Connecticut Employment Law Blog : Connecticut Employment Lawyer & Attorney : Daniel Schwartz : Stamford, Hartford New Haven, CT

With all the developments the last week or two with the Connecticut legislative session, it's been difficult to keep up with everything ELSE happening in employment law. 

So, time for a "Quick Hits" post, where I recap some of the stories you might have missed relating to the world of labor and employment law that might be of interest to employers in Connecticut and beyond.

• Michael Moore, of the Pennsylvania Labor & Employment Blog, has a long-awaited followup to his guest post in this blog last year on Body Mass Index being the next type of claim out there under the ADA.  This time, he looks at the effect of the new ADA amendments on such claims.
   
• In what should be a surprise to no one, the U.S. Government has delayed implementation of E-Verify yet again for federal contractors. (My most recent post on E-Verify is here.) The newest date is September 8, 2009.  Don't hold your breath on this one.
   
• The World of Work was among numerous blogs that reported this week on a new case out of California overturning a $105M verdict in favor of baristas who claimed that they shouldn't have had to share the "tip jar" with shift supervisors. (H/T Overlawyered)
   
• As you may know, the NLRB - a five member board - has only had two appointees lately. A recent appellate court called into question the legitimacy of the decisions by the board. The inevitable appeals have now started, reports the Workplace Prof blog. I have a hard time believing that this decision is going to be upheld but we'll see. For employers, however, unless you have a case up at the Board level, this isn't something that will impact them, at least in the short term. 
   
• The intersection between Twitter and employment law -- the subject of an earlier post by me -- gets the scholarly treatment with an interesting seminar article. Some of it states the obvious such as "Users must be careful what they tweet. Twitter is subject to vast potential liability, as is any electronic communication tool." But it's refreshing to see someone looking at the subject from a treetop level.  

 

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Addressing the legal risks associated with a reduction in force (or "RIF") has long been a topic on this blog. In fact, looking in my crystal ball way back in January 2008, I suggested that it would the hot topic before years' end. 

Flash forward to the present, and the headlines continue to be dominated by news of layoffs, plant closings, furloughs and bankruptcies. 

One of my friends and professional colleagues in the area, Lori Rittman Clark, has posted her thoughts on RIFs in the For the Defense blog. 

While there's nothing particularly ground-breaking (quite simply because there aren't a lot of new developments in the area), it is a concise and well-rounded summary for employers and HR professional looking to reduce legal risks associated with reductions in force.

What are the issues she suggests reviewing?

• Potential Applicability of the WARN Act;
• Disparate Impact Analysis.;
• Disparate Treatment Analysis; and,
• Releases.

All are sound subjects for review. The best suggestion should be the most obvious one: Seek legal guidance at the START of a process, rather than the end, to avoid the legal pitfalls that surround RIFs.

In the end, however, there is no magic bullet to eliminating legal risks associated with reductions in force. Each of the items Clark raises may help reduce the legal risks, but even implementing all of the above may not eliminate the risk entirely.

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The WWE has filed its reply brief (download here) in further support of its motion to dismiss yesterday contending that three former wrestlers "cannot escape the clear language of the booking contracts". For background on the case involving "Raven" and two other former wrestlers, click here. 

The brief is filled with lots of "smackdowns" (to borrow a wrestling phrase) chiding the wrestlers about not doing their research before filing their claims (p2, footnote 1),  about conducting a "fishing expedition" (p2, footnote 2), about pursuing futile claims (p3), about using "sleight-of-hand tactics" (p7, footnote 5), and, well, just about everything else.

The brief is a lawyers' dream -- and a wrestling fan's cure for insomnia. (The new movie, "The Wrestler" may be a better entertainment choice.) The arguments are thick with legal analysis that frankly will only excite those with an interest in this arcane area of law. But the gist of the argument is that the claims are filed too late and are barred by various legal theories.  And even when there might be viable claim under ERISA, the wrestlers never amended their complaint to add it (and WWE contends that it is too late to do so now).

Is there anything all that new or revealing? No, not really,  At the end of the day, the plain language of the booking contracts is what should control the outcome of the case, argues the WWE. It's not very different from the argument it made in its first brief.

Zach Lowe, of the AmLaw Daily blog, provided this delicious update on the case (and welcome to readers of the blog as well).

I would expect that a decision on the matter will not be forthcoming for several more months. Until then, the matter is likely to remain fairly quiet. 

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Many weeks after the WWE filed its motion to dismiss the lawsuit brought by three former WWE wrestlers ("Raven" and "Kanyon" and others -- otherwise known as Scott Levy, Chris Klucsartis and Michael Sanders ), the wrestlers have fired back filing their papers opposing WWE's motion.  (For full coverage of this lawsuit, click here.) 

The papers, filed late Wednesday afternoon, are available for download here.  There aren't, as some much have hoped for, any more source documents attached to it (such as the wrestlers contracts that were attached to WWE's original motion) so readers will just have to make do with legal arguments.

For those following the matter, the opposition papers use much of the same theory that was advanced in the complaint -- that the WWE is pure entertainment, not sport, and the WWE controls everything about it.

Specifically, the wrestlers claim that the WWE exercises:

virtually complete dominion and control over its wrestlers -- determining when and where the wrestlers will perform, where and how they will train, scripting the fight and wrestlers' pre- and post-fight interviews, controlling the wrestlers' costumes, props and personas and pre-ordaining the results of each fight.

The wrestlers argue that the court should look to the specifics of the relationship, not the contracts themselves.  They contrast themselves with professional boxers, an interesting comparison.   Moreover, they argue that its too early for the court to decide the issues -- and that the case should proceed with discovery (in other words, each party asking the other party questions and for certain documents). 

Interestingly, the wrestlers also bring up the fact that in 2001 WWE argued that a former wrestler (Nicole Bass) should be barred from bringing certain claims because she was an employee, not an independent contractor -- the reverse position argued here.   

However, the wrestlers highlight an interview given to a British newspaper in August 2008 about the case that suggests a bit more complicated of a picture. While the result is the same -- she was treated as an employee, not an independent contractor, it appears the WWE argued that she was not an employee. 

In the interview, K&L Gates attorney Jerry McDevitt noted that the only time WWE litigated the issue - it actually lost on the legal argument (though ultimately prevailed in the case on other grounds).

The independent contractor v employee situation has only come up once before in litigation in the long history of the WWE, when they were sued for sexual harassment by former female wrestler Nicole Bass.

Jerry reveals: “The sexual harassment laws, of the United States at least, are purposely designed to protect employees and do not extend to independent contractors.

“However the interpretation given under Title VII of the Civil Rights Act which covers sexual harassment is very broad, as it wants to include in it as many people as possible.So a preliminary issue that came up was whether she was an employee, for Title VII purposes, or an independent contractor. 

She was determined to be an employee.

As I've often said, you can't do complete justice to an argument in a short post, so review it for yourself to get a complete picture.

The WWE will now have 10 days to file a reply to this, if it wishes (and I can't imagine that it will leave this argument unchallenged). After that, the court will rule on the motion. Don't expect a decision overnight, however. It is likely that a decision won't be forthcoming for at least 2-3 months.

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While most people are focusing on Connecticut's ruling legalizing same-sex marriages, word leaked out late today that the UAW and Foxwoods agreed to enter into discussions for a possible labor agreement.   (For background on the UAW/Foxwoods dispute, see prior blog coverage here.) 

The joint press release -- issued at 4:30 EST -- is brief but dramatic in its wording. 

Today - The UAW and the Mashantucket Pequot Gaming Enterprise agreed to enter into discussions for 30 days to determine if an agreement can be reached to bargain under tribal law without either party waiving any of their rights or legal positions under the National Labor Relations Act. 

The parties further agreed that they will not discuss the status of negotiations during this 30-day period.

If you blinked, you probably missed the biggest news contained here.  It's not that the parties agreed to enter into discussions; it is that the parties are working on an agreement under tribal law.  This is a major victory for Foxwoods and a major concession by the UAW, both of which have been fighting for nearly a year over tribal sovereignty and whether federal or tribal law should apply to UAW's efforts to organize workers at Foxwoods.

Foxwoods has long claimed that it is willing to negotiate -- but only if tribal law applied.  Why? Because Foxwoods believes that it has tribal sovereignty and that federal labor laws should not apply to it. 

The press release further notes that such discussions and negotiations are being done without "either party waiving any of their rights or legal positions" under federal law -- presumably referring to Foxwoods' appeals of various NLRB rulings. But it is likely that if the parties reach an agreement -- which is still a big if -- they will then agree to withdraw any further appeals.

Despite the apparent concession by the UAW, this announcement does have some potential to be a win-win situation for both. Foxwoods can avoid potentially damaging rulings by federal courts applying labor laws to it, and UAW can start representing workers -- albeit under tribal law.  

I'll have more analysis next week when I return from travels but in the meantime, feel free to post your comments below.

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With lots of little things going up, it's time to followup on a few topics we've covered in the last few days and some other notable posts from around the web.

• First up, my post on the WWE Wrestlers was picked up by Above The Law editors yesterday. Today, the American Lawyer does a little story of their own on the lawsuit with a quote from K&L Gates attorney who notes that his strategy will be revealed later this week in a motion to dismiss.
   
• Today, my guest blogging at Overlawyered continues with a post on one individual's lawsuit against Amtrak for jumping from a train. You can read the court decision related to it here. 
   
• California Labor & Employment Blog discusses whether social networking site are good or bad for the workplace. As I've said before, policies should be tailored to the workplace.
   
• The Greater Hartford Real Estate Blog asks a question that lots of employers in the Hartford, Connecticut area ask: Can we attract young professionals to the area? The answer to that question dictates how well the whole area does.  Interesting how much "power" Generation Y is going to have on the economy and local area.
   
• And lastly, with the Democratic National Convention going on this week, the Workplace Prof blog reminds us to catch up with the "Plum Book" -- your list of jobs potentially available in a new presidential administration.

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Six months ago, I predicted a renewed emphasis on reduction in force laws and regulations with the possibility of an economic slowdown looming.  With six months left to go in the year, I'm still feeling good (if you can feel "good" about such things) about that prediction. 

Is the economy still on the yellow brick road or are we walking deeper into the forest filled with lions, tigers and bears?

The statistics from the Equal Employment Opportunity Commission do not paint a rosy picture.  

The numbers of discrimination claims filed with the EEOC are up.  

And up by a lot.

In fact, the EEOC reported a 21 percent increase in charges for the first quarter of 2008, over the same period last year. 

So what can employers do? I talked a few weeks ago about one aspect of reductions in force -- namely compliance with the OWBPA (Older Worker Benefit Protection Act) and how compliance with that law can avoid one pitfall associated with a reduction in force. 

But another law that is commonly misunderstood is the WARN (Worker Adjustment and Retraining Notification) Act.  WARN is not a mandatory severance law; in other words, it doesn't mean that employers need to give employees severance when they are affected by a mass layoff or plant closing.

What WARN does require is that the employer give notice to employees who may be affected by a plant closing or mass layoff.  The Department of Labor has prepared this fact sheet for employers to answer some of the basic questions.   It is a law that is, frankly, fairly easy to comply with, and yet there are still some employers who are facing class actions for their alleged failure to comply. 

In addition to notice to employees, the employer must also notify the Connecticut Department of Labor of its proposed actions.  The state then posts them in monthly reports available here.  You can view July's report here.

What is fascinating about the reports thus far is that Connecticut has, as of now, avoided some of the mass layoffs that have plagued some of the other states.  The June reports for Connecticut show only 400 or so employees statewide who received WARN notices.  Moreover, numbers released over the weekend show that Connecticut employers have added jobs, not eliminated them.  Whether this trend continues will be an item to watch for in the second half of 2008.

In an upcoming post, I'll highlight some of the particulars of WARN in more detail.  Until then, try to avoid the fields of sleeping flowers.

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A few weeks ago, I posted on a decision by the Connecticut Supreme Court that ruled that an order denying class certification is not an appealable final judgment. I said back then that the case, Palmer v. Friendly Ice Cream Corporation, gives employers and other defendants in class actions, "an important arrow in their quiver of defending against class action cases."

This week,the Hartford Business Journal discussed the case in some detail with some good information about the underlying claims raised by the wait staff. 

The dispute between the food servers and restaurants hinges on the differences in the hourly wages paid to waiters and other non-wait staff. Restaurants are allowed to pay waiters below minimum wage levels, reducing wait staff pay by a 29.4 percent “tip credit,” which is based on the assumption that waiters are expected to earn much of their income from tips.

Food servers claim that their wallets take a hit when employers assign them tasks that don’t include waiting tables, such as brewing coffee, rolling napkins or cleaning restrooms.
For that reason, servers employed by T. G. I. Friday’s and Friendly’s want to be paid for the extra tasks they perform while on the job, so they have been working together to form class-action groups to fight restaurants.

The reporter from the story happened to call me for my views on the case, which I was happy to share with her. You can check out my quotes from the story here.  

Without sounding like I'm trying to fawn over them, the HBJ really is an under-appreciated publication that fills a good niche on business news in the state.  If you aren't looking at their site, you are really missing out on some great little nuggets about Connecticut business.

The case also highlights the importance of following wage rules carefully. The application of a "tip credit" isn't exactly the easiest formula for employers to apply in practice. Employers who may pay under minimum wage for one reason or another should consider themselves targets for potential claims and should ensure that they are in full compliance with the wage and hour laws.

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Attorney John Williams is well-known in this state for his avid representation of various state workers -- particularly state police officials -- in discrimination matters.  Yesterday, he held a press conference to announce that he will be filing a class action lawsuit in a few weeks challenging the hiring procedures of the Connecticut State Police.

The Hartford Courant has the details in an article this morning:

Racism is so entrenched in the Connecticut State Police that basic hiring practices ensure only a few minority troopers will even enter a training class, never mind be promoted in the ranks, an attorney representing a black troopers' coalition said Thursday.  ...

Only candidates who score at least 85 out of 100 on a written test are chosen to continue training, even though the passing score is 65. That practice discriminates against members of minority groups, Williams said.

Public Safety Commissioner John A. Danaher III vehemently denied Williams' accusations and defended the department's hiring practices, saying they are fair and blind to race. He also said he has taken steps since becoming commissioner to recruit more members of minority groups, including reaching out to more colleges and forming a selections unit that is largely minority.

WTNH has this report on the subject, as does the AP.  Because the complaint hasn't be filed yet, it is too early to tell the exact legal theories and arguments that will be used in the case, but it appears to be following a well-worn path of what are known as "disparate impact" cases.

So what is "disparate impact"? Well, when most of us hear of discrimination cases, they are known as "disparate treatment" cases, not "disparate impact" cases. These cases allege that someone intentionally discriminated against them because of a protected class (race, gender, etc.)

"Disparate Impact" cases are something different.  LawMemo has a nice little summary in its blog:

Disparate impact is the idea that some employer practices, as matter of statistics, have a greater impact on one group than on another.

A good example, taken from the first US Supreme Court Title VII case on the topic: When hiring laborers, the employer required applicants to have a high school diploma. The diploma requirement screened out vastly more blacks than it did whites. Therefore, there was a disparate impact based on race, even though there was no intentional discrimination.

The Supreme Court said that once the employees proved a significant disparate impact, the burden shifted to the employer to prove that the diploma requirement had "a manifest relationship to the employment in question."

Federal legislation enacted in 1991 says that if the employees prove that a practice causes a disparate impact, then the employer must demonstrate that the practice "is job related for the position in question and consistent with business necessity."

The allegations being raised by Attorney Williams are similar. He appears to be saying that the decision to screen applicants based on their score of a written test has a disparate impact on black applicants.  The EEOC has issued some guidance on employment tests that shed further light on the subject:

Moreover, as the EEOC notes, in 1978, the EEOC adopted the Uniform Guidelines on Employee Selection Procedures or “UGESP” under Title VII.  UGESP provided uniform guidance for employers about how to determine if their tests and selection procedures were lawful for purposes of Title VII disparate impact theory:

UGESP outlines three different ways employers can show that their employment tests and other selection criteria are job-related and consistent with business necessity. These methods of demonstrating job-relatedness are called “test validation.” UGESP provides detailed guidance about each method of test validation.  

In general, disparate impact cases are typically long drawn out cases that rely, in good measure on statistical analyses by experts.  They are costly and time-consuming affairs.  Thus, don't expect a quick resolution to the claims raised in this new lawsuit.  Indeed, the State Police will likely spend lots of time arguing that the standards it uses are "job related" and "consistent with business necessity".   Who will prevail? Stay tuned....

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Lawyers representing the class of retirees from CIGNA will argue that their clients are entitled to "hundreds of millions" of dollars in retirement benefits as a result of misrepresentations made by CIGNA, according to a report in yesterday's Hartford Courant. 

The Courant -- which finally reported on the decision 5 days after it came out and well after we posted on it  -- barely mentions the argument of whether the new cash balance plan is age discriminatory (which the court found it wasn't). Instead, it focuses on the fact that CIGNA failed to mention that the benefits could be subject to "wear-away". 

Eager to claim victory, the class representative attorneys now say that the disclosure argument is vitally important to the case:

Friday's ruling will serve as "an excellent blueprint for other courts to scrutinize these disclosures" that companies make concerning conversion to cash balance plans, said Tom Moukawsher in Hartford, co-counsel representing the CIGNA employees. "This court decision is a precedent for looking at the underbelly of the disclosures for basic honesty."

Certainly the court was disturbed by communications by CIGNA. For example, in a Newsletter discussing the changes, the Court found that: "nothing in the Newsletter indicated to plan participants that their rate of benefit accrual might decrease, much less by a significant margin. And yet that is exactly what happened." (Decision at 80.) Indeed, as the Court said later:

Taking all of this information into consideration, the Court concludes that CIGNA was aware of the significant reduction in the rate of future benefit accrual that would affect at least a substantial proportion of its employees as a result of the transition to Part B, that CIGNA wished to avoid the employee backlash likely to result from a thorough discussion of these aspects of Part B, and that CIGNA sought to negate the risk of backlash by producing affirmatively and materially misleading notices regarding Part B. As a result, its § 204(h) notice failed to meet ERISA's stringent standards.

As I indicated previously, both parties have until March 17th to brief the issue of what the appropriate remedy would be in this situation. 

Although the lawyers for the class have reason to be pleased with the decision, certainly CIGNA and other companies nationwide must be relieved that the underlying conversion from a defined benefit plan to a cash balance plan itself has been upheld.  If the court had found that the conversion was discriminatory, it could have had an impact nationwide; the decision here may have a more modest impact given the evidentiary findings of the court that are particular to this case.

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My post from last Friday's ERISA decision in Amara v. CIGNA Corp. has drawn quite a bit of interest. Since my post over the holiday weekend (from vacation) was intended merely as a brief summary until this week, it has drawn sufficient attention that a few points bear further elaboration, including disclosure of my knowledge of one of the class representatives.

• First, I know one of the named class representative as a longtime family friend. Other than being aware generally of her involvement, we haven't discussed the case in any specifics and I didn't discuss the decision with her either.  I don't believe this impacts my reporting of the case but readers should be aware of that fact.
  
  
• Second, in my discussion of the age discrimination claim, one reader has suggested that I may have oversimplified the judge's rationale. I can't dispute that since, after all, I'm attempting to reduce a 122 page decision to a few paragraphs.  I did not, for example, discuss whether this case suggests "that more and more courts are buying into the Easterbrook line of argument that cash balance plan conversions are generally not age discrimination" as Workplace Prof did.  As I have suggested, however, readers should review the entire decision for its analysis.  But this additional quote from Judge Kravitz bears review too:
  
             Finally and importantly, the Court agrees with CIGNA that what Plaintiffs see as age
  discrimination is merely the transition from one plan that was heavily age-favored to another plan that is still age-favored but less so. In the Court's view, that transition is not age discrimination.
  
  
• Third, in my discussion of the remedies that may be appropriate, I pointed out that the court suggests at one point that only injunctive relief may be appropriate against CIGNA (versus the plan administrator) in one of the claims.   It is hardly conclusive, however, and it may be that the court fashions a remedy that is more far-reaching on the notice and disclosure provisions.  The court left a discussion of remedies (i.e. damages) for further briefing.  There are also individual claims that need to be resolved as well.
  

The Pension Protection Act blog has another discussion of the case with some additional points that bear review.  And to review other original source documents, readers can go to  Attorney Stephen Bruce's webpage on the actual lawsuit as well.   And for readers that may question whether the attorneys, like Stephen Bruce, did their job well, I'll quote directly from the judge's opinion:

Counsel for each side distinguished themselves throughout this case by their skillful advocacy, professionalism, and civility. The Court is grateful to each of them.

The decision has lots of little items like this to review.  The best thing about a blog like this is that readers can and should decide for themselves what it ultimately means.

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Difficult, time-consuming, and expensive litigation with uncertain results – such as this case represents – is assuredly not a sensible way to manage the Nation's retirement system for either employers or employees. Sadly, at least for now, litigation appears to be the only option available to them.

In a 122 page opus on ERISA law (download here), District Court Judge Mark Kravitz has issued a fascinating and thorough decision, Amara v. CIGNA Corp. et al analyzing one company's change in 1998 from a traditional defined benefit plan to a cash balance plan.  The decision -- despite its length -- is a fairly easy legal read (as easy as reading a legal decision can be, of course) and does a good job at explaining the different theories that have developed in such a conversion. 

I'll quote from the beginning below, but the keys to the case are:

1) The conversion of CIGNA's retirement plan to a cash balance plan did not discriminate against older workers.  As the court stated, "To the contrary, the CIGNA Plan provides greater annual benefits to older workers who are similarly situated to younger workers."  The court wisely observed that any apparent difference in benefits from a worker retiring in 2015 to a worker retiring in 2030 is due to the "time value of money" or interest, not discrimination.

2) CIGNA can, however, be liable for its failure to provide proper notices to the retirees and failure to explain things in an easy to understood manner.  The court seems to suggest that only non-monetary relief may apply in such circumstances, but has left the issue to further briefings.

For Connecticut, the decision ought to become required reading for those interested in ERISA issues such as cash balance plan conversions, anti-backloading and non-forfeiture rules, and plan descriptions and disclosures. 

 I'll leave it to Judge Kravitz's own words to describe the importance of these issues:

Since the mid-1980s, hundreds of U.S. employers have converted their traditional defined benefit pension plans into what are known as "cash balance" retirement plans. In fact, according to the Pension Benefit Guaranty Corporation, over 1,500 cash balance plans and other similar hybrid plans were in existence as of 2003, providing pension benefits to over 8 million participants,approximately one-quarter of the total employee population covered by defined benefit plans.

Like many other corporations, CIGNA Corporationconverted its traditional defined benefit plan to a cash balance plan, in 1998.Despite their popularity among employers, cash balance plans have spawned considerable litigation. This case is yet another in a long list of cases challenging an employer's conversion to a cash balance retirement plan under the Employee Retirement Income Security Act ("ERISA").

Plaintiffs consist of a class of current and former CIGNA employees who participated in CIGNA's traditional defined benefit plan before January 1, 1998 and have participated in CIGNA's cash balance plan since that time. Plaintiffs and Defendants raise numerous class, sub-class, and individual claims and defenses. At the risk of over-simplification, however, the central issues in this case may generally be described as follows:whether CIGNA's cash balance plan is age discriminatory or otherwise violates certain non-forfeiture and anti-backloading rules under ERISA; whether CIGNA gave the notices and other disclosures required by ERISA; and whether the information CIGNA provided its employees about the conversion and the cash balance plan in summary plan descriptions and other materials satisfied ERISA's requirements.

The questions raised in this case are vitally important to both employers and employees (and their families). Given how profoundly significant retirement plans and planning are to the great majority of Americans – employees and employers alike – this is one area where the answers should be clear, explicit, and definite. Regrettably, however, the answers to the issues raised by these parties are not entirely clear, in large measure due to the fact that ERISA, and the regulations under it, are often lamentably obscure – to describe them as a tangled web does not do them justice. On top of that, there are conflicting decisions around the country on identical issues, making planning for nationwide enterprises impossible. ...

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The Connecticut Supreme Court, in a decision released today, ruled today that an order denying class certification is not an appealable final judgment.  The case, Palmer v. Friendly Ice Cream Corporation, gives employers and other defendants in class actions, an important arrow in their quiver of defending against class action cases. 

In Palmer, thirty-seven waiters or waitresses employed by Friendly's, sought certification as a class to pursue their claims that their employer had ‘‘failed to pay servers the hourly, minimum wage mandated by General Statutes § 31-60 because the defendant unlawfully deducted ‘tip credits’
from servers’ wages’’ for work that was ‘‘non-service’’ in nature. The potential class included ‘‘all current or former servers’’ at the defendant’s forty-eight restaurants in Connecticut ‘‘against whose wages tip credits were subtracted.’’

 According to the Court:

The plaintiffs’ complaint arose from the defendant’s alleged violation of § 31-62-E4 of the Regulations of Connecticut State Agencies, which governs the payment
of minimum wage for ‘‘[d]iversified employment within the restaurant industry . . . .’ The complaint
alleges that the defendant ‘‘failed to definitely segregate all of the time spent performing ‘non-service’ duties and nevertheless took a ‘tip credit’ with respect to most of the hours worked by [the plaintiffs] and the class members and failed to compensate them at the required full minimum wage for their entire shift.’

The Superior Court denied certification of the class and the Appellate Court found that such a ruling was non-appealable -- a decision affirmed by the Connecticut Supreme Court.

I'll look at the underlying wage issue another day, but for now, the Supreme Court's decision will be applicable in all sorts of employment-type class actions filed in state court. 

For employers, plaintiffs will not be able to use the threat of an immediate appeal for settlement purposes, while the employers will also have an extra incentive for defeating class certification. If that decision cannot be appealed until much later (including a verdict), much of the "value" of the class action will be diminished.

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These days, everyone seems to be jumping on the wage and hour bandwagon, predicting an endless stream of lawsuits for 2008, just as there was for 2007.  But just as mutual funds preach that "past performance is no guarantee of future success", I would argue that focusing too much on one trend, misses an opportunity to see another.

Indeed, having looked into my crystal ball for 2008,  I believe lawsuits involving reductions in force will be the latest trend to emerge in the next year. (And lest you think me too radical, I do think wage and hour lawsuits will certainly continue as well, albeit in lesser amounts as companies adapt to the litigation trend by addressing wage and hour issues preemptively.)

What is a reduction in force? Really, just a lawyerly way of saying "layoff". Back in the early to mid 1990s, lots of companies went through them.  And the number of lawsuits arising from those reductions went through a major peak in 1995 or so.

But these types of lawsuits rise and fall with the economy.  When the economy is good, lawsuits go down. When it's not so good, they go up. One reason is that when people can find another job quickly (i.e. the unemployment rate is low), then tend not to sue as much.

So what leads me to think that reductions in force lawsuits are on the horizon?

Well, for one, the unemployment rate numbers crept up over 5 percent on Friday.   The second, is that financial sector companies have announced major layoffs in late 2007, as a result of the mortgage crisis.  And when these people get laid off, more dollars are at stake.  And lawsuits typically follow the money. 

Moreover, with the overall economy in a stall pattern at best, companies will continue to resort to the cost-cutting measure they have used before -- layoffs. 

To be sure, the landscape involving RIF lawsuits has changed in the last 15 years; more companies offer severance packages (with accompanying separation agreements) and more companies do statistical analyses to determine if their RIFs have any statistical disparities among protected groups.  And layoffs for 2007, fell to their lowest since 2001. 

But harder times nearly always means more employment claims.

One more factor suggests to me that more lawsuits are on the horizon -- it's much easier for a few employees to band together than in the past. Previously, people would have to use their existing networks to find laid off employees to hear their stories (indeed, outplacement firms were a good source for employees looking to talk with other laid off workers). But now, with the rise of social networking sites, it seems only a matter of time before a group of employees will form a Facebook or MySpace page to compare experiences.  Employees from around the country can share information instantly, making it much easier to figure out if there are trends associated with the layoff that may give rise to a lawsuit. (Unions already have started marshaling the Internet, like this site for a group of Washington Post workers.)

This should give employers some pause; multiple plaintiff cases are always a challenge and expensive, and class actions (where attorneys fees could be recovered) could also be an attractive option.

Will this happen? Let's check back in a year. But absent the economy rocketing ahead in 2008, I don't think it's a stretch to see reduction in force lawsuits making a comeback.

Stay tuned.

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U.S. District Court Judge Vanessa Bryant is having a busy week.  Today, she released a decision certifying a FLSA class action against Smith & Hawken based on an alleged failure to pay overtime.

In Holbrook v. Smith & Hawken, Ltd., the Plaintiff, a former assistant store manager (ASM) in the Glastonbury, Connecticut store, claimed that she was improperly classified as an exempt employee.  She moved for certification of a class under the FLSA and comparable state law.

Notably, Smith & Hawken conceded that all ASMs were subject to the same job description.  Smith & Hawken claimed that each store functions autonomously and the sheer number of ASMs and store locations should preclude that finding. The court disagreed.  In doing so, the court indicated that the Plaintiff's claims should proceed as a collective action since she was similarly situated to the other ASMs. 

The court need not find uniformity in each and every aspect of employment to determine a class of employees are similarly situated.... The consistent manner in which Smith & Hawken classified its own ASMs is sufficient to carry Holbrook’s burden, even in the presence of minute factual variances in treatment between store locations.

Ultimately, the court defined the class as "individuals employed as ASMs by Smith & Hawken within the three years preceding the date of this order who worked more than forty hours in
any week."  According to the Company's website, there are currently 58 stores in 23 states.   The parties have the next two weeks to come up with a plan on how to proceed in this case.

The "Assistant Manager" argument raised by the plaintiff is certainly not new in the context of wage & hour litigation.  But the case serves as a additional cautionary tale about classifying "assistant store managers" as exempt employees. 

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For employment lawyers and HR professionals, it's "old" news that overtime lawsuits are a major concern.  Business Week picks up on that trend in next week's Cover Story entitled: "Wage Wars: Does your Boss Owe You Overtime". 

According to the article:

No one tracks precise figures, but lawyers on both sides estimate that over the last few years companies have collectively paid out more than $1 billion annually to resolve these claims, which are usually brought on behalf of large groups of employees.

Yes, you read that right. A BILLION dollars. 

Is this estimate true? Who knows.  But considering that the Labor Department estimates that 86 percent of the workforce is subject to overtime rules, that number suggests that there may still be lots of other potential lawsuits out there.  Connecticut has had no shortage of these lawsuits either. 

What's an employer to do? Clearly, some pro-active steps are always in order. 

• Audit your exempt employees.  Go over job descriptions and compare that with actual duties.  Sometimes "managers" are just glorified sales workers.
• Take seriously any complaints by employees about their overtime.  If there is a problem, odds are the complaining employee isn't the only one with the problem.  And that means the potential for a class action case. 
  
• Educate your Human Resource personnel and, even better, your payroll people about the overtime rules.  In particular, even if people are receiving overtime, make sure its calculated correctly.
• When in doubt, get advice.  These issues never get "better" overtime. If anything, when overtime issues are allowed to fester, the risk for companies increases substantially.  Working with an attorney and payroll personnel to comply with the law with ensure that the little issues don't turn into big ones. 
  

We'll discuss more about wage and hour claims in upcoming posts, but for background on the issue, the Business Week article is a good background piece.

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