Phillips v. TLC Plumbing, Inc., 172 Cal. App. 4th 1133 (2009)

Trisha Phillips, the daughter and successor in interest of decedent Judith Phillips, filed a complaint against TLC, alleging negligent hiring and retention of James Joseph Cain after Cain, a former employee of TLC, murdered Judith. While Cain was employed as a plumbing service repairman for TLC, he was dispatched on a service call…

Johnson v. United Cerebral Palsy/Spastic Children’s Found., 173 Cal. App. 4th 740 (2009)

Dewandra Johnson, who was employed as a counselor for this charitable foundation, alleged that she had been terminated while and because she was pregnant. Johnson also alleged that her supervisor (Raquel Jiminez) had a discriminatory animus against pregnant and heterosexual women and that Jiminez gave preferential treatment to gay and lesbian…

Chindarah v. Pick Up Stix, Inc., 171 Cal. App. 4th 706 (2009)

Two former employees of Pick Up Stix (a restaurant) filed a complaint seeking unpaid overtime, penalties and interest due to the misclassification of their jobs as exempt from the overtime pay requirements of state law. The putative class included current and former general managers, assistant managers and lead cooks employed during the…

On April 24, 2009, President Obama announced his intention to nominate Craig Becker and Mark Gaston Pearce to fill two of the three vacant positions on National Labor Relations Board.

The NLRB is comprised of five members appointed by the President who are subject to approval by the Senate Health, Education, Labor and Pensions Committee and confirmation by the full Senate. Board Members are appointed for a term of five years. The two current Board Members are Wilma B. Liebman (Democrat), who on January 20, 2009 was designated Chairman by President Obama, and Peter C. Schaumber (Republican), whose term expires on August 27, 2010.

The U.S. Department of Labor’s (the “DOL”) Wage and Hour Division recently issued a Wage and Hour Opinion Letter, FLSA 2009-3, addressing how a company can compute overtime payments retroactively for salaried employees it had mistakenly classified as exempt (not overtime-eligible) under the Fair Labor Standards Act (“FLSA” or the “Act”). The DOL reiterated its support for the half-time methodology in calculating back overtime due, endorsing the so-called “fluctuating workweek” model on a retroactive basis for remedying the misclassification of salaried employees. This is a significant development and, in so deciding, the DOL has “weighed in” on an issue that remains a source of lively debate in the federal courts.

Generally, the FLSA requires that overtime pay be calculated weekly (notwithstanding that an employer’s payroll period might be semi-monthly or bi-weekly) and that employees receive one and one-half times their regular hourly rate of pay for each hour worked in excess of 40 hours in a workweek. Here, the employer paid a guaranteed salary bi-weekly and expected the employees to work a minimum of 50 hours per week. The employer’s payroll software even converted the bi-weekly salary to an hourly rate by dividing the salary by 100, without regard to whether the employees worked more or less than 100 hours in the payroll period. When the employer concluded that it had mistakenly classified certain salaried employees as exempt, it wished to pay them back overtime retroactively, using a half-time methodology, reasoning that the employees had already been compensated straight-time for each hour over 40 worked in the workweek.

The DOL agreed. Since the fixed salary covered all the hours the employees worked in a workweek, straighttime already was included in the salary covering the hours worked over 40 and, as a result, the employees needed only to be paid an additional one-half of their actual regular rate for each overtime hour. Important to the DOL’s decision was the fact that the fixed salary was paid to the employees even when they worked less than 100 hours in the bi-weekly payroll period.

The Opinion Letter is particularly noteworthy for its generous interpretation of the fluctuating workweek’s “clear mutual understanding” requirement which, heretofore, many had understood meant that there had to be a “clear and mutual understanding” at the outset of how salary and overtime would be calculated and paid for hours worked. According to this Opinion Letter, the “clear and mutual understanding” criterion does not need to be set forth in writing and intent can be inferred from the parties’ conduct that the fixed salary was compensation for all hours actually worked by the employee in a given week, rather than for a fixed number of hours per week – a stance that adopts the minority view among judicial decisions that have considered the issue.

Recent changes in the legal and economic landscape have significantly heightened the risk that employers’ compensation systems will come under attack. Congress has passed the Lilly Ledbetter Fair Pay Act (“Ledbetter”), which effectively waives the statute of limitations for compensation discrimination claims under the majority of federal employment statutes. The law increases a plaintiff’s ability to recover for compensation discrimination, by placing into issue each and every decision impacting pay, starting from the date of initial hire, rather than just those decisions that occurred within statutory filing period. The law has made the issue of pay equity a hot button issue. Plaintiffs’ attorneys and government regulators are primed for attack.1

The Obama administration also has brought the specter of increased EEOC and OFCCP enforcement activity, as well as the possibility of additional proemployee legislation in the pay discrimination arena. Of note is the Paycheck Fairness Act (“PFA”), which, if passed in its current form, would substantially amend the Equal Pay Act of 1963 and make it significantly easier for employees to establish unlawful pay discrimination. The PFA broadens the categories of employees that plaintiffs can claim as comparators for purposes of showing pay inequity; it sharply curtails the affirmative defenses available to employers; it makes it easier for plaintiff’s attorneys to bring large class-action lawsuits, and it permits uncapped compensatory and punitive damages. It also allows the OFCCP to use a simplistic and often inaccurate “pay grade methodology” when identifying federal contractors unjustly investigated and make it more difficult for them to defend against agency audits.

Coupled with these legal developments have been a rash of company layoffs, rising unemployment, and an increasing number of employees and former employees who face difficult financial plights. All of these forces make employee compensation discrimination lawsuits more likely. Conducting internal audits to identify disparities in compensation that might be subject to legal challenge, and appropriately addressing such disparities, is one of the best ways to prevent pay discrimination lawsuits and to place your organization in the most favorable position should they occur. This Tip of the Month provides guidance for in-house counsel and human resources executives when undertaking such audits.

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1 For more information on the Ledbetter Act see our Client Alert about it.

Proskauer Prevails As The Court Holds That Collectively Bargained Agreements for The Arbitration of Statutory Discrimination Claims are Enforceable

On April 1, 2009, the United States Supreme Court, in a 5-4 decision, ruled in favor of Proskauer Rose’s client 14 Penn Plaza LLC, holding that a collective bargaining agreement (“CBA”) that clearly and unmistakably requires union members to arbitrate Age Discrimination in Employment Act (“ADEA”) claims is enforceable as a matter of federal law. The Court’s decision validates the right of an employer and a union to negotiate about the way disputes can be resolved, even when those disputes involve individual statutory rights. Accordingly, 14 Penn Plaza LLC. v. Pyett, is significant to all employers who have collective bargaining relationships.

Proskauer negotiated the CBA at issue on behalf of the Realty Advisory Board on Labor Relations, Inc., (“RAB”) and handled this litigation on behalf of 14 Penn Plaza — from the district court through argument of the matter before the Supreme Court by Paul Salvatore, co-chair of Proskauer’s Labor and Employment Law Department.

Sullivan v. Oracle Corp., 557 F.3d 979 (9th Cir. 2009)

The Ninth Circuit has withdrawn its published opinion in this case and certified the following questions to the California Supreme Court: (1) Does the California Labor Code apply to overtime work performed in California for a California-based employer by out-of-state plaintiffs in the circumstances of this case, such that overtime pay is required for…

People v. Tabb, 170 Cal. App. 4th 1142 (2009)

Edward Nathaniel Tabb, Sr. was convicted by a jury for grand theft of his employer’s property. Tabb worked as a “runner or helper for pipe fitters” at BAE Systems. Over a period of approximately two months, Tabb brought new or used ship parts to A to Z Auto Dismantling, a recycling company, and sold them…

Cristler v. Express Messenger Systems, Inc., 171 Cal. App. 4th 72 (2009)

James Cristler and others sued Express Messenger, a parcel delivery service, for violations of California law based upon Express’ allegedly illegal classification of its workers as independent contractors and not employees. Among other things, plaintiffs alleged violations of the California overtime requirements, as well as requirements to properly itemize wages and to…