded that the phrase “filed any complaint,” taken by itself, was not clear. Id. at 5-11.

Nor could the FLSA’s other references to “filed” resolve the question of whether oral complaints were included. Some parts of the FLSA involve filed material that is almost always written; others specifically require a writing, and others leave the oral/written question unresolved. Because the text at issue, taken alone, might, or might not, encompass oral complaints, the Court had to look to other methods of interpretation. Id. at 5-11.

The Court observed that several “functional considerations” indicated that Congress intended the anti-retaliation provision to cover both oral and written complaints. Id. at 11. First, looking to the FLSA’s purposes, the Court noted that a narrow interpretation excluding oral complaints would undermine the law’s basic objective: to prohibit “labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers,” 29 U.S.C. § 202(a). The Court had previously observed that the FLSA relies for enforcement of its substantive standards on “information and complaints received from employees,” Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288, 292 (1960), and its anti-retaliation provision makes the enforcement scheme effective by preventing “fear of economic retaliation” from inducing workers “quietly to accept substandard conditions[.]” Ibid. With that purpose in mind, the Court noted that limiting the provision’s scope to written complaints could have the undesirable result of preventing Government agencies from using hotlines, interviews, and other oral methods to receive complaints. 563 U.S. at 11-14.

Second, the Court determined that in light of the delegation of enforcement powers to federal agencies, the agencies’ views about the meaning of the phrase “filed any complaint” should be given weight. The Secretary of Labor, charged with enforcing the FLSA, has long interpreted “filed any complaint” as covering both oral and written complaints. Similarly, the Equal Employment Opportunity Commission, charged with enforcing other employment laws, has a similar view that oral complaints are protected complaints. The Court held that these views were reasonable and consistent with the FLSA. And the length of time the Secretary of Labor held its position suggested it was the result of careful consideration, not “post hoc rationalizatio[n].” Id. at 14-16 (quoting Motor Vehicle Mfrs. Assn. of United States, Inc. v. State Farm Mut. Automobile Ins. Co., 463 U.S. 29, 50 (1983)).

Finally, Saint-Gobain made an alternative argument that the anti-retaliation provision only covered official complaints to government agencies or in court, and therefore did not protect internal complaints (written or oral) to employers. The Court declined to address this argument, however, because it was not properly raised in the certiorari briefs and did not need to be addressed to resolve the oral/written complaint issue. Id. at 17.

Scalia dissented on that point, arguing that the language of anti-retaliation provision, in light of the FLSA’s other references to “filing,” only protected official grievances filed with a court or an agency, not oral complaints — or even formal, written complaints — from an employee to an employer. Id. at 18-26.

Analysis

Kasten clarified that an oral complaint about an employer’s FLSA violation is protected activity under the FLSA. The law therefore prohibits employers from retaliating against employees who complaint about violations of the federal wage and hour law, regardless of whether the employee complains orally or in writing.

This blog was also posted to TimCoffieldAttorney.com.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

Independent Contractor v. Employee: Law of Economic Realities

In cases under the Fair Labor Standards Act, a question sometimes arises as to whether a worker is an independent contractor or an employee. The answer can be important, as an employee may have rights to minimum wage and overtime compensation that an independent contractor performing the same basic job tasks does not.  

To determine whether a worker is an employee under the FLSA, courts in the Fourth Circuit look to the “economic realities” of the relationship between the worker and the putative employer.

McFeeley v. Jackson St. Entm’t, LLC, 825 F.3d 235, 241 (4th Cir. 2016) (quoting Schultz v. Capital Int’l Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006)). The touchstone of the “economic realities” test is whether the worker is “economically dependent on the business to which he renders service or is, as a matter of economic [reality], in business for himself.” Id. If the practical economic reality is that the worker is “economically dependent” on the putative employer and not “in business for himself[,]” the worker will generally be considered an employee qualified for FLSA rights. Id

Economic Realities Test

In making this determination, courts applying the economic realities test consider six factors:

(1) [T]he degree of control that the putative employer has over the manner in which the work is performed;

(2) the worker’s opportunities for profit or loss dependent on his managerial skill;

(3) the worker’s investment in equipment or material, or his employment of other workers; 

(4) the degree of skill required for the work; 

(5) the permanence of the working relationship; and 

(6) the degree to which the services rendered are an integral part of the putative employer’s business. 

McFeeley, 825 F.3d at 241. These factors are often called the “Silk factors” in reference to United States v. Silk, 331 U.S. 704 (1947), the Supreme Court case from which they derive. See Schultz at 305.

Generally speaking, the greater the degree of control the putative employer has over the manner in which the work is performed, the greater the permanence of the working relationship, and the greater the degree to which the worker’s services are an integral part of the putative employer’s business, the more likely the worker is an “employee” under the economic realities test. Similarly, the fewer opportunities the worker has for profit or loss dependent on his managerial skill, the less the worker invests in equipment, material, or employment of other workers, and the lower degree of skill required for the work, the more likely the worker is an “employee” under the economic realities test. 

Application

For example, in Schultz, the plaintiff security workers worked jointly for a Saudi prince and a security firm. The Fourth Circuit found the prince and security firm exercised nearly complete control over how the workers did their jobs. Further, the workers had no opportunity for profit or loss dependent on their managerial skills, as they were paid a set rate per shift. Additionally, the firm and prince supplied the workers with all the necessary equipment, including cell phones, cars, firearms, and cameras. With respect to the fourth factor, although some security duties required special skills, others did not. As to the permanence of the relationship, the prince employed some workers for several years and preferred to hire workers who would stay with him over the long term. And the services rendered by the workers were integral to the security firm’s business, as the firm’s only function was to provide security for the prince, and workers were hired specifically to perform that task. Considering these facts under the economic realities test, the Fourth Circuit concluded the security workers “were not in business for themselves” and “thus were thus employees, not independent contractors.” Schultz, 466 F.3d at 309.

Similarly, in McFeeley, the plaintiff exotic dancers worked for dance clubs. The Fourth Circuit found that the clubs exercised significant control over how the dancers performed their work. That control included dictating dancers’ schedules, imposing written guidelines that all dancers had to obey during working hours, setting fees the dancers were supposed to charge patrons for private dances, and dictating how tips and fees were handled. Further, the dancers’ opportunities for profit or loss depended far more on the clubs’ management and decision-making than their own; the club owners’ investment in the clubs’ operation far exceeded the dancers’ investment; the job duty of dancing at the clubs required a relatively minimum degree of skill; and the dance clubs could not function without exotic dancers. Therefore, the dancers were employees of dance clubs under the FLSA, rather than independent contractors. McFeeley, 825 F.3d 235, 242-244.

And in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017), the plaintiff drywall installers worked for a subcontractor of a larger company that offered general contracting and interior finishing services, including drywall installation, carpentry, framing, and hardware installation. The workers were economically dependent on the subcontractor alone, making them necessarily economically dependent on the contractor and subcontractor jointly. Due to the contractor’s daily supervision of these workers, it exercised greater control over their work than the subcontractor exercised alone. Further, the contractor provided all of the materials, supplies, tools, and equipment that workers used for their work. On these facts, the Fourth Circuit determined the drywall installers were employees covered by FLSA, rather than independent contractors, based on their entire employment for both the framing and drywall installation subcontractor and general contractor. Id. at 150-151.

Summary

In summary, Fourth Circuit courts determine whether a worker is an employee or an independent contractor by looking to the “economic realities” of the relationship between the worker and the putative employer. The outcome is important because an employee may have rights to minimum wage and overtime compensation under the FLSA that an independent contractor performing the same basic job tasks does not. The “economic realities” test turns on whether the worker is economically dependent on the business to which he renders service or is, as a matter of economic reality, in business for himself. If the practical economic reality is that the worker is economically dependent on the putative employer and not in business for himself, the worker will generally be considered an employee qualified for FLSA rights. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.net.

Integrity Staffing v. Busk: Principal Activities Law

In Integrity Staffing Sols., Inc. v. Busk, 574 U.S. 27 (2014), the Supreme Court held that under the Fair Labor Standards Act, time warehouse workers spent waiting for and undergoing security screenings was not compensable time. More broadly, the decision clarified the proper analysis of “principal activities” verses preliminary and postliminary activities. Principal activities are compensable under the FLSA. Purely preliminary or postliminary activities (like a commute) are not, but some activities before or after a shift might still be compensable principal activities. The term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” An activity is “integral and indispensable to the principal activities” if it is an “intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.” 574 U.S at 33.

Facts

Busk worked for Integrity Staffing Solutions as an hourly warehouse worker. Integrity Staffing provided warehouse staffing to Amazon. Integrity Staffing’s warehouse workers retrieved and packaged products for delivery to Amazon.com customers. Integrity Staffing required these employees to undergo a security screening before leaving the warehouse each day, but did not pay them for the time (roughly 25 minutes each day) they spent waiting for and undergoing the screening. Busk and his co-workers filed suit under the Fair Labor Standards Act. They asserted, inter alia, they were entitled to compensation for the time they spent waiting to undergo and undergoing the screenings. They also argued the screenings were compensable because the company could have reduced the time involved to a negligible de minimis amount by adding screeners or staggering shifts, and because the screenings were conducted to prevent employee theft and, thus, for the sole benefit of the employers and their customers.

The District Court dismissed this claim. It held the screenings were not integral and indispensable to the employees’ principal activities but were instead postliminary and noncompensable under the Portal–to–Portal Act. The Ninth Circuit reversed that decision in part, holding that the postshift screening would be compensable as integral and indispensable to the employees’ principal activities if the screenings were necessary to the principal work and performed for the employer’s benefit. Integrity Staffing appealed. 

The Court’s Decision

The Supreme Court reversed. It held the time the warehouse workers spent waiting to undergo and undergoing security screenings was not compensable under the FLSA. 

First, the Court explained Congress passed the Portal–to–Portal Act in response to the “unexpected liabilities” created by a broad judicial interpretation of the FLSA’s undefined terms “work” and “workweek.” See 29 U.S.C. § 251(a). The Portal–to–Portal Act therefore exempted employers from FLSA liability for claims based on “activities which are preliminary to or postliminary to” the principal activities that an employee is employed to perform. 29 U.S.C. § 254(a)(2)

The Court had long held that the term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” Steiner v. Mitchell, 350 U.S. 247, 252–253 (1956). In Integrity Staffing, the Court further explained that an activity is “integral and indispensable to the principal activities” if it is an “intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.” 574 U.S at 33.

For example, in Steiner, the Court held the time battery-plant employees spent showering and changing clothes was compensable because the chemicals in the plant were “toxic to human beings” and the employer conceded that “the clothes-changing and showering activities of the employees [were] indispensable to the performance of their productive work and integrally related thereto.” Id. at 34 (quoting Steiner at 249, 251). Similarly, in Mitchell v. King Packing Co., 350 U.S. 260, 262 (1956), the Court held compensable the time meatpacker employees spent sharpening their knives because dull knives would “slow down production” on the assembly line, “affect the appearance of the meat as well as the quality of the hides,” “cause waste,” and lead to “accidents.” 574 U.S. at 34 (quoting Mitchell at 262). By contrast, in IBP, Inc. v. Alvarez, 546 U.S. 21 (2005), the Court held noncompensable the time poultry-plant employees spent waiting to don protective gear because such waiting was “two steps removed from the productive activity on the assembly line.” 574 U.S. at 34 (quoting IBP at 42). The Court further noted Department of Labor regulations were consistent with this approach. See 29 CFR § 790.8(b) (“The term ‘principal activities’ includes all activities which are an integral part of a principal activity.”); 29 CFR § 790.8(c) (“Among the activities included as an integral part of a principal activity are those closely related activities which are indispensable to its performance.”); 29 CFR 790.7(g) (examples of preliminary and postliminary activities). 574 U.S. at 30-35.

The Court then held the security screenings at issue in Integrity Staffing were noncompensable postliminary activities. First, the Court determined the screenings were not the principal activities the employees were employed to perform. The workers were not employed to undergo security screenings. They were employed to retrieve goods from the warehouse and package them for shipment. Nor were the security screenings “integral and indispensable” to those activities. In support of this conclusion, the Court cited a 1951 Department of Labor opinion letter, which found noncompensable under the Portal–to–Portal Act both a preshift screening conducted for employee safety and a postshift search conducted to prevent employee theft. 

The employees in Integrity Staffing, like the Ninth Circuit, essentially took the position that if an activity was required by an employer it was compensable under the FLSA. The Court disagreed with this approach, noting that it would sweep into “principal activities” the very activities that the Portal–to–Portal Act was designed to exclude from compensation (like the time waiting to don protective gear held noncompensable in IBP). Finally, the Court rejected the employees’ argument that the screenings were compensable because Integrity Staffing could have reduced the time to a de minimis amount. Whether an employer could conceivably reduce the time employees spent on a preliminary or postliminary activity did not change the nature of the activity or its relationship to the principal activities that an employee is employed to perform. Therefore, that concern was properly addressed through bargaining, rather than in a suit under the FLSA. 574 U.S. at 35-37.

Analysis

In sum, Integrity Staffing clarified the analysis of “principal activities” verses preliminary and postliminary activities. Principal activities are compensable. The term “principal activities” includes all activities which are an “integral and indispensable part of the principal activities.” An activity is “integral and indispensable to the principal activities” if it is an “intrinsic element of those activities and one with which the employee cannot dispense if he is to perform his principal activities.” 574 U.S at 33. More specifically, Integrity Staffing stands for the proposition that time spent waiting for and undergoing security screenings was not a principal activity and therefore not compensable under the Fair Labor Standards Act. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

This blog was also published to TimCoffieldAttorney.com.

Law of Joint Employment

Law of Joint Employment

A worker’s joint employers are jointly and severally liable for any violations of the Fair Labor Standards Act. Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 134 (4th Cir. 2017). This means that for purposes of the FLSA’s requirements that an employer pay minimum wages and overtime wages to non-exempt employees, a worker may have more “employers” than just the company who issues her paychecks. In short, if more than one entity has the ability to help determine the conditions of a workers’ employment, more than one entity may be liable if the worker is not paid the minimum wages or overtime compensation required by federal law.

DOL Joint Employment Regulations

The Department of Labor regulation implementing the FLSA distinguishes “separate and distinct employment” from “joint employment.” 29 C.F.R. § 791.2(a). “Separate employment” exists when “all the relevant facts establish that two or more employers are acting entirely independently of each other and are completely disassociated with respect to the” individual’s employment. Id. By contrast, “joint employment” exists when “employment by one employer is not completely disassociated from employment by the other employer(s).” Id. When two or more entities are found to jointly employ a particular worker, “all of the employee’s work for all of the joint employers during the workweek is considered as one employment for purposes of the [FLSA].” Id. (emphasis added). Thus, for example, all hours worked by the employee on behalf of each joint employer are counted together to determine whether the employee is entitled to overtime pay under the FLSA. Id; Hall v. DIRECTV, LLC, 846 F.3d 757, 766 (4th Cir. 2017).

Fourth Circuit Factors

In Salinas, the Fourth Circuit observed that the joint employment regulations speak to “one fundamental question: whether two or more persons or entities are ‘not completely disassociated’ with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise codetermine — formally or informally, directly or indirectly — the essential terms and conditions of the worker’s employment.” 848 F.3d at 141 (quoting 29 C.F.R. § 791.2(a) and citing In re Enter. Rent-A-Car Wage & Hour Employment Practices Litig., 683 F.3d 462, 468 (3d Cir. 2012) (“[W]here two or more employers … share or co-determine those matters governing essential terms and conditions of employment — they constitute ‘joint employers’ under the FLSA.” (internal quotation marks omitted)).

With these principles in mind, courts in the Fourth Circuit consider six factors in determining whether entities constitute joint employers:

(1) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to direct, control, or supervise the worker, whether by direct or indirect means;

(2) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to, directly or indirectly, hire or fire the worker or modify the terms or conditions of the worker’s employment;

(3) the degree of permanency and duration of the relationship between the putative joint employers;

(4) whether, through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;

(5) whether the work is performed on a premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and

(6) whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over functions ordinarily carried out by an employer, such as handling payroll, providing workers’ compensation insurance, paying payroll taxes, or providing the facilities, equipment, tools, or materials necessary to complete the work. Id. at 141.

Salinas at 141.

The Fourth Circuit in Salinas observed that these six factors may not constitute an exhaustive list of all potentially relevant considerations. Id. at 142. “To the extent that facts not captured by these factors speak to the fundamental threshold question that must be resolved in every joint employment case — whether a purported joint employer shares or codetermines the essential terms and conditions of a worker’s employment — courts must consider those facts as well.” Id.

As these factors illustrate, the Fourth Circuit’s joint employer test turns on whether the entities in question codetermine the essential conditions of a worker’s employment. Salinas at 143. Thus, the existence of a general contractor-subcontractor relationship “has no bearing on whether entities … constitute joint employers for purposes of the FLSA.” Id. 143–44.

Application of Salinas Factors

For example, in Salinas, the Fourth Circuit held that a drywall installation subcontractor and general contractor were joint employers under the FLSA because, inter alia, the subcontractor provided staffing for the contractor based on the contractor’s needs; the employees performed the work for the contractor’s benefit; the contractor supervised the employees’ progress daily and provided feedback; and the employees wore uniforms bearing the contractor’s logo. 848 F.3d at 146.

For another Fourth Circuit case on the joint employer issue, see Hall v. DIRECTV, LLC, 846 F.3d 757, 762 (4th Cir. 2017). In that case, the plaintiff technicians sufficiently alleged DIRECTV as a joint employer, even though the technicians were nominally employed by a subcontractor. The court held that DIRECTV could be liable as a joint employer along with the subcontractor because, inter alia, the technicians were required to “obtain their work schedules and job assignments through DIRECTV’s centralized system,” to check in with DIRECTV after completing assigned jobs, and to “wear DIRECTV uniforms…when performing work for the company.” Similarly, in Young v. Act Fast Delivery of W. Virginia, Inc., 2018 WL 279996, *8 (S.D. W.Va. Jan. 3, 2018), the court held that under Salinas, a pharmaceutical delivery company was a joint employer of the plaintiff couriers, even though the couriers were nominally employed by a third party subcontractor.

As the Fourth Circuit emphasized in Salinas, “Separate employment exists when … ‘two or more employers are acting entirely independently of each other and are completely disassociated with respect to’ the individual’s employment.” 848 F.3d at 133-34 (emphasis in original) (quoting 29 C.F.R. § 791.2(a)). “By contrast, joint employment exists when ‘the facts establish … that employment by one employer is not completely disassociated from employment by the other employer.’” Salinas at 134 (emphasis in original).

Summary

Therefore, under the Fourth Circuit’s framework, the “fundamental question” guiding the joint employment analysis is “whether two or more persons or entities are ‘not completely disassociated’ with respect to a worker such that the persons or entities share, agree to allocate responsibility for, or otherwise codetermine — formally or informally, directly or indirectly — the essential terms and conditions of the worker’s employment.” Id. at 140. If the facts show that two related companies were not “completely disassociated” or “acting entirely independently” with respect to a worker’s employment, they may be joint employers. If the entities shared control over the conditions of employment, they may both be potentially jointly and severally liable for FLSA violations as joint employers.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

McKennon v. Nashville Banner: Law of After-Acquired Evidence

McKennon v. Nashville Banner: Law of After-Acquired Evidence

What happens when an employer, having wrongfully terminated an employee (in violation of federal employment law), discovers in litigation that the employee did something that would have legitimately and lawfully lead to termination, had the employer known about it before wrongfully firing the employee? Does the employer still have to pay lost wages for the wrongful termination, or does this “after-acquired evidence” excuse the violation?

The Supreme Court addressed these questions in McKennon v. Nashville Banner Pub. Co., 513 U.S. 352 (1995). The Court rejected the argument that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, the Court also indicated that such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination.

Facts

McKennon worked thirty years for Nashville Banner Publishing Company until she was terminated at age sixty-two. McKennon filed suit, alleging that her discharge violated the Age Discrimination in Employment Act of 1967 (ADEA). McKennon’s suit sought a variety of legal and equitable remedies available under the ADEA, including backpay. In her deposition, McKennon admitted that during her final year of employment she had copied and taken home several of the Banner’s confidential financial documents. 513 U.S. 354-56.

For the purposes of summary judgment, the Banner conceded that it had discriminated against McKennon because of her age. Id. The District Court, however, granted summary judgment for the company, holding that McKennon’s misconduct in taking the confidential documents was grounds for termination and that neither back pay nor any other remedy was available to her under the ADEA. The Court of Appeals affirmed on the same reasoning. McKennon appealed. Id. at 355-56.

The Court’s Decision

The Court reversed. It held that an employee who is fired in violation of federal employment law is not barred from all relief when, after her discharge, her employer discovers evidence of wrongdoing that would have led to her termination on lawful and legitimate grounds had the employer known of it. 513 U.S. 356-360.

After-Acquired Evidence Not a Complete Bar

First, the Court held that this kind of “after-acquired evidence” is not a complete bar to recovery. The Court reasoned that even if the employee engaged in misconduct that would have prompted a termination, the employer’s discrimination that actually prompted the discharge cannot be disregarded. The Court assessed the purposes of the ADEA’s remedial provisions, 29 U.S.C. § 626(b) and 29 U.S.C. § 216(b), which (like the remedial provisions of other employment laws) were designed both to compensate employees for injuries caused by unlawful discrimination and to deter employers from discriminating in the first place. The Court concluded that allowing after-acquired evidence to bar all relief would frustrate both of these important objectives. Therefore, the Court held that after-acquired evidence did not bar all relief for unlawful discrimination. Id. at 358-360.

Relevance to Crafting an Appropriate Remedy

Second, however, the Court observed that trial courts should take into account after-acquired evidence of an employee’s wrongdoing in determining the specific remedy for the employer’s discrimination. To hold otherwise, and bar any consideration of employee misbehavior in the relief analysis, would be to ignore the employer’s legitimate concerns about employee misconduct. The ADEA, like other employment laws, just prohibits discrimination. It does not limit employers from having legitimate rules and exercising appropriate lawful discretion in hiring, promoting, and firing employees. Therefore, the Court noted, employee wrongdoing is relevant in taking due account of such lawful prerogatives and the employer’s corresponding equities arising from the wrongdoing. Id. at 360-61.

General Rule: No Reinstatement or Front Pay

Third, the Court discussed how trial courts might balance these competing concerns — on one hand, the prohibition against unlawful discrimination, and on the other, the employer’s right to address legitimate employee misconduct in an appropriate manner. The Court decided that remedial relief in such cases should be addressed on a case-by-case basis. However, the Court stated that as a general rule, if the employer proves the employee engaged in misconduct that would have prompted a lawful termination had the employer known about it, neither reinstatement nor front pay is an appropriate remedy. Id. at 362. This is because “it would be both inequitable and pointless to order the reinstatement of someone the employer would have terminated, and will terminate, in any event and upon lawful grounds.” Id.

Possible Limitations on Back Pay

The Court indicated that the more difficult issue, in after-acquired evidence cases, is the proper measure of back pay. This is because even a guilty employer cannot be required to ignore information it learns about employee wrongdoing that would lead to a legitimate discharge, even if it is acquired during the course of a discrimination lawsuit and might have gone undiscovered in the absence of the discrimination that led to the lawsuit. Id. at 362. The Court stated that the “beginning point in formulating a remedy should therefore be calculation of backpay from the date of the unlawful discharge to the date the new information was discovered.” Id. In determining the appropriate relief, the court can consider extraordinary equitable circumstances that affect the legitimate interests of either party. But an “absolute rule barring any recovery of backpay, however, would undermine the [federal employment law’s] objective of forcing employers to consider and examine their motivations, and of penalizing them for employment decisions that spring from … discrimination.” Id. Thus, as a general rule, after-acquired evidence does not bar back pay, but it might limit the amount of back pay an employee can recover.

No Bar to General Compensatory, Punitive, or Liquidated Damages

It is also worth noting that McKennon did not state or suggest that compensatory damages for past or future emotional harm should be time-limited. The decision only addressed possible limitations on lost wages and reinstatement. Allowing full emotional distress damages even if the defendant prevails on an after-acquired evidence defense makes good sense in light of McKennon’s reasoning. This is because no legitimate business prerogative would be served by allowing a proven discriminator to avoid paying the full cost of the emotional damage caused by the discrimination. The same reasoning supports the conclusion that after-acquired evidence does not bar punitive damages or liquidated damages, in cases where the usual standards for awarding punitive or liquidated damages are met. Here is a link to EEOC’s guidance on this issue.

Employer’s Burden of Proof

Finally, the Court discussed the employer’s burden in attempting to prove an “after-acquired evidence” defense. When an employer seeks to use this defense, it must first establish that the wrongdoing was of “such severity that the employee in fact would have been terminated on those grounds alone had the employer known of it at the time of the discharge.” Id. at 362-63. The Court also expressed concern that, due to the possibility of uncovering after-acquired evidence, employers might routinely undertake extensive discovery into an employee’s background or job performance to resist employment discrimination claims. Id. at 363. However, the Court concluded the trial courts’ authority to award attorney’s fees under §§ 216(b) and 626(b) and to invoke the appropriate provisions of the Federal Rules of Civil Procedure would likely deter most abuses of the discovery rules. Id.

Analysis

The Court in McKennon rejected the notion that a legitimate reason for termination, discovered after an unlawful discharge, excuses the unlawful action or bars the employee from recovery. However, such after-acquired evidence may limit the employee’s ability to obtain reinstatement or recover all lost wages associated with the termination. To use this defense, an employer must prove that the employee engaged in misconduct of such severity that the employee would have been terminated on those grounds alone had the employer learned of it during her employment. As a general rule, if the employer meets this burden, reinstatement is not an appropriate remedy and back pay may be limited.

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.

Corning Glass Works v. Brennan: EPA Law Requires Equal Pay for Equal Work

In Corning Glass Works v. Brennan, 417 U.S. 188 (1974), the Supreme Court addressed the allocation of proof in pay discrimination claims under the Equal Pay Act of 1963. This was the first Supreme Court decision applying the Equal Pay Act. The Court held that to prevail on an EPA claim, the plaintiff must prove that the employer pays an employee of the one sex more than it pays an employee of the other sex for substantially equal work. The opinion addressed what it meant for two employees to perform “substantially equal work” for the purposes of the Equal Pay Act, including what it means for work to be performed under “similar working conditions.” 

Facts

Corning was a glassworks company. It employed night shift inspectors and day shift inspectors at its plants. For many years, Corning allowed only men to work the night shift, and it paid night shift inspectors more than it paid the day shift inspectors, who were women. In June 1966, three years after the passage of the Equal Pay Act, Corning began opening the night shift jobs to women, allowing female employees to apply for the higher-paid night inspection jobs on an equal seniority basis with men.  

In January 1969, Corning implemented a new “job evaluation” system for setting wage rates. Under that pay system, all subsequently-hired inspectors were to receive the same base wage (which was higher than the previous night shift rate) regardless of sex or shift. With respect to employees hired before the new pay system went into effect, however, the pay plan provided that those employees who worked the night shift would continue to receive a higher (“red circle”) rate. Because of this “red circle” rate, the new pay system perpetuated the previous difference in base pay between day and night inspectors, thereby also perpetuating the previous disparity in pay between female (day) inspectors and male (night) inspectors. 

The Equal Pay Act prohibits an employer from paying different wages to employees of opposite sexes “for equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions,” except where the difference in payment is made pursuant to a seniority or merit system or one measuring earnings by quantity or quality of production, or where the differential is “based on any other factor other than sex.” 29 U.S.C. § 206(d)

The Secretary of Labor brought suit, asserting that Corning’s pay practices violated the EPA by paying male and female inspectors differently for equal work. 

The Court’s Decision

The Court addressed the question of whether Corning’s pay practices violated the EPA by paying different wages to employees of opposite sexes for “equal work on jobs the performance of which requires equal skill, effort, and responsibility, and which are performed under similar working conditions[.]” The Court found that they did. 

First, the Court held that Corning’s pay practices from the passage of the EPA in 1963 to June 1966 violated the EPA, because during that period the night shift inspectors (all male) were paid more than the day shift inspectors (female) and the night shift and day shift inspectors performed equal work “under similar working conditions.” 29 U.S.C. § 206(d). Corning argued the difference between working at night and working at day meant the different positions did not entail similar working conditions. The Court rejected this argument, holding that the EPA’s legislative history established that the statutory term “working conditions,” as used in the EPA, encompasses only physical surroundings and hazards, and not the time of day worked. 417 U.S. 197-204.

Corning also argued that the pre-1966 pay disparity was lawful because the higher pay to (male) night inspectors was intended as additional compensation for the inconvenience of night work, and thus the pay disparity was based on a “factor other than sex[.]” 29 U.S.C. § 206(d). The Court rejected this argument, holding the evidence showed the pay disparity in fact arose because men would not work for the low rates paid to women inspectors. The pay disparity therefore “reflected a job market in which Corning could pay women less than men for the same work.” 417 U.S. 204-05.

Second, the Court held that Corning did not remedy its violation of the EPA in June 1966 simply by permitting women to work as night shift inspectors, because the violation could only be cured by increasing the base wages of female day inspectors to meet the higher rates paid to night inspectors. Corning’s action in allowing women to work the night shift did not accomplish this, as “Corning’s action still left the inspectors on the day shift — virtually all women — earning a lower base wage than the night shift inspectors because of a differential initially based on sex and still not justified by any other consideration[.]” 417 U.S. 207-08. In effect, “Corning was still taking advantage of the availability of female labor to fill its day shift at a differentially low wage rate not justified by any factor other than sex.” Id. Thus, Corning’s allowing women to work the night shift, without increasing base pay to the female day shift workers, did not remedy the EPA violation. 

Finally, the Court held the Corning did not remedy its violation of the EPA in January 1969 with its pay plan equalizing day and night inspector rates, because the plan’s higher “red circle” rate paid to employees who previously worked the night shift only perpetuated the previous unlawful pay disparity. This was because the previously-hired male night shift workers would receive the higher red circle rate based on their pre-1969 pay — before day and night wage rates were equalized. Thus, the pay plan had the unlawful effect of continuing the pay disparity between men and women for equal work. As the Court observed, “the company’s continued discrimination in base wages between night and day workers, though phrased in terms of a neutral factor other than sex, nevertheless operated to perpetuate the effects of the company’s prior illegal practice of paying women less than men for equal work.” 417 U.S. 209-10.

Analysis

This case was important because it marked the first time the Supreme Court addressed the requirements of the Equal Pay Act. The Court held that to prevail on an EPA claim, the plaintiff must prove that the employer pays an employee of one sex more than it pays an employee of the other sex for substantially equal work. The opinion addressed what it meant for two employees to perform “substantially equal work” for the purposes of the EPA, and held that the requirement for work to be performed under “similar working conditions” referred to physical surroundings and hazards, and not the time of day worked. If a male employee and a female employee perform equal work at different times of the day, they should therefore be given equal pay — unless the pay disparity is based on a seniority or merit system or one measuring earnings by quantity or quality of production, or where the differential is “based on any other factor other than sex.” 29 U.S.C. § 206(d). If an employer’s pay practices violate the EPA, the only way to cure the violation is to equalize wages between men and women — simply offering women the same job titles is not sufficient. And pay systems that have the effect of perpetuating prior discrimination may still violate the EPA — even if the pay system is neutrally-worded and made without intent to discriminate. 

This site is intended to provide general information only. The information you obtain at this site is not legal advice and does not create an attorney-client relationship between you and attorney Tim Coffield or Coffield PLC. Parts of this site may be considered attorney advertising. If you have questions about any particular issue or problem, you should contact your attorney. Please view the full disclaimer. If you would like to request a consultation with attorney Tim Coffield, you may call 1-434-218-3133 or send an email to info@coffieldlaw.com.