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

Given the typically slower summer months, I'm going to highlight some basic Connecticut employment laws that most employers should be familiar with (but that some may not).  Picking up on yesterday's post, it'll be entitled "The Basics" and hopefully will run at least once every week.

Today's topic: Weekly Payment of Wages.

Connecticut law (Conn. Gen. Stat. 31-71b) provides that employers in Connecticut have to pay their employees on a weekly basis. Not every other week. Not twice a month.

For multi-state employers on may have a bi-weekly payroll schedule across the country, this can cause a few headaches (though most payroll companies have long since been able to adapt payroll schedules on a state-by-state basis). 

But of course, there's a big exception to this:  Employers can ask the Department of Labor for a waiver. Conn. Gen. Stat. 31-71i provides that the department  has the discretion to grant or deny such a waiver, so long as the employee is paid at least once a month.  

To request a bi-weekly payment schedule, in fact, the Conn. DOL has set up an online form that the employer can fill out; these requests are typically granted by the CTDOL.  

For employers who request a semi-monthly or even monthly pay schedules, those requests have to be sent directly to the Department of Labor. Those are typically scrutinized in much more detail and there ought to be a pretty good rationale behind that request. 

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With all the talk this week about Title VII and what I would call slightly more "advanced" issues in employment law, it's always wise to make sure that you, as an employer, have the basics down. 

One issue, for example, that employers sometimes wonder about but rarely figure out is "What Records Must I Keep Related to Wage & Hour Laws?"

Fortunately, the Connecticut Department of Labor website contains a concise summary.  These records, listed below, must be kept at the employer's place of business.  They are: 

• The employee's name and address;
• The employee's occupation;
• The total daily and total weekly hours worked, showing the beginning and ending time of each work period, computed to the nearest unit of 15 minutes;
• The total hourly, daily or weekly basic wage;
• The overtime wage as a separate item from the basic wage;
• Additions to, or deductions from, wages each pay period;
• Total wages paid each pay period;
• Working papers/statements of age for each employee under the age of 18.

That's not to say that these are the only records that must be kept. There are a whole host of other regulations (both state and federal) that may apply, including safety records and the like. But for smaller employers in particular, there's no time like the present to make sure you have the basics down correctly. 

For more answers to Frequently Asked Questions, the Connecticut DOL has redesigned their webpage to answer 21 common questions in a short, concise manner. It's worth checking out. 

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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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A quick update on the Mortgage Lenders Network matter I've covered a few times before (here and here.) 

Earlier this month, a Delaware bankruptcy court approved of a $2.7 million settlement of a class-action lawsuit filed on behalf of more than 1600 employees, many of whom worked in Connecticut.

The settlement, first reported by the Hartford Courant, essentially covers wages and salaries that should have been paid during the 60-day WARN notice period.  The average payout per employee is $1,636. 

The Courant adds a few more details:

Monday's settlement is separate from the civil lawsuit seeking unpaid wages and commissions being pursued by the attorney general and the state Department of Labor. That lawsuit seeks $2.6 million for about 100 employees.

Charles A. Ercole, a lawyer for the Philadelphia law firm that negotiated Monday's settlement, said Monday that MLN was left with few assets when it filed for bankruptcy. But the company has subsequently been able to recover some money from lenders who provided lines of credit to fund MLN's mortgage business, Ercole said.

"It is a very good settlement under the circumstances," Ercole said.

Final court approval is expected after a hearing Aug. 5. Checks could be sent out in early fall, Ercole said.

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Remember the big uproar over the AIG bonuses a few weeks back? (Seems like a few years ago now, right?)

Well, the beginning of the end of Connecticut's interest in the matter occurred today with a whimper, not a bang, when the state's consumer protection commissioner released a memorandum concluding that Connecticut has no legal authority over the bonuses under the Connecticut Unfair Trade Practices Act (CUTPA).

Commissioner Jerry Farrell, Jr. issued a press release that determined that while there is outrage in the public, no consumer protection laws are implicated.

“We conducted an exhaustive investigation and analysis of CUTPA case law, a thorough review of the Unfair Trade Practices Act itself, and careful scrutiny of the company’s documents to determine if Connecticut had any legal authority in this matter as an unfair trade practice, and we found that we do not have subject matter jurisdiction over the issue,” Farrell said.

“The Connecticut Unfair Trade Practices Act was made law by our state legislature to remedy problems that individual consumers had with businesses that they could not otherwise get relief for, under the law,” Farrell said.

Commissioner Farrell pointed to classic examples of corporate behavior that CUTPA was intended to remedy –those cases where a business systematically cheats its customers, such as by charging a fee for a service that was never provided, but does not otherwise violate any specific law.

“In every analysis under CUTPA, you look to see ‘who is the consumer?’ and ‘how is the consumer being aggrieved?’” Farrell said.

“CUTPA is a unique and expansive law, but it too has its limits,” he said. “While the Memorandum that I’m issuing speaks for itself, it concludes that CUTPA is meant to help consumers with problems they have with businesses – strictly as consumers and not in any other capacity. While we might like to look at ‘the taxpayers’ who are ultimately funding the AIG bonuses, and be tempted to say that they too are consumers -- the group of people that CUTPA was meant to protect -- that would be stretching the law beyond its original intent and logical reading,” Farrell said.

“I could not find anything in the CUTPA statute that would have allowed me to say that ‘taxpayer’ is the same as ‘consumer,” Farrell said. “If indeed the CUTPA statute somehow had the power to right injustices to the taxpayer, the amount of use it would get might be limitless.”

The Hartford Courant has an additional report with some feedback.  The result isn't that surprising; indeed, during the time that it took the DCP to review the law, the furor over the bonuses has subsided.  While the legislature technically still has an investigation open, Connecticut's interest and role in the AIG bonuses is coming, for all intents and purposes, to a quiet end.  

 

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It's been much too long since my last installment of "Four for...", an occasional post on some useful web resources that you might overlook in your day-to-day work. 

This post focuses on four things you can find on the Department of Labor website that are particularly helpful for employers.  

1. A comparison of Connecticut's FMLA (CTFMLA) and the federal FMLA laws -- With the changes to the federal FMLA regulations, Connecticut employers are continuing to struggle with the implementation of those rules consistent with the more stringent rules in Connecticut. The Department of Labor (in addition to putting on sold-out seminars on the subject) has a good comparison of the two rules (and which one should apply) on their website. 
    
2. A new updated FAQ for employers -- The Department of Labor has just updated their Frequently Asked Questions (and Answers) page for employers.  It helps answer some basic questions like: "Is an employer required to give employees a break?" or "When must an employer pay wages upon terminating an employee?"  Before you spend time with an attorney or searching the Internet, check out this site too which really DOES help answer some great wage/hour questions. 
    
3. Free posters and guide books (and forms too) - Keeping up with all the posters required by the Department of Labor can be a taxing task. But fortunately, the DOL has summarized the regulations all on their website, which you can download. You can also e-mail the DOL directly and get the regulations and guide books.  And the best part of it all? It's free.  (Of course, there are OTHER workplace posters required by law, but, at least for the DOL requirements,  why spend $50 on a poster that you can get for free?)  The DOL also has various employer authorization forms and other forms for employers to use. 
    
4. An employer's guide to unemployment compensation - If you are an employer, at one time or another, you're going to terminate the employment of various people. When that happens, the DOL again has a great resource -- an employer's guide to the whole unemployment compensation system.  It answers technical questions and the mundane ones. 

And your bonus site: The New Hire Reporting System -- Because all Connecticut employers are required to report all newly-hired employees within 20 days of hiring them, this site allows employers with a fast, reliable, and secure option for reporting their new hires as required by Federal and State regulations.

A full list of employer services provided by the Department of Labor is available here. 

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Writing a blog can be a lonely endeavor at times with the question of "Will anyone read this?" popping up from time to time. 

And while the blog had its 400,000th (!) visitor earlier this month, it's always nice to get some additional encouragement.  

So, a tip of my hat to Above the Law and Point of Law forum for their references to my blog over the last 36 hours.

And a short while ago, I discovered that the blog was discussed in the Wall St. Journal's "Best of the Web" column, and it should be in Saturday's print editions.  (You can get the online version here). A special thanks to the WSJ for the reference.

And to those readers visiting for the first time, feel free to stay awhile. While this may be a "specialized" blog (in the words of the WSJ), there's plenty of things of interest, particularly for employers in Connecticut. 

Thanks for visiting and thanks for reading.   Feel free to e-mail me with questions, topics or comments you might have about the blog.

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It's FINALLY a nice spring day outside in Connecticut (see the picture of the Connecticut River taken this morning) so no need to spend a minute more than necessary to catch up on some other employment law-related items you might have missed during the week:

• A topic near and dear to my heart, background checks, had several good posts written about them. The first, from the BeenVerified.com blog, recaps online identity issues and emphasizes the importance, yet again, of doing background checks before hiring.  And the EmployeeScreenIQ Blog reports on various schools and employers who fail to follow the law and don't accept electronic signatures for conducting such checks.
   
• Several blogs, including the Ohio Employer's Law Blog and the Workplace Prof blog, report on the Department of Labor's new commitment to wage & hour enforcement cases. Because of this, Jon Hyman suggests that employers need to be extra vigilant in uncovering wage and hour violations in their own workforce.
   
• Although I previously discussed the new whistleblower provisions in the stimulus package, the Laconic Law Blog does a good job discussing this further.  As the post suggests, "Any organization receiving stimulus funds should be aware of these provisions because, among other things, they contain posting requirements."
   
• For employers receiving funds from the government under TARP (Troubled Asset Relief Program), the United States Citizenship and Immigration Services explained new requirements that employers must meet before hiring foreign nationals to work with H-1B visa.  The Washington Employment Law Update has the details. 
   
• The Florida Employment Law Blog has a timely post about the pitfalls of reducing salary and pay of exempt workers as a way to cut costs in these tough economic times.  The post suggests ways for employers to avoid running afoul of such rules. 

 

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As state legislators go forward with a hearing today on the AIG issues (you can view the hearing on CT-N, here), one of the recurring themes suggested in various newspapers articles and by state leaders is that there were lots of ways that the employer could have avoided paying these retention payments.

Perhaps.

But suppose you were an employer that was going through financial difficulties arising from the subprime mess and decided to avoid paying some commissions to salespeople involved with these mortgages -- even if just for a short while.  Under such circumstances, what would the State of Connecticut do then? Give you a free pass, particularly if those employees who got you into the mess may be the same employees to whom you owed wages?

Well, it turns out you don't have to theorize about it .  There continues to be a case that I first reported on in September 2007 about an employer who failed to pay some commissions due to executives and salespeople, a company named Mortgage Lenders Network  

That case illustrates that, for much less money than was paid to the AIG employees, an employer could get into a heap of trouble. So much trouble, in fact, that the State might go beyond just requesting double damages for failure to pay wages, but might issue an arrest warrant to the company President for such a failure.

You remember that company, right? The company had built a nationwide presence by making subprime loans and was in the midst of building a big new headquarters in the state. But by late 2006, it was going through some financial difficulties as credit lines came to a halt and then it allegedly failed to pay some employees commissions -- at least $1.6 million total. (These were, after all, the same employees, who participated in the company's subprime lending practices.)

Ultimately, MLN filed for bankruptcy.  What did the state do then? It had an investigator from the Department of Labor look into the situation and ultimately issued an arrest warrant for the Company's president back in March 2007 for failure to pay wages and sales commissions on time. 

That arrest has been stayed and delayed for nearly two years as the MLN President has pursued various appeals and motions in the bankruptcy court and federal court in Delaware.  Recently, in January 2009, the District Court of Delaware denied latest Mr. Heffernan's appeal; he has since filed appeal papers with the Third Circuit. 

In one of the motions filed by the State of Connecticut in December 2007, the State reiterated its strong stance against employers who fail to pay wages and commissions on time, even if the employer was going to pay the employees later because of financial difficulties: 

Under Connecticut law, any employer or any officer or agent of an employer or any other person authorized by an employer to pay wages who violates any provision of the Connecticut statutes governing the payment of wages may be fined not less than $2000.00 nor more than $5,000.00 or imprisoned not more than five years for each offense if the total amount of all unpaid wages owed to an employee is more than $2000.00. Conn. Gen. Stat. Sec. 31-71g(1)...Under Connecticut's wage laws, it is no defense that the malfeasor later made restitution to the employees by paying the wages after they were due under state law. Under the law, late payment of wages incurs the same penalties as non-payment. 

A separate civil wage action was also announced by the state in a press release  back in February 2008. 

There is no doubt that the MLN and AIG cases are quite different and that using the MLN case as an analogy is not perfect. (The MLN case concerns sales commissions primarily, for example, while the AIG concerns retention or "stay" bonuses -- which may or may not be "wages".)

But if the State was willing to go after an employer for failing to pay just $1.6M in wages and sales commissions, is it fair now to suggest to employers in Connecticut, like AIG, that they can now simply ignore obligations they make to their employees because they are going through financial difficulties and can't really afford to pay them?

I look back on my September 2007 post about the MLN prosecution and can't help but think of the irony of my last paragraph:

[T]he state's continued pursuit of this employer demonstrates that failing to pay wages is one type of action that the state won't tolerate. For employers in the state, its a good lesson and one that more employers would be wise to follow.

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UPDATED

Over the last 24 hours, it seems that every politician is decrying the use of Connecticut wage and hour laws as apparent support for AIG's payout of various retention payments. Connecticut Attorney General Richard Blumenthal's comments are among the most pointed, according to Capitol Watch:

"I have significant doubts about the validity of AIG's claims that they are required by Connecticut law to pay these outrageous bonuses,'' Blumenthal said. "AIG is shamelessly shielding itself behind the Connecticut Wage Act -- a joke of a justification for squandering scarce taxpayer resources.''

One reporter has even called Connecticut's wage laws, an "obscure" law.  But that would likely be news to the Connecticut Department of Labor which features that law prominently in the materials about the subject in its website. 

So, what IS the law that everyone keeps referencing? Well, the main provision is Conn. Gen. Stat. Sec. 31-72. That law states, in part:

When any employer fails to pay an employee wages in accordance with the provisions of sections 31-71a to 31-71i, inclusive, ...., such employee ... may recover, in a civil action, twice the full amount of such wages, with costs and such reasonable attorney's fees as may be allowed by the court...  

In plain English, what this means is that if an employer does not pay an employee "wages", that employee can sue the company and MAY recover twice the amount of wages that should have been paid. 

And what's a "wage"? Well, Conn. Gen. Stat. Sec. 31-71a(3) defines it as "compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation."  As I've discussed in prior posts, some (but not all) bonuses are treated as "wages" and therefore, employees may sue under this statute. 

That view was confirmed in a quote from an unnamed Department of Labor official in today's Courant: 

"Our first step is to determine if the bonus is a wage," said a state Department of Labor official.  "If it's a wage, it's based on performance, production and efficiency"" the official said. "It has to tie directly to your performance, that you met certain standards and certain goals in order to turn that into a wage. ... Companywide performance is less likely to be a wage."

What's left unanswered in the whole debate though is why Connecticut's wage and hour laws should NOT apply here.  Is Connecticut now saying that retention payments are never "wages" or just not in this case?  Is it simply the amounts of the payments that make such payments intolerable here?

Of course, that's not to say that of an employee's right to be paid under a contract is absolute. But existing laws don't make it easy to get around that right.  Slate has a good column that suggests several legal theories that may be out there to attempt to break or avoid such contracts.  (And, as I said yesterday, I'll leave it to others to opine on whether the payments here were proper or not.)  The New York Times has a very good series of columns about whether the contracts can be broken as well. 

One thing is certain: The debate over these payouts is far from over. And Connecticut's wage laws are likely to never be the same again.

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UPDATED

Various blogs have started to link to this one today after AIG released a white paper to support its assertion that it was required to make payments to various executives and employees over the last week.

It turns out that the retention plan at issue is to be construed under Connecticut's wage and hour laws.  As bloggers and commentators will quickly realize, Connecticut doesn't exactly have an litany of cases on which to base any type of legal analysis.  In some ways, it's like trying to do a jigsaw puzzle with about 10 pieces. But that doesn't mean that some parameters of the discussion haven't been formed.

I can't (and won't) comment about the specific AIG plan or employee agreements because I haven't seen them but I do want to briefly comment on some items of my prior posts to clarify a few things:

1) Any analysis of whether retention payments are "wages" is dependent on the language of the retention plan or agreement.

Without looking at the underlying plan and agreement, all the talk about whether a payments to be made under a retention plan are required to be made as "wages" (and subject to penalties if they aren't made) is just speculation.  Connecticut wage laws MAY apply to certain retention plans, but there are situations where certain payments to employees should not be considered "wages" but may more akin to fringe benefits (like unused vacation).  As I said back in December, whether something is a "wage" all depends on the language of the agreement between an employer and employee. 

2) Characterizing payments to employees as "bonuses" but not "wages" is really beside the point. Some bonuses can be considered wages (and therefore subject to Connecticut's wage statutes when they are linked to services rendered) and some are not (see my discussion of a recent Connecticut Supreme Court case here). 

Instead, to determine whether a payment is a wage or not, courts look at the specifics of the agreement between an employer and employee (or the applicable plan) and determine if there is a link between an employee rending services and the payment.   The more that there is a link between an employee's services and the payment by the company, the more likely that courts will view such payments as "wages" (and be subject to Connecticut's wage and hour laws.) 

Retention agreements (or "stay bonuses" or "key employee agreements) have long been used by companies to provide incentives to employees to stay with a company, particularly when that company is going through a merger or bankruptcy, etc.  Much like any other contract, the ability to modify the contract is going to depend on the language of the agreement. And whether or not retention agreement payments are "wages" will depend on the contract itself.

But aside from the wage issue, there's another theory underlying retention agreements -- basic contract law.  Perhaps if you're having difficulty understanding the concept in terms of wages, think of this example:

Suppose you want to renew your season tickets with the Yankees but have been skeptical of them because they haven't won a World Series in years (I know, I'm a Yankees fan).  The Yankees offer you a contract as an incentive. That contract states that if you continue to be a season ticket holder for two years, you will get front row seats for 10 games of your choice. 

Now suppose that you stayed a season ticket holder for two years, would anyone really argue that you were not entitled to get those front row tickets?  Wouldn't there be an outrage if the Yankees just unilaterally decided not to honor the terms of that deal anymore? And wouldn't there be an outrage if the government stepped in to prevent such tickets from being issued? 

Connecticut's wage laws are going to be under a spotlight for a little while.  I just hope we'll get some sound analysis of the issues involved rather than soundbites. Somehow, I'm not convinced we'll get that over the next few days.

Update 5 p.m. Several legislator and state officials today that they were working on a way to re-write state wage law.  CT News Junkie has all the details.  There's even a draft proposal that would define a "bonus" and "retention bonus" under state law and prevent the doubling of penalties for any failure to make such payments.  Making changes to the wage law to include definitions of "bonuses" and "retention bonuses" may only add to the confusion present here. 

Additionally, simply because there is a plan or contract here, does not mean that there are never ANY escape clauses to them. The Word on Employment Law points out a few here.

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There are a lot of sleepy Connecticut basketball fans this morning, with the game against Syracuse last night (and this morning) going into SIX overtimes.  Those of us staying up until nearly 1:30 a.m. to watch the second-longest game in NCAA basketball history will remember that game for a long time. 

With overtime on my mind, it's a good time to address two simple issues that sometimes arise in Connecticut:

• What's the difference between daily overtime and weekly overtime?
• And does Connecticut have a "daily" overtime rule?

"Daily" overtime is a concept that a non-exempt employee who works more than 8 hours in a day (or perhaps on a weekend day or holiday) is due an overtime rate of time-and-a-half of regular hour rate.  Some states have imposed this rule."Weekly" overtime is the more commonly understood concept that an non-exempt employee is only due an overtime rate of pay after working more than 40 hours during a week.

Connecticut's Department of Labor quite succinctly states that Connecticut does not have an "daily" overtime rule, absent some contractual arrangement.  Instead, Connecticut follows a weekly overtime rule, that can be found at Conn. Gen. Stat. Sec. 31-76b. 

Thus, if there were non-exempt employees in Connecticut who had to work late last night because of the basketball game, they are only going to be eligible for overtime if they work more than 40 hours during this week (or there was some other type of contract, like a collective bargaining agreement, that mandated it).

And if you see some people napping around the office today, have some sympathy for them too. Staying up late didn't help UConn's cause; they lost 127-117. 

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Employment law is quite the hot topic among various blogs. So much so that it's time for the next installment of Quick Takes -- a quick summary of what's new and noteworthy.

• Don't miss the Ohio Employer's Law Blog's post on how NOT to fire an employee. In the post, Jon Hyman describes how an employer took an already difficult situation and made it worse.  Lesson from Jon: Do not do layoffs or firings via e-mail. Period.
   
• World of Work continues the focus on the new COBRA subsidies with a link to FAQ by the Department of Labor.  A new blog, Compliance Building, has information from the IRS also about the new COBRA subsidies. 
   
• The Employee Free Choice Act is expected to be introduced into Congress soon. For what its worth, one union leader is predicting passage by August, according to a post by the Pennsylvania Labor & Employment Blog.   And although the EFCA has been recapped extensively by this blog and others, the Labor & Employment Law Blog has one more here. 
   
• If there was really a remaining question about whether a plaintiff's Facebook postings were discoverable, a recent court finding out of Canada suggests the answer: Yes.  (Delaware Employment Law Blog)
   
• Richard Hayber, over at the Connecticut Employee Rights Blog points out a recent case by a federal appeals court that holds that releases of future claims in last chance agreements are invalid.   While the case isn't binding in Connecticut, Richard clearly believes that the same concepts could be applied by a Connecticut court.
   
• My former colleague, Richard Tuschman from the Florida Employment Law Blog, highlights a case in which a common question is raised: Does hiring an employee who has a non-compete agreement from a competitor constitute "tortious interference" (and subject that new employer to a claim)? The answer? Maybe not, but there are still other claims to worry about.

And on the lighter side, don't miss this fun post by the Delaware Employment Law Blog recapping the top 10 excuses for being late to work.

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In a closely-watched case, a federal district court last week threw out claims by three wrestlers that they were employees, rather than independent contractors of the World Wrestling Entertainment, Inc. (WWE) in a thorough repudiation of their claims.

The decision in Levy v. WWE (download here) is based, in part on the language of the wrestlers' contracts (which can be found here). I've discussed this case extensively in a variety of posts here.

If there were any doubt that the WWE is entertainment, not a sport, the court readily dismisses that at the outset:

Though wrestling is a sport in which two combatants engage in efforts to throw each other, as presented by defendant it is not a competitive engagement but is a staged pseudo-match, scripted, choreographed by agents of defendant and executed by wrestlers assigned by defendant which directs and controls the wrestlers’ conduct and the outcome.

Alas, the rest of the decision is not nearly as theatrical as a WWE match. Indeed, it is more akin to the Olympic-style wrestling matches you might see -- methodical with only flashes of action.

The court dismisses the claim that WWE breached the wrestlers' contracts by not doing tax withholdings (assuming they were employees) because the court finds that the wrestlers weren't harmed by that action.  Indeed, the court also finds that the claim that the wrestlers were deprived of benefits connected to the withholdings to be "fabricated":

The allegation of a deprivation of benefits "paid for by such withholding" is fabricated of whole cloth as withholding is subtracted from an employee’s compensation and paid to the government for application to an employee’s tax liability. It accrues no added earnings which plaintiffs make no claim were not paid in full to them. No particular benefits are claimed to have been lost.

As to the unjust enrichment claim, the court dismisses that claim because there is an express contract (namely the booking contracts) that prevents such claims from being raised. The court also finds that the statute of limitations on many of the wrestlers' claims also applies.

The wrestlers can move to have to decision reconsidered or can take an appeal.  However, given the court's thorough dismissal of their claims, it's difficult to see that they have any real good options left.  

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I love my Blackberry Bold. And I know many others that praise the virtues of an iPhone or other PDA device.

But recently, questions have been raised about the use of these devices by non-exempt employees -- in other words, those employees who are eligible to receive overtime.  If these employees are reviewing their messages outside of work, do they need to be compensated for that time?

Recently, my colleagues, Joshua A. Hawks-Ladds and Megan M. Youngling prepared an article for the Connecticut Law Tribune supplement on this subject that you can download here. It is worth reading because it discusses an answer to this question.

While the law is still developing here, they conclude that:

[A]fter-hours PDA use increases an employer’s exposure for overtime and record-keeping liabilities, as well as the possibility that nonexempt employees will not be properly compensated for all time actually worked in violation of the FLSA and state wage laws. The practices and policies that many employers currently have in place for after hours work may no longer “fit” today’s PDA environment.

Employers must reexamine their current policies and procedures and revise them to reflect PDA usage. They must also reexamine their employees’ exempt versus nonexempt status. Once appropriate policies governing PDA usage are in place, they must be adequately communicated to employees and then enforced. Policy violators should be subjected to appropriate discipline. Following these steps should limit the risks PDAs pose to employers under the sate and federal wage laws.

As I've said before, there are a lot of issues right now for a human resources department. But ensuring compliance with wage and hour laws should continue to remain a top priority for employers. 

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To the surprise of absolutely no one, the U.S. House of Representative overwhelmingly passed two employment law bills addressing compensation issues.  

The Lilly Ledbetter Fair Pay Act, HR 11, pretty much split among party lines 247-171. The Paycheck Fairness Act, HR 12, passed 256-163.  

The bills now move on to the Senate, where the vote is expected to be closer.  

 

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One of the more interesting television shows out there now is the Emmy award-winning  "The Amazing Race". At the start of the show, the host shouts, "Ready, Set, Go!" and off the contestants go on a race around the world places as yet unknown.

That, in essence, is what 2009 is shaping up to be in employment law: a race to change things as fast as you can with the final destination (and pitstops) as yet unknown.

This week, for example, two employment-law bills are on the fast-track for passage in the U.S. House, but it's being done so quickly that you may have a tough time catching up. 

Several Washington, D.C.- based blogs (including the Washington Labor & Employment Wire) are reporting this site that two pay-related bills are on the fast-track for consideration by Congress, perhaps in an effort to get them on to President-Elect Obama's desk by the time inauguration rolls around.

From the Washington D.C. Employment Law Update:

...House Majority Leader Steny Hoyer (D-Md.) announced that two employment-related bills will reach the House floor later this week. Both the Paycheck Fairness Act (H.R. 1338) and the Lilly Ledbetter Fair Pay Act (H.R. 2831) were introduced and easily passed the House during the last Congress, but stalled in the Senate due primarily to Republican opposition and a presidential veto threat. It is noteworthy that both bills are being sent directly to the House floor instead of being vetted through the committee process....

The Paycheck Fairness Act [version that]... will reach the House floor this week aims to do the following:

• Amend the Fair Labor Standards Act (FLSA) to allow victims of pay discrimination to potentially recover more remedies than those currently provided in the FLSA

• Enforce a new concept of “equal pay for comparable work”

• Prohibit employers from reducing other employees’ wages to achieve pay equity

• Require employers to disclose job categories and pay scales as needed to enforce the law

• Prevent employers from relying on the “factor other than sex” affirmative defense in wage discrimination cases; instead, employers must additionally prove that such factor is “job related” and serves a “legitimate business purpose.” An employee could rebut this claim by showing that an “alternative employment practice” exists that could achieve the same business purpose

• Entitle employees to unlimited punitive and compensatory damages, regardless of whether the wage discrimination was intentional.

You can view some of my earlier posts about the Paycheck Fairness Act starting here.  As I said then, this bill will re-emphasize to employers the importance of documenting pay decisions. 

On the Lilly Ledbetter bill, I summarized it and discussed the issues related to it in posts such as this one.   My comments then are fairly relevant to today as well:

The issue in Ledbetter case was, in many ways, a technical question of how far back an employee should be able to go to challenge past pay practices -- in other words, about deadlines and "statute of limitations". The Supreme Court said that the 180-day deadline found in the statute should apply. Should the statute of limitations remain at 180 days? 1 year? 2 years? 5 years? 20 years? I don't suggest to know what the right answer is. Ultimately, the answer to that question will help shape the Paycheck Fairness Act bill's final outcome and it should be the one that the politicians focus on.   Employers would certainly like shorter statute of limitations and have good arguments that because supervisors leave, short statute of limitations prevent stale claims from being brought. But employees have decent arguments that a longer statute of limitations should apply because discriminatory pay practices are often learned of only after they occur.
 

For employers, the debate over the Paycheck Fairness Act is one worth paying attention to because the real-world consequence of the bill's passage (whether now or next year) will be to increase the importance of documenting pay practices and to give employers another reason to preserve such documents for future litigation.

Hopefully, as the bill progresses, we'll see more debate on the pros and cons on having longer deadlines to file suits.

With the bills on the fast-track, i doubt we'll see much substantive debate on the bills, which is unfortunate. In the election, the concept of "change" was thrown about. This week is the first real sign that, for employment law issues, change is here.

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I don't think it's going out on a limb to suggest that 2009 brings about some of the broadest changes to employment laws in the United States this decade.  Some changes are already known, while others are forecasted to occur.  

Michael Moore, over at the Pennsylvania Labor & Employment Blog, has an excellent post from earlier this week, that details five items that should be added to an HR professional's "To Do" list for the first quarter of 2009.  

• ADA Amendments Act Compliance (effective 1/1/2009);
   
• E-Verify Registration and Immigration Compliance (effective 1/15/2009);
   
• FMLA Regulations Implementation (effective 1/16/2009) which require action by employers in the following areas:
  • Reviewing the regulatory changes and integrate them into your compliance program.
  • Using the new forms and poster.
  • Revising Employee Handbook provisions;
     
• EFCA and RESPECT Act Planning; and 
   
• Wage & Hour Self-Audit: As evidenced by Wal-Marts recent record settlement, wage and hour lawsuits will play prominently in 2009. A self-audit of compliance practices can mitigate these claims.

This list strikes me as a good place to start for many employers.  There's going to be plenty of changes on the way but making sure that your FMLA and ADA policies and procedures are in compliance with the new laws and regulations should be a priority for most companies.

I've covered these topics in more detail in various posts, so use the "search" function to the left to find the topic that best suits your needs. 

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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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Remember a Connecticut appellate decision a few weeks ago that suggested that a bonus allegedly promised to an associate could be "wages" under Connecticut's wage statutes? Indeed, a fellow Connecticut blogger suggested that 2008 was shaping to be a banner year for employees.

Well, not so fast. A new Connecticut Supreme Court decision today (and officially released on December 30, 2008) suggests new limits on whether bonuses are really wages.  Employers in Connecticut can and should breathe a huge sigh of relief that Connecticut's wage statutes are not going to continue to be interpreted in an extreme manner.

The decision in Weems v. Citigroup, Inc.(download here) arises from a federal case in Massachusetts that certified a question to the Connecticut Supreme Court. (For those unfamiliar with the process, a federal court can ask a state's highest court to clarify state law if it needs it).  

The decision has a few points which I will followup in the upcoming days, but the most important part for employers is the conclusion of the court that the bonuses given to employees here were not wages.  In particular, the Court found that because the bonuses were awarded on a discretionary basis and not linked to the "ascertainable efforts of a particular employee", the bonuses are NOT wages.

The court though isn't through.  The court found that the terms of a regular and branch manager bonus in this case were also not wages even though the Plaintiffs claimed that they had to meet certain goals: 

Although the plaintiffs argue that the branch managers had to achieve ‘‘specific goals’’ to receive the bonuses, thus rendering them compensation for services rendered, a review of the bonus plans cited in the parties’ joint appendix, as well as the deposition of...[the] human resources director...., indicate that the bonus awards are tied to subjective factors such as diversity within a branch, and the profitability of the particular branches, which are factors not entirely predictable or within the control of the specific employee. Thus, we conclude that the bonus and branch
manager programs are not wages contemplated by § 31-71a (3), and, therefore, the wage statutes are inapplicable to these particular claims.

Thus, what the Court is suggesting is that even if a department manager's goal is to increase revenue by 10%, any bonus tied to that revenue increase is not a "wage" because is not within the control of the specific branch manager.  (If you're curious, the Court simply ignores the Ziotas v. Reardon Law Firm decision.) 

Again, look for a followup post soon on the other portion of the case in which the Court considers whether the forfeiture provisions of three different capital accumulation plans have offered to their
employees through a voluntary payroll deduction violate Connecticut’s wage statutes.  The court also concludes that forfeiture provisions do not violate Connecticut law either.  

For employers in Connecticut, the immediate takeway is to review your bonus plans to look at the discretionary portion of it and to also determine whether the bonus is tied to a particular employee's performance. Bonuses still could be wages in another case, but structured correctly, employers can limit their liability and give them discretion to reward employees for work done well.

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Although Connecticut's own Rep. Rosa DeLauro was rumored to be on the short list for a Secretary of Labor post, reports Thursday evening suggest that Rep. Hilda Solis - a Democrat from California - has been tapped for that position.

So, what's the immediate feedback from labor and business groups? Well, labor groups issued a press release praising the pick and business groups expressed concern. The New York Times sums it up here:

Ms. Solis has championed a bill, called the Employee Free Choice Act, that is the No. 1 priority of organized labor because it would make it far easier to unionize workers. The business community bitterly opposes the bill. She is the only member of Congress on the board of American Rights at Work, a pro-union group pushing for the bill.

“We’re thrilled at the prospect of having Representative Hilda Solis as our nation’s next labor secretary,” said John J. Sweeney, president of the A.F.L.-C.I.O. “We’re confident that she will return to the Labor Department one of its core missions: to defend workers’ basic rights in our nation’s workplaces. She’s proven to be a passionate leader and advocate for all working families.”

Labor leaders say they are very pleased that Ms. Solis joined them in opposing the Central American Free Trade Agreement as well as the pending trade agreement with Colombia.

By contrast, the reaction of business groups to the choice of Ms. Solis ranged from tactful displeasure to sharp dismay.

“We’re disappointed that she supports the Employee Free Choice Act,” said Randel K. Johnson, the vice president of labor policy at the United States Chamber of Commerce. “We expected Obama to pick someone supported by the A.F.L.-C.I.O. She’s not a pick whose philosophy we didn’t expect. We will disagree with her on some issues and work with her on some.”

The Washington Labor & Employment Wire has some more specifics on Rep. Solis's positions, including her support for EFCA and "green collar" jobs. 

For employers in Connecticut, there's likely to be a lot of hype about Rep. Solis' positions supporting labor.  But before you leap, ask yourself this -- can you name the current Secretary of Labor? Chances are, probably not. (It's Elaine Chao.) 

Why? Because the President has dictated and will dictate what the agenda will be and what his priorities are going to be.  Given President-Elect Obama's desire to seek consensus on a variety of issues, time will tell just what that agenda is going to look like.

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One occasional feature of this blog is a short post on a law or regulation that is commonly overlooked.

Today's installment revolves around wage and hour claims in Connecticut.  Suppose that an employee claims that he is entitled to unpaid overtime wages for years because he has been misclassified as an exempt worker. 

How far back is the employee entitled to go for his claim for damages? Or, in other words, what is the statute of limitations on wage & hour claims in Connecticut?

A look at the wage statutes reveals nothing. How can that be? Because you have to go digging somewhere else entirely.   Conn. Gen. Stat. 52-596, entitled "Actions for payment of remuneration of employment" has the rule:

No action for the payment of remuneration for employment payable periodically shall be brought but within two years after the right of action accrues, except that this limitation shall be tolled upon the filing with the Labor Commissioner of a complaint of failure to pay wages pursuant to the provisions of chapter 558.

In plain English, what does this mean?

Two things. First, claims must be brought within two years after the paydate in which the missing wages are allegedly due. Or, put another way, an employee who claims unpaid wages can only look back over a two-year period for recovery.  Second, the time period can be extended if the employee has filed a claim with the Department of Labor for failure to pay wages.

For employers, this statute should not be overlooked. It can help limit damages in cases of unpaid wages.  And when an employer discovers an issue of unpaid wages, it can determine its potential exposure to this issue by applying this statute of limitations.

 

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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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Yesterday, I discussed the employment contract portion of a new Appellate Court case, Ziotas v. The Reardon Law Firm (download here). 

Today, I'll discuss the second part of the court's decision on whether the associate's bonus could be said to be "wages". Why is this important? Because under state law (Conn. Gen. Stat. 31-72), failure to pay wages to an employee is a violation of law and could entitle the employee to double damages.  Here, the Appellate Court said that the bonus could be "wages" and remanded the case to the Superior Court for further analysis of this issue.

The issue, the court said, is whether any agreement or offer gave the employee the right to compensation in exchange for services that the employee provided:

It is not relevant whether the amount of that bonus was calculated on the basis of the number of hours worked, as a percentage of the defendant’s net income or on some ‘‘other basis of calculation,’’ which may or may not incorporate the efforts of others. The issue instead is whether the terms of the parties’ employment agreement, as alleged in the complaint, vested in the plaintiff a right to compensation in the form of a bonus in exchange for the services that he had provided during the first ten months of 1998. ...

Under these facts and circumstances, namely, the agreement between the plaintiff and the defendant, the bonus could have been classified as wages for purposes
of § 31-71a (3).

Why is this important to employers in Connecticut? Because if an employer's agreement with an employee is not precise as to why and when a bonus will be paid out, it is certainly possible that the court will find that the bonus is in exchange for the employee's services (and thus "wages").  As a result, even if the employee leaves in the middle of a calendar year, the employee might be able to claim that he or she is entitled to a pro-rata bonus.

Some employers have structured offer letters and agreements to make it clear that bonuses are contingent on an employee still being employed as of the day of payout. Others have indicated that bonuses are entirely discretionary on behalf of the company, thereby removing any reference to the bonus being tied to the employee's exchange of services.

Regardless of the path or paths that the employer chooses, this Appellate Court decision is a good reminder to employers to review their bonus structures with their employees and ensure that the language that is used (particularly for the upcoming calendar year) is precise and accurate.

For extra credit, employers may also want to take a look at a 2002 Supreme Court decision which clarified the rules on wages and bonuses further. The case, Mytych v. May Dept. Stores Co., 260 Conn. 152, 159, 793 A.2d 1068 (2002), can be found here.   Even better, employers should discuss this with legal counsel to get a greater understanding of the exposure that the company may have about this issue.

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Have you ever wondered about the fluctuating workweek method for calculating the regular hourly rate or the overtime premium rate for employees who are paid a weekly salary? Most have probably not. But if you are one of the few employers who do use it, have we got a Connecticut Supreme Court case for you. 

In a decision officially released next week, the Connecticut Supreme Court in Stokes v. Norwich Taxi, LLC (download the advanced release opinion here), looks to the federal laws and regulations to determine the parameters of the fluctuating workweek method as applied in Connecticut.

For background, on the fluctuating workweek, The Wage & Hour blog had this good summary:

Employees who are compensated on a salaried basis and whose hours of work fluctuate from week to week may be paid a salary such that the fixed amount covers all straight time pay for whatever hours are worked in a given week. The following conditions must be met: 1) Hours must fluctuate from week to week; and, 2) There must be a clear and mutual understanding between the employee and employer that the fixed salary is compensation for the hours worked each work week, whatever the number; 3) The amount of salary must be sufficient to provide compensation to the employee at a rate not less than the applicable minimum wage rate for every hour worked; and, 4) The agreed-upon salary must be paid even though the workweek is one in which a full schedule of hours is not worked.

This four-part test has formed the basis of several circuit court decisions.  The federal regulations on the subject are also helpful.  29 C.F.R. 778.114 can be found here.

So what did the court decide in Stokes? Well, first that the employer bears the burden of proving that the fluctuating workweek method applies under the facts of the case, not the employee.  The court then concluded that the employer failed to establish the second element of the four-part test (similar to the one above). 

The court also ruled on a number of other procedural issues, but those have minimal relevance for employers.

What's the takeaway from this case for employers? Understand the fluctuating workweek method.  It is not used all that frequently and if it is used, it is not the easiest to follow. Getting legal counsel involved at the outset to structure the position appropriately may be the easiest way to avoid problems in the future.

Final word of warning: earlier this year, new regulations were proposed that would modify the regulations on the fluctuating workweek. So this may be the first and last time the Connecticut Supreme Court looks at this issue in this fashion. Stay tuned.

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Two new sets of statistics released this month by the Connecticut Department of Labor shed some light into the workplaces in Connecticut.

First and foremost, the number of deaths in the workplace last year remained the same as in 2006 -- 38.  While any death is tragic, the rate is far below the national average.  The Hartford Business Journal reports that work injuries claimed nearly 5,500 lives nationwide in 2007, resulting in a rate of 3.7 deaths per 100,000 workers. Connecticut's rate for last year was 2.1 deaths per 100,000.

So, are Connecticut employers and workers more careful than the rest of the nation? That's unlikely, according to the DOL, which attributes the lower death rate to the fact that most jobs in the state are in "low-risk industries".  In other words, there aren't a lot of deaths doing insurance and financial services work in Connecticut. 

Second, the DOL reported to the Governor M. Jodi Rell that it recovered nearly $7 million in unpaid wages for workers in Connecticut during the fiscal year that ended June 30.  The press release from Governor Rell (available here) touts the department's "success":

The Department’s Division of Wage and Workplace Standards recovered $3.2 million after 3,234 workers complained they were not paid wages owed to them. The division also recovered $1 million by enforcing Connecticut’s prevailing wage laws and returned $2 million more to workers unpaid for overtime or the minimum wage. Additionally, the department recovered $58,000 in back pay owed to service workers hired by private contractors for work on state property.

According to Division Director Gary Pechie, the unit handled more than 25,000 telephone and written inquiries during the past fiscal year and provided outreach services to businesses and schools to ensure that laws were fully understood.

Perhaps some of these companies thought they could make a cheap buck at workers' expense. But more likely, many of these companies were simply unaware of their obligations. 

IS following the law easy? At times, no.  Overtime rules can be confusing and employers are often unaware of obligations to, for example, pay wages on a weekly basis unless an exception has been granted.  Some of the laws can be found here, but ultimately, remaining vigilant about such laws will reduce the likelihood that your company's run-in with the DOL will end up as part of one of this "statistic".

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Earlier today, I noted how the Department of Labor released some proposed regulations by burying them deep in the Federal Register. Now word comes today of a press conference AND press release on a subject that I have to confess, I'm having a hard time wondering what the fuss is about.

Apparently, so does Footnoted author Michelle Leder:

Yesterday, the SEC sent out a media advisory alerting reporters of a press conference set for 2 p.m. today with both Chairman Chris Cox and Labor Secretary Elaine Chao to talk about ways the two agencies would work together “to protect approximately $5.5 trillion in retirement assets of investors nationwide.” It sounded pretty important. But today, after reading the release as well as the memorandum of understanding, I’m awfully glad I didn’t hop on the Acela.

Leder goes on to note that "Clearly, given everything else that’s going on with the state of the economy, two top government officials — one of them a Cabinet member — can come up with more important things to do than agree to continue cooperating."

So what's this "memorandum of understanding" about? The press release noted that the SEC and DOL "agreed  to make permanent their agencies' longstanding relationship of sharing information on retirement and investments".  In doing so, they have agreed upon a formal "Memorandum of Understanding", nicknamed a "MOU". 

What does the MOU require?

• The establishment of regular meeting and points of contact between the two agencies;
• Cross-training of staff;
• DOL Access to Non-Public SEC Examination Information; and,
• SEC and DOL Access to Non Public SEC and DOL Enforcement Information.

Suffice to say, I can't see this making the headlines of any major papers, particularly with an earthquake (even a relatively minor one) dominating the news.

And for everyone outside of the SEC and DOL, I can't see this MOU having any significant impact; it doesn't change any of the rules that employers face. 

If you're interested, the DOL's new proposed regulations still haven't warranted a press release from the DOL either.

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Buried deep, deep, deep in Monday's Federal Register was a quiet announcement that the U.S. Department of Labor was proposing some new wage/hour regulations interpreting the Fair Labor Standards Act of 1938 (download here).  In the "summary" section, the DOL states that the new regulations are needed because the regulations, in some cases, are out of date based on court decisions or subsequent legislation.  The DOL website doesn't even have a press release on it as of Monday evening --- only a link buried deep on a webpage here.

Comments are requested by September 11, 2008, so presumably the DOL is trying to implement these new regulations by the end of the current administration. 

So what topics are covered in these proposed regulations? A few are noteworthy, while several others others are snoozeworthy.

For example, among the more noteworthy items are regulations addressing "compensatory time" and a "fluctuating workweek".  More snoozeworthy items including regulations regarding salesmen who sell boats and regulations regarding workers who work on ditches, canals and reservoirs, where 90% of the water used is for agricultural purposes.

Among the other topics covered

• Updating regulations regarding "tipped" employees and the way the phrase "minimum wage" is used in various statutes;
• Updating regulations defining who an "employee" is and excluding certain volunteers at private non-profit food banks;
• Updating regulations regarding those employees engaged in "fire protection activities";
• Updating regulations to clarify that stock options are excluded from the computation of the regular rate of pay;
• Addressing regulations of "service advisers" working for auto dealers;

Upon first glance, most of the changes suggested by the Department of Labor just incorporate language from laws that have been passed in the last 20-30 years.  But for employers that have a particular interest in one of the above topics, special care should be used to review the language to see if it will have a particular impact on the business.

Lastly, these regulations are mere proposals; while it is somewhat likely that regulations like this will be implemented, they may undergo some significant changes in the final rule. Thus, employers should be cautious about relying on these rules until the final regulations are issued.

I'll continue to review them and post any further comments or thoughts later in the week.

(H/T Fl. Employment Law Blog)

Photo courtesy of Library of Congress.

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You may hear about an increase in the federal minimum wage today from $5.85 to $6.55 per hour.   If you do, you can ignore the news in Connecticut because it will not have any effect on workers here.

If a state law puts the minimum wage rate higher than the federal minimum wage, state law applies.  (To see if your state may be covered, check out a variety of websites, including this recent post by the HR Daily Advisor Blog.)   

In Connecticut, our minimum wage is currently at $7.65 per hour, so Connecticut law applies.

And Connecticut's minimum wage rates will continue to exceed the federal minimum wage for the foreseeable future.  As a result of a new law passed last month, Connecticut's minimum wage will increase to $8.00 per hour on January 1, 2009 and to $8.25 on January 1, 2010.   

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Earlier this week, I discussed the benefits of providing notice to employees who may be affected by mass layoffs and plant closings, by complying with the Worker Adjustment and Retraining Notification (WARN) Act.

But what exactly does the WARN Act require and who is covered? Here are some basic answers to some basic questions. As always, those who need more information should seek legal counsel and review the applicable laws.   In addition, some states have additional requirements that must be complied with; this post just discusses the WARN Act.

Who's Covered?

Not all employers are covered. Employers who have 100 or more full-time employees are covered. But employers who have 100 or more full-time AND part-time employees who, in total, work more than 4000 hours per week are also covered.  Most governments are not covered, but some quasi-public and public entities may be covered.

When Does WARN Apply?

As I discussed in my prior post, there are two types of events that are covered  by WARN -- plant closings and mass layoffs. "Employment Losses" within each of them triggers some notice requirements.  All of these terms have a definition though. 

"Plant closings" are a permanent or temporary shutdown of a "single site of employment" (though it can also be one or more facilities or operating units within a single site of employment), so long as the shutdown results in an employment loss at that site for 50 or more full-time employees during any 30-day period.

"Mass layoffs" are a reduction in force (that is also not the result of a plant closing) that results in an employment loss at a single site of employment during any 30- day period for at least 50 employees.  These 50 or more employees must also make-up at least 33 percent total employees (excluding any part-time employees). This will also be satisfied if there are at least 500 employees (excluding any part-time employees) affected by the mass layoff as well.

What Is An "Employment Loss"?

Despite its term, the term "employment loss" is fairly broad.  It means either:

1. a termination of employment for reasons other than a discharge for cause, voluntary departure, or retirement,
2. a layoff longer than six months (which indicates that the employee may return after the "layoff", or 
3. a reduction in hours of more than 50 percent during each month of any six-month period.

What Notice Is Required? 

A WARN notice must be given to each employee at least 60 days before a plant closing or mass layoff.  However, if there is a union, the notice must be given to the union representative of the affected employees. 

In Connecticut, notice must also be provided to the Connecticut dislocated worker unit (see below) and the chief elected official of the local government where the closing or layoff is occurring. 

The Website for the Connecticut Department of Labor has some more specifics on the notice required:

Written notification should be printed on company letterhead, signed by the authorized employer representative, and addressed to:

Rapid Response Unit
Connecticut Department of Labor
200 Folly Brook Boulevard
Wethersfield, CT 06109-1114

This notification should include: the name and address of the employment site where the plant closing or mass lay off will occur; the date(s) of proposed closing or mass layoff; the number of affected workers, and address of their collective bargaining representative and chief elected officer if applicable; and, the name, address, and telephone number of the employer representative to contact regarding the closing or mass layoff.

Interestingly enough, the DOL site also encourages employers to seek legal counsel regarding the notices. 

As with lots of federal laws, there are some exceptions and some tricky questions that arise such as what happens when you have multiple layoffs within a short time that don't trigger WARN individually but would collectively, and what happens in situations that are not foreseeable (plant burns down and must therefore close immediately). 

The U.S. Department of Labor has some additional guidance on this issue for those types of situations in this employer's guide.

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Word came down late yesterday about an important case for employers that have California-based employees. 

The case, Brinker Restaurant Corp. v. Hohnbaum, is the first California appellate case to rule on the parameters of employers' duties under California laws requiring rest and meal periods.  The California Workforce Resource Blog has the details, as does the What's New in Employment Law Blog.  For an employee-based perspective, the Wage Law blog also has a good summary as well.

Why do I bring this up in a Connecticut blog? For a few reasons. First, there are several Connecticut employers that have California employees, whether through sales or otherwise. Second, California tends to be on the cutting edge of some legal issues. With nearly 36 million people (or roughly 10 times the population of Connecticut), those issues just tend to pop up more than in a small state like Connecticut.

Third, the case provides a good opportunity to highlight the Connecticut meal period law -- an underappreciated law that lays out what is necessary and is much different than California.

Connecticut's law is found at Conn. Gen. Stat. 31-51i and states:

(a) No person shall be required to work for seven and one-half or more consecutive hours without a period of at least thirty consecutive minutes for a meal. Such period shall be given at some time after the first two hours of work and before the last two hours.

In plain English, what this means is that if an employee works a 7 1/2 hour shift, they are required to be given a 30-minute break for a meal.  For an employee working 9-5, the meal period must be between 11 a.m. and 3 p.m.

There are exemptions to requiring this meal period but, for the most part, it's going to be good business practice to allow for the meal period anyways.  However, there may be instances where a break is not feasible. The Labor Department recognizes an exemption if one of the following conditions is met:

1. complying with this requirement would endanger public safety;
2. the duties of the position can only be performed by one employee;
3. the employer employs less than 5 employees on that shift at that one business location (this only applies to that particular shift); or,
4. the employer's operation requires that employees be available to respond to urgent conditions, and that the employees are compensated for the meal period.

Note that this meal period applies to both exempt and non-exempt workers.  Employers who do not comply can be subject to some civil penalties.  While the law talks about a meal period, there is no requirement for a "rest" period in addition to this meal period. 

As others will surely note, each state has their own rules on meal period and breaks. Employers should not assume that what will work for one state, will work for another.  In Connecticut, the rules are not particularly onerous for employers and certainly all efforts should be made to comply with these particular rules.  

Photo courtesy Library of Congress , circa 1943 Clinton, Iowa

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There's been a lot of talk of late of a "trend" beginning where employers are taking stock of employees health habits, particularly smoking.  Some employers are even considering a "smoke screen", per this story and this followup as well.   Some other background on employers and smoking policies can be found here, and here.

While employers have the statutory right to control and limit smoking in the workplace, Connecticut employers should be mindful of a state law that restricts an employer's ability to regulate smoking outside the workplace.

In fact, in Connecticut,  Conn. Gen. Stat. 31-40s is fairly clear about smokers' "rights" and that employers or agents of the employer cannot make no smoking a condition of employment.  Specifically, the law states:

No employer or agent of any employer shall require, as a condition of employment, that any employee or prospective employee refrain from smoking or using tobacco products outside the course of his employment, or otherwise discriminate against any individual with respect  to compensation, terms, conditions or privileges of employment for smoking or using tobacco products outside the course of his employment, provided any nonprofit organization or corporation whose primary purpose is to discourage use of tobacco products by the general public shall be exempt from the provisions of this section.

The only notable exception to this broad restriction is that the limits do not apply to firefighters and police officers, for the most part. 

Note that the restrictions also apply to compensation or other "privileges" of employment.  Thus,  employers in Connecticut that want to get on the "wellness" bandwagon and start restricting employees from smoking outside the workplace or provide rewards to employees that do not smoke, ought to think twice and conform any programs with the legal requirements on the state.

As always, getting legal advice to specific issues like regulating smoking outside the workplace is the best policy to avoid liability in the future.

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Earlier this week, I discussed the state's telecommuting practices amid requests from some politicians to expand the state's telecommuting programs.  In perhaps a slow week for news, the Hartford Courant has continued to followup on its articles and expanded its coverage into discussing the possibility of four-day work weeks -- something Utah is implementing.

But both ideas -- widespread telecommuting and four-day work weeks -- for state workers appear long shots right now with bi-partisan (but not unanimous) support for maintaining the current system. 

Republican Governor M. Jodi Rell discussed the idea of four-day work-weeks for state workers:

I talk about state employees as public servants, and that's exactly what they are.  And the public expects them to be there five days a week, whether you're getting a fishing license or you're getting a permit for a storm-water system in a town. You can't do those things from home. You have to be there physically to greet the person and take the information. Some things can be done by telecommuting, but certainly most all of public service is a five-day-a-week job.

And earlier this week, a spokesman for Senate President Pro Tem Donald Williams, the highest-ranking senator and Democrat, chimed in on a plan to have some staffers for House Republicans telecommute.

"We always knew the Republicans were phoning it in; now they want to make it official policy," said Derek Slap, spokesman for Senate President Pro Tem Donald Williams, D-Brooklyn. "The reality is that the GOP plan would not save taxpayers any money and would not ease congestion. In fact, the only people the plan would help would be Republican caucus staff members."

As I mentioned earlier this week, all of this runs counter to the trend in the corporate work towards these flexible options.  Bank of America, for example, launched a telecommuting program earlier this month to great fanfare, hoping to boost the numbers of employees that telecommute. 

Will the state start taking more cues from the corporate world? That seems unlikely for now.  But as more corporations consider these options, it'll be fascinating to watch how their experiences shape policy discussions going forwards. 

For those that are curious about employment laws on the subject, there's nothing about our state or federal employment laws that prohibit either telecommuting or four-day work weeks (we don't for example have a "daily" overtime rule, like Nevada).  So it boils down to a policy argument about the benefits of four-day work weeks and telecommuting. Right now, the status quo is winning.

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You know it's summer when the most exciting headline in employment law over the last day seems to be the markup of an arbitration fairness bill by a House Judiciary Subcommittee.  Not terribly exciting.  If you'd like more details on that bill, Workplace Horizons has a nice little summary and does it's typical terrific job on keeping up to date on some federal legislative items.  But it is still a long way off. 

In the meantime, this little lull provides an opportunity to catch up on a series of posts I've done on little known employment laws. For some of the previous installments, check out here and here.  

Today's post addresses offer letters.  For many employers, they are standard practice, but others seem to ignore them.

Connecticut actually requires something resembling an offer letter to each employee. Specifically, Conn. Gen. Stat. 31-71f requires that every employer, at the time of hiring, advise an employee of three things:

1. The rate of remuneration (in other words, the salary or rate of pay);
2. The hours the employee is expected to work;
3. And the schedule for wage payments (weekly or otherwise).

Notably, that statute also requires that employers "make available" to employees (either in writing or through a posted notice in a lunch room or other accessible location) any policies or practices relating to:

• wages;
• vacation pay;
• sick leave;
• health and welfare benefits;
• and comparable matters.

If the employer makes any changes to these policies and practices, the statute requires that the employer provide notice to employees as well.

Thus, offer letters (or something resembling them) are a good business practice, but also the law. Use them as an opportunity to also include language that confirms that the employee is "at-will" meaning that the employer can fire the employee at any time for any reason (and the employee can leave anytime for any reason too). 

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Connecticut's wage payment statutes, with the definition of wages found at Conn. Gen. Stat. 31-71a(3), certainly have left courts room to interpret the statute. After all, the definition of wages is merely: 

compensation for labor or services rendered by an employee, whether the amount is determined on a time, task, piece, commission or other basis of calculation.

If an employer does not pay "wages" properly, an employee can bring a civil action to collect such wages (along with attorneys fees, and double damages) under Conn. Gen. Stat. 31-72.

But what happens when an employer does not pay accrued vacation or sign-on bonuses? Is that a failure to pay "wages"?

A recent Connecticut Superior Court case says "no".  In Tamborino v. Velocity Express, 2008 Conn. Super. LEXIS 1527 (June 6, 2008)(Tierney, J.) (registration needed to download), the Superior Court concluded that the definition of wages did not include such items.  Moreover, "wages" does not include post-termination COBRA insurance premiums.  Thus, the employee could not use the "wage" statutes to claim that the employer's failure to do so violated state law (and entitled him to attorneys fees for pursuing such a claim).

The case also discusses performance bonuses and says that in some cases, such bonuses may be "wages".  In this case, however, the court found that the employer's failure to pay such a bonus was not made in "bad faith" and declined to award the Plaintiff additional damages for such a failure.

For employers, the case is a reminder of the importance of using clear and plain language in offer letters and employment contracts.  If bonuses are to be contingent on achievement of certain goals, or discretionary, language can be included to that effect.  

As I indicated earlier this week in my post on "fairness", employees will become bitter if they believe that the employer is not living up to the terms of the "deal".  Ensuring that offer letters give employers the flexibility to run their business while also outlining the essential terms of employment can be crucial to avoiding misunderstandings later on. 

Photo courtesy of Library of Congress (Flickr) - Workers in 1940

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This week, I've highlighted some new state laws that affect the employment law arena. This next one (Public Act 08-156) creates a new joint commission and new advisory board in Connecticut to deal with the issue of employee misclassification. 

For employers, this new structure means that it is more likely that enforcement of misclassification laws (in other words, whether employees are classified properly as exempt or non-exempt from wage/hour, tax and workers' compensation laws) will occur.  As noted below, there appears to be a particular emphasis on employers in the construction industry, so that particular category of employer ought to be aware of this new law.

What's the new structure?

First, effective July 1, 2008, a joint commission will be established made up of representatives of the Department of Labor, the Commission on Revenue Services, the Workers' Compensation Commission, the Attorney General's Office, and the Chief State's Attorneys office.

What will be their role?

They are to meet at least four times a year (probably in conference rooms not very different from the one pictured). 

Their main goals will be to:

• review the problem of employee misclassification by employers for the purposes of avoiding their obligations under state and federal labor, employment, workers' compensation and tax laws;
• coordinate the civil prosecution of violations of state and federal laws relating to employee misclassification, and 
• report any suspected violation of state criminal statutes to the Chief State's Attorney.

What else is required of the Commission?

By February 1, 2010 (and each year after that) the Commission will report on the commission's actions for the preceding calendar year and include any recommendations for administrative or legislative action.

The new law also creates a companion "Employee Misclassification Advisory Board" to advise the commission on misclassification specifically in the construction industry.  The Board will be made up of six members, each representing differing interests in the construction industry. 

A summary of the new law by the legislature is also available here. And interestingly, the General Assembly passed identical portions of this law in another public act (P.A. 08-105) as well.  Apparently, you can never have enough joint commissions (though obviously, they will be combined here). 

What steps can an employer consider in response to this law?

This new law emphasizes the fact that issues regarding employee misclassification are not going to disappear anytime soon. Because of this, employers can take this opportunity to audit themselves and determine if they continue to have an exposure under wage and hour laws.  If necessary, correcting issues regarding classification of workers ought to be considered; taking such steps before a problem occurs may allow the employer to escape the broad enforcement capabilities now presented in this new law.

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The Connecticut Supreme Court today ruled (in a decision that will be "officially released" on June 24, 2008) that an agreement between an employer and his employees to defer an employee's past wages until the employer receives revenue sufficient to pay those wages, is contrary to public policy , therefore, an invalid defense in a criminal prosecution for failure to pay wages.

The case, State of Connecticut v. Lynch (available here) is somewhat unusual because there are not very many criminal prosecutions of a failure to pay wages. Most cases arise in the civil context. But not here.  Here, the employer failed to pay wages for several pay periods and then tried to get employees to agree that their back wages and future wages would be contingent on future revenue of the company.

You may recall a case a few months ago  Ravetto v. Triton Thalassic Technologies (discussed in this earlier post)  which held than an agreement to defer accural of wages in the future does not violate public policy.  Indeed, back then, the court noted:

We cannot conclude as a matter of law, however, that an employer experiencing financial hardship that honestly informs employees that it cannot meet payroll and that does not promise them that future payment will be made is acting unreasonably when it allows employees to continue to work with the hope of future payment. This is particularly true where the employees are experienced business people and members of management who choose to continue working in the hope that their services to the employer will improve the financial status of the company. We can imagine circumstances in which such a choice by employees may inure to their benefits particularly when the financial hardship is short-lived and the financial status of the company ultimately improves. In the present case, we recognize that Triton ultimately did pay the plaintiffs the wages that were due them.

So, what's the difference here? Here, the Court says that the Agreement at issue applied by prospectively but also retroactively and as such, violated public policy. In fact, at the time that the employer proposed this "agreement", the employer had already missed several payroll periods.  Thus, the Court said that an agreement to postpone accural of wages violates public policy when applied retroactively.  In the absence of an agreement on when wages accrue, it's safe to assume that they accrue when the employee performs work.

What's the takeaway for employers from this case? First and foremost, keep up with obligations of payroll.  In the extreme case, the Connecticut Department of Labor can and will file criminal charges against employers that fail to keep up. Failure to pay wages is not one of those "grey" areas. Set up a payroll system and stick to it.

But if the company begins getting cash flow problems, it may consider setting up agreements with employees that may make payment future wage payments contingent on revenue.  This often happens in small, start-up ventures where the work is being done ahead of revenue coming in the door. 

These agreements will be heavily scrutinized so getting sound legal advice on this issue (as many others) should help ensure that the agreement will hold up later on.  The Court took great pains to note that agreements on when the employee accrues wages may be okay, but employers should still tread carefully because of the important public policy of paying employees wages "on time".

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For non-exempt employees (in other words, those employees eligible for overtime), a common question is whether an employee should be paid for commuting time.  The answer to that question is typically no.

Now suppose the employee carries their work files in a briefcase to and from work, does that change the analysis? According to a recent Second Circuit decision (which covers employers in Connecticut, New York and Vermont), the answer is still no.   In doing so, the Second Circuit in Singh v. City of New York has clarified the limited circumstances when an employee may be paid for their commuting time. 

When is that? Well, under the Fair Labor Standards Act (FLSA), the employee must engage in work for the employer's benefit at the employer's request, in order for commuting time to be compensable.  In addition, if an employer's policies increase that commuting time by a trivial amount, the employee is still not entitled to be paid under the FLSA.  

When is work required during a commute? When the employee's work during that time is integral and indispensable. It typically depends on whether the time is spent predominantly for the benefit of the employer ("predominant benefit test"). For commuting, the Second Circuit indicated that the:

appropriate application of the predominant benefit test is whether an employer's restrictions hinder the employees' ability to use their commuting time as they otherwise would have had there been no work-related restrictions.

For employers, and particularly with the addition of BlackBerrys, this case emphasizes that the employer should review its policies and practices to ensure that commuting time remains non-compensable.  In particular, the employer can emphasize that non-exempt employees should not perform work during their commute. 

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This week, the U.S. Department of Labor updated their website and provided some new online tools to help employers figure out which recordkeeping, reporting and notice requirements apply to them. 

According to the DOL:

The new FirstStep Recordkeeping, Reporting and Notices elaws Advisor has been integrated into a FirstStep suite of advisors that also includes the revised and expanded FirstStep Poster Advisor and FirstStep Employment Law Overview Advisor.

"These Internet tools will make it easier for small business employers to learn about and comply with the federal laws that apply to them," said Secretary of Labor Elaine L. Chao.

However, employers in Connecticut using these tools should be cautious.  There are additional requirements that employers in Connecticut that may apply and some are stricter than the federal rules.

Because of this, employers should use the department's online tools as a resources, but should followup with an attorney or the Connecticut Department of Labor about additional requirements that may apply.

(H/T Delaware Employment Law Blog)

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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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Continuing a very busy Wednesday in employment law (where were all these cases earlier this month?), the Connecticut Supreme Court issued a noteworthy decision on a few different wage issues. Because of time limitations, I'll address the case in a few separate posts.

The case, Ravetto v. Triton Thalassic Technologies, Inc. et al. , was argued to the Court in February 2007 (that is not a typo) and finally released on Wednesday (though it won't be "official" until March 4, 2008). 

There are lots of interesting employment issues in the case, but what immediately jumps out at me is the court's holding that an employee who is provided advances on commissions, does not need repay those advances when that employee's employment ends, even if the actual commissions did not amount to the advances.  The Court's ruling assumes that the employment agreement in place is silent on the issue of repayment.

The Court, in a 4-1 decision, adopts a view in a majority of other states that says that simply using the words "draw" or "advance" in an employment agreement is insufficient to establish a contractual obligation to repay those advances upon the end of employment.

We agree with the majority of courts that the mere use of the terms ‘‘draw’’ or ‘‘advance’’ in an employment agreement is not sufficient to establish the parties’ intent that the employee is obligated to repay the excess advances.

In arriving at the general rule that an employer may not recover excess advances unless an express or implied agreement to repay is established, many courts have reasoned that because the employer usually drafts the employment agreement, it easily may include language in the agreement obligating the employee to repay any advances that exceed commissions. ...

We therefore agree with the majority of jurisdictions that ‘‘absent a contractual provision expressly holding [an employee] personally liable for advances, [an
employer] must show that [the employee], by his [or her] conduct, exhibited an intent to be held personally liable for the repayment of the advances.’’ ...This rule is consistent with the ‘‘well settled judicial reluctance to cause a forfeiture of money already received unless it convincingly appears that such a result was intended by the parties. . . .’’

This decision has the potential to have a significant impact for employers in Connecticut.  What the court appears to be saying is that it is fine for an employer to say explicitly in an offer letter or employment agreement that the employee must repay the advances on commissions upon termination of employment, but in the absence of that provision, the employee is not obligated to do so. 

For employers in Connecticut, the case suggests an obvious course of action as well. Employers may want to consider having an explicit "repayment" provision in their offer letters and employment agreement for those employees who receive an advance or draw on commission.  Does this mean that existing agreements should be modified to add this provision? It may be something to consider.

There's more to this topic, and the decision in general. And, when time permits, I'll provide some additional thoughts.

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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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The Second Circuit released an important decision today that sets forth some new groundrules for employers and particularly placement agencies to be aware of in paying employees overtime.  In doing so, the court has distinguished the long-standing Supreme Court case of Tennessee Coal Co. v. Muscoda Local No. 123 (321 U.S. 590) (1944) and, according to the Court's own reasoning, has created a split in the circuits.

The short issue of the case is whether employees must be paid overtime wages for work that their employer has prohibited and does not desire. The Court indicates that this is a matter of first impression and answers the question in the affirmative.

The case, Chao v. Gotham Registry, Inc. (available here) is ostensibly about a decision denying a contempt order against an employer.  While the Court upholds the decision denying the contempt order, it does by finding that the employer was dealing with a novel question and that it should not be punished for coming to a wrong conclusion.

The Court's analysis is lengthy but it has summarized the facts and its decision here:

A typical Gotham [employer] placement begins when one of its client hospitals requests a nurse to fill a temporary vacancy or to support hospital personnel during a peak period. Gotham then offers the assignment to a nurse on its register, and the nurse who accepts the position reports directly to the hospital. The nurse is required to sign in and out on daily time sheets, which are compiled and reviewed by the hospital and forwarded to Gotham each week. Gotham is not permitted to go on hospital premises to verify the nurse's hours or otherwise supervise his or her performance. The hospital  pays Gotham an hourly fee multiplied by the number of hours worked by the nurse and Gotham pays most of this money to the nurse.

Until the early 1990s, Gotham did not pay its nurses overtime wages for hours worked in excess of 40 hours in any workweek because it viewed the nurses as independent contractors. After the Department of Labor commenced an enforcement action in 1992 against the staffing agency asserting that its practice of paying nurses straight-time wages for overtime hours violated the Act, Gotham consented to treat the nurses on its register as employees for purposes of the Act. ...

As Gotham's clients do not pay Gotham a premium for overtime hours in all cases, Gotham's promise to abide by the Act quickly proved expensive. After seeking advice of counsel, the staffing agency adopted a policy designed to check unauthorized overtime or, failing that, insulate itself from claims for time and one-half compensation for unauthorized hours. Gotham's overtime policy is printed on the time sheets completed by its nurses and reads: "You must notify GOTHAM in advance and receive authorization from GOTHAM for any shift or partial shift that will bring your total hours to more than 40 hours in any given week. If you fail to do so you will not be paid overtime rates for those hours."

In the course of their assignments at client hospitals, Gotham nurses are sometimes asked to work overtime by hospital staff. Nurses who agree to work an unscheduled shift will on occasion contact Gotham first to request approval in compliance with Gotham's rule. If Gotham authorizes an assignment, the nurse is guaranteed premium wages for any resulting overtime. But three out of four approval requests are denied. At other times, nurses accept unscheduled shifts without obtaining the staffing agency's approval. When these nurses report their overtime for the preceding week, Gotham attempts to negotiate with the hospital to procure an enhanced fee for the overtime hours already worked. If Gotham succeeds -- as it does ten percent of the time -- it pays the nurse time and one-half wages for the unauthorized overtime hours. Otherwise, the nurse receives straight-time wages for the extra hours worked.

It is this scenario that gives rise to the Secretary's contention that Gotham's overtime practices violate 29 U.S.C. § 207(a) and, by extension, the 1994 consent judgment....

 The Secretary challenges that portion of the district court's March 20, 2006 judgment that denies her petition for 8 civil contempt against Gotham. That court believed the unauthorized hours did not constitute work under the Act or, if these were working hours, the legal question was too much in doubt to warrant civil contempt. On this appeal the Secretary presents us with two questions: first, whether Gotham's overtime practices violate the Act; and second, if so, whether the violation provides an adequate basis for civil contempt. We think the trial court erred in labeling the nurses' overtime hours as anything other than work and answer the first question in the affirmative. But because we believe Gotham acted on a reasonable interpretation of then unsettled law, we answer the second question in the negative, and affirm the district court's judgment on the alternative ground that the Secretary did not meet her burden to prove contempt.

There is also a thoughtful concurrence by Chief Judge Jacobs as well.  He chides the majority for its reasoning:

I cannot sign the majority opinion because it holds  that Gotham’s practice violates the FLSA--though Gotham could not be expected to know this until so advised by the majority’s ambitious, consequential and dubious rulings.

As this case is analyzed, I'm sure much will be written about this in the upcoming days.  For now, the key takeaway from the case is that for placement agencies in particular that may not pay overtime based on a similar policy to Gotham, those agencies should review those policies and practices and get legal advice. 

I'll post more later in the week as the analysis comes in.

UPDATE: The Second Circuit Blog has another summary of the case available here.

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The latest news trend has been to report that wage & hour claims are the new "in" lawsuit filed by employment attorneys.  However, the cost of bringing such a lawsuit may still be onerous for some employees.

That's where the state's legal services organizations routinely fill the gap by offering their services free to people in need of an attorney.  Two new federal lawsuits filed on the same day last week by two different legal services groups in the state, show that these groups are not afraid to tackle employment issues and are doing so with increased frequency. 

(As always, readers are cautioned that the complaints contain mere allegations, not proven facts.)

In Morales v. Cancun Charlie's Restaurant, the Jerome N. Frank Legal Services represents a kitchen worker for a popular Milford restaurant.  (The Jerome N. Frank Legal Services organization is run by the Yale Law School.)  The Complaint alleges that the employee regularly worked over 100 hours per week and did not receive overtime.  The Complaint also alleges that he did not receive the appropriate minimum wage.  No response has yet been filed.

This is not a one-time gig for the Yale Law School legal services group.  For example, last month, the group brought a nearly identical claim against another Connecticut restaurant, the Mianus River Tavern, on behalf of two workers. Although the restaurant closed earlier this year, the Complaint alleged that these two workers did not receive any overtime for their work over the years. 

The Complaint in Godoy v. D&S Remodeling, LLC contains very similiar allegations as well and was also filed last week. Brought by Connecticut Legal Services , on behalf of 12 employees, the lawsuit alleges that these laborers for a construction company did not receive their wages as promised by the employer. The complaint also alleges that overtime and minimum wages were not paid for these individuals at various times.  No response by the employer has been filed yet either.

Will the employers raise as a defense the possible undocumented status of the employees? (The Complaints are silent as to whether these workers were authorized to work -- though no inference should be drawn on this without additional facts.)  The law on this is far from resolved. In 2002, the Supreme Court in Hoffman Plastic Compounds, Inc. v. NLRB (U.S., No. 00-1595, 3/27/02), determined that the National Labor Relations Board ("NLRB") could not award backpay to undocumented aliens for violation of the National Labor Relations Act ("NLRA") But the Department of Labor and other groups have suggested the the law is different for violations of federal discrimination laws and the Fair Labor Standards Act ("FLSA"). 

In any event, these new lawsuits should continue to serve as a cautionary tale for service industry companies in Connecticut such as restaurants and constructuion companies.  The overtime laws are, what they say they are.  Ensuring strict complaince with the law will remove lots of headaches down the road.  Keep good records, treat employees fairly and fix past mistakes where necessary.

While lawsuits involving the Legal Services groups may not "feel" like the typical employee-side attorney, they have the resources and the energy to ensure that these cases proceed like an ordinary lawsuit. These lawsuits should not be taken lightly. 

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We all love surveys and rankings.  From Family Feud to U.S. News School Rankings to American Idol - we love to know who is up, who is down, who is the best and who is the worst.

But some surveys and rankings just don't add up.  Last week, a group calling itself the Alliance for Worker Freedom, ranked each state on an Index of "worker freedom".  (The group, according to its website, "was founded in 2004 to combat anti-worker, pro-union legislation and educate the public about the plight to protect workers rights.")  It contends that the "2007 Index of Worker Freedom (IWF) is the first state-by-state comparative study that measures the level of worker freedom by analyzing actual policy as well as quantitative state data."

And how does Connecticut rank, according to the survey? Survey says: Dead last, with a letter grade of "F". 

What does this mean? Beats me. I can't make any sense out of it.  For example, the state receives zero points because its minimum wage is above the federal minimum wage. Huh? Certainly, in Connecticut, where the cost of living is much higher -- it hardly seems "anti-worker" to have the minimum wage be $7.65.  And Ohio, which has a higher percentage of union workers than Connecticut, receives a "C+", so go figure.

And therein lies the tragedy with surveys like this. They do little to educate the public about the labor and employment facts of a particular state, relying only on an easy to remember "grade system".  

(Hat Tip: Workplace Horizons)

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It has been over a year since the Supreme Court's decision in Garcetti v. Ceballos, which held that where a public employee speaks as an employee and not a public citizen, such speech is not protected under the First Amendment. 

Courts applying the decision have tried to impart some parameters to the Court's decision such as whether an employee's job description is "controlling" as to what those job duties actually are.    (One issue not yet resolved-- and the subject of a future blog post -- is the question of whether Garcetti applies to employees at private companies.  A split in authority has been developing in the state courts on that issue, although the majority appears to answer that question "yes".) 

One interesting case came down from the U.S. District Court in Connecticut last month.  In O'Dea v. Shea, et al, the court granted a state agency's motion for summary judgment where the employee claimed that she was given a poor performance review in violation of her First Amendment rights.  

But the reasoning behind the decision shows that Connecticut courts have begun to apply the Supreme Court's ruling in Garcetti v. Ceballos. The background of the case is straightforward:

• The Plaintiff became Director of Acute Nursing at Blue Hills Hospital in central Connecticut.
• In the spring of 2004, her supervisor purchased refurbished used furniture for the unit. 
• According to the plaintiff, she complained that bringing in used furniture into the facility would lead to more insect infestations. 
• In May 2004, the plaintiff received a "satisfactory" rating on her performance review and sued on that basis. 

Rather than address the issue of an adverse job action (which would seem to be the "easier" of the questions), the court ruled that Garcetti foreclosed her case.  "An Employee may still be performing his job when he speaks, even if that expression is not demanded of him."  The court emphasized, thus, that courts should not look at formal job descriptions but rather to the "practical" considerations of an employee's job.  Thus, the court -- in essence -- found that the job description was not dispositive of the issue.

Because the court concluded that the employee raised her concerns in her "professional capacity" as an employee, and not as a private citizen, her speech was not protected by the First Amendment.

The case reinforces the notion that First Amendment claims (including those brought under comparable state laws) by employees face an uphill battle.  For the time being, not even narrowly drafted job position descriptions appear to be able to defeat a defense that the employee's comments were in the course of his/her duties.

For employers that are considering revising an employee's job duties or position description, it makes sense to include a reference to reporting safety or other concerns (if that is a legitimate part of the job). Although the employer may believe that this is implicit in particular jobs, it is helpful to have this established at a neutral point in time in writing -- rather than as a company policy.

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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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Earlier this week, the Connecticut Supreme Court decided Malan v. University of New Haven Police Department, an important decision for employers to be aware of when dispensing with job references.  In an earlier post, we discussed how the court created a qualified privilege for such references. 

So what questions did the court leave open? Well, the old expression when it comes to legal decisions (and, for that matter, financial statements) is to always check the footnotes. 

Checking footnote 8 reveals that the court left open the question as to what would defeat the privilege. 

• ‘[W]e need not decide whether, in a defamation action such as this one, a plaintiff could prove actual malice to defeat the qualified privilege on some lesser showing of recklessness."

But the court goes point out that it is not deciding whether other ways to defeat the qualified privilege will work either.

• "We also need not decide whether a plaintiff alleging defamation could overcome the qualified privilege without proving actual malice, by proving a lack of good faith on the part of the employer. "
  
• "Finally, we need not decide whether a plaintiff could overcome the qualified privilege without proving actual malice, by proving that the defamatory statement had been published to others."

What does this all mean? Well, for starters, it means potential litigation on this issue.  But more important, it suggests that if the employer can show that the job references were made "in good faith", that may go a long way towards maintaining the qualified privilege.  (An honest appraisal will also defeat a defamation claim by being "truthful".)

But the last note suggests that it is an open question as to whether a defamatory comment in a job reference could defeat the qualified privilege, just by being published, without even a showing a lack of good faith.  That type of approach would seem to significantly weaken the qualified privilege's scope -- something that the court took great pains to set up in this case.  Given the court's unanimous decision setting up the qualified privilege, it would be unlikely the court would undercut it by allowing the privilege to be defeated fairly readily. 

Nevertheless, for employers who want to provide job references for its current and former employees, the decision provides a good deal of protection.  

 (For advice on how to write a good job reference letter, the Employment Blawg has a very good article today with several practical links.)

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The Hartford Courant has a lengthy piece today about the rise and fall of the Mortgage Lenders Network.  From an employment perspective, the piece recounts how the Connecticut Department of Labor came across one of the largest cases in the state of a company failing to pay wages, at least $1.5 million. 

Gary Pechie, the director of the state Department of Labor's wages and workplace standards division, was used to dealing with minor cases of businesses - the pizza shops, the independent grocers - who didn't pay their employees.

He rarely saw a case as a big as MLN. High-flying loan officers had been stiffed out of thousands of dollars, some hundreds of thousands, in commissions. And the complaints kept coming in.

Pechie sent two wage enforcement agents down to MLN on Jan. 23.

One of those agents, Frank Royce, had 17 years on the job. He and agent Mike Witkowski pulled up at MLN in Middletown at about 10:30. Human resources director Gary Porter told the agents that the company was "experiencing some problems" and that it wasn't clear "if or when some of the employees would be paid."

Porter produced a partial list. Royce did a little mental math to figure out what employees were owed. He came up with about $1.5 million. Later in the day, Porter came up with more.

When he and Witkowski got back in the car, Royce was quiet for a moment. Then he spoke.

"Wow," he said. "This is going to be big."

The article goes on to report that:

On March 9, the labor department asked the chief state's attorney to issue a warrant for [MLN head Mitchell] Heffernan's arrest for failing to pay nearly $3 million in wages, mostly commissions. Failing to pay wages in Connecticut is a Class D felony and can lead to jail time, fines or both....

[The DOL] and Attorney General Richard Blumenthal pursued the criminal charge in Connecticut. Heffernan fought the state's right to seek such a warrant while MLN was in bankruptcy. After a federal bankruptcy judge ruled that the matter didn't belong in that court, Heffernan appealed. A trial is pending on the legal question.

A look at the actual court documents reveals some more details and, from a legal perspective, Heffernan's tactics have staved off action by the DOL.  So far, it appears to have bought him several more months of legal limbo.

Upon learning of potential criminal charges against him, Heffernan filed a motion to enjoin the state from criminal prosecution.   The State of Connecticut, led by AAG Robert Clark, filed its objection on April 5, 2007.  Heffernan filed a supplemental brief a few days later with many more details and claiming that the criminal prosecution was a result of intense media scrutiny.  On April 10, 2007, the bankruptcy court denied Heffernan's request.

However, Heffernan's appeal of that decision has bought more time for him.  He appealed to the District Court of Delaware.  A briefing schedule reveals that it is unlikely the state will get any resolution of this matter until next year because final briefs are not due until late December 2007.  (It is unclear where the Courant's notion of a trial comes into play; the scheduling order of the court only referred to motion practice.) Because of the elevation of the assigned District Court judge to the matter (Judge Kent A. Jordan), the case does not yet have a district court judge formally assigned to it, which may further delay resolution of this matter. 

For MLN workers, the case is surely a frustrating one.  But the state's continued pursuit of this employer demonstrates that failing to pay wages is one type of action that the state won't tolerate. For employers in the state, its a good lesson and one that more employers would be wise to follow. 

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For many years, the Connecticut Department of Labor website just looked, well, a bit on the outdated side.  But lo and behold, the agency freshened things up a bit lately.  

They've introduced a new logo and new typeface.

After digging around for a few minutes, the content on the site has, unfortunately, not been updated in any major way.  But for those who have a difficult time still navigating the site, there is a useful "search" box on the upper right hand side of the page.  Not as good as Google, but it gets the job done.  

Notably, the DOL isn't the only agency that invested in a new logo. The CHRO released its new logo recently as well.

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