The U.S. Supreme Court this morning in Janus v. AFSCME (download here) reversed 40 years of labor law precedent and concluded that  requiring public employees to pay “agency fees” for labor unions that they don’t want to belong to violates the First Amendment of the U.S. Constitution.

Previously, prior cases have banned forcing public sector employees from joining a union and paying union dues. But a number of states permitted union contracts that required employees to still pay an “agency fee” to cover the costs of collective bargaining.

In its 5-4 decision, the U.S. Supreme Court rejected this — leaving public sector unions, particularly in states like Connecticut, to potentially lose significant funds from employees who say that they want no part of their salary to go towards unions.

Given that this blog covers more employment law than labor law, and focuses more on private-sector than public sector, I’m not going to do a deep-dive today into the case. The SCOTUSBlog is one good resource. 

But my labor law colleagues at my firm have spending the morning looking into this.  Here’s the quick recap posted this morning on the Employment Law Letter blog and the impact to Connecticut public-sector employers.:

The immediate effect of the Court’s decision is that agency fee (or “fair share” fee) provisions in collective bargaining agreements are invalid. The Court specifically states that agency fees and similar payments may not be deducted from an employee’s pay unless the employee has expressly consented to the deduction.

This statement suggests that employers should stop deducting agency fees unless and until an employee has affirmatively consented.

Because Connecticut law requires express employee consent for payroll deductions, Connecticut public sector employees have likely already consented to the deduction of agency fees.

However, public sector employers should be prepared for employees approaching them and requesting that the agency fee deductions be stopped, effectively withdrawing their consent.

Justice Alito’s decision is emphatic in this point and the significant dollars at stake:

We recognize that the loss of payments from nonmembers may cause unions to experience unpleasant transition costs in the short term, and may require unions to make adjustments in order to attract and retain members. But we must weigh these disadvantages against the considerable windfall that unions have received under Abood for the past 41 years. It is hard to estimate how many billions of dollars have been taken from nonmembers and transferred to public-sector unions in violation of the First Amendment. Those unconstitutional exactions cannot be allowed to continue indefinitely.

Watch my firm’s blog for more details on this critical decision in the public-sector.

GavelConnecticut has pretty strict rules that employers must follow if they want to take deductions off of an employee’s salary.  Typically, an employer must seek CTDOL approval for all sorts of deductions, which I covered back in a 2012 post.

But what happens if an employer makes a mistake on a paycheck and overpays an employee. What then?

That situation is not uncommon. Most of the time, employees will note the mistake and return the money to the employer — no questions asked.

But I’ve heard of other instances where the employee cashes the check and then, say, buys a used car with the mistake.  Or the employee just says no. What then?

Well, I’ve received informal indications from the CTDOL that in those cases, the agency allows for the use of deductions to recover clerical errors.  The employer may try to work out an agreement or payment schedule to recover the money in an orderly manner.

I would add that the employer should really be sure that whatever deductions are made from future salary payments leave enough that the employer is really paying minimum wage for the week.  That should avoid any issue with a claim that minimum wage laws aren’t be followed.

In short, employees don’t get to profit from employer paycheck mistakes and employers are free to engage in a bit of self-help to recover the funds … if it’s really necessary.

Everyone knows that taxes are inevitable.  Except perhaps one employee who won his Title VII case but complained that the employer shouldn’t have made withholdings for taxes when it paid out the judgment.  The Second Circuit, in a decision released right before the Labor Day weekend, said the employer did the right thing.

You can read the case, Noel v. New York State Office of Mental Health, here. 

In the case, the employer lost a retaliation case and was ordered to pay front and back pay in the amount of $280,000.  The employer, in choosing to satisfy the judgment, made various deductions and mailed a check directly to the plaintiff (not his counsel) for $139,582.52. 

No doubt the plaintiff was surprised by the amount of deductions (which included over $94,000 in federal withholdings) and filed an objection to the amount.  The employer took the position that because the judgment was for back and front pay — i.e. “wages” — it was obligated to make with withholdings and that the plaintiff would be able to claim credits against his tax liability come tax return time.  The District Court agreed with the employee and ordered the employer to pay an additional judgment of $164,987.59.  

The Second Circuit reversed and agreed with the employer:

[We] hold that payments pursuant to judgments for back and front pay are “wages” as defined under the Internal Revenue Code and, as such, employers are required to withhold income and [FICA] taxes.  Moreover, we conclude that …. the district court should not have ordered the double payment.

The employer was taken to task for, for example, sending the check directly to the plaintiff, instead of to his opposing counsel and for making a few other improper deductions in a “somewhat bureaucratic manner” such as for union days.   “Although the state may not have conducted itself to the Queen’s taste, we nonetheless consider the remedy imposed by the district court to have been excessive.”

For the plaintiff, the loss is probably doubly hard. As noted by the Wait a Second blog, the Plaintiff actually received the extra $164,987.59 that it will now have to pay back in taxes.  Ouch.

In a post last week, I pointed out that New York amended its laws to allow for some deductions by employers from an employee wages.  I joked that Connecticut could do the same as some of Connecticut’s rules are a bit dated themselves.  

A nice note from a Connecticut Department of Labor official suggested that I point readers to the page where the deductions are allowed.  Its actually something I’ve covered before and I’m happy to do so again. 

Connecticut has an online form for employers to send to the Connecticut Department of Labor for approval.  What types of items may be deducted with approval?

  • Life Insurance Premium;
  • Loan;
  • Employee Purchases;
  • Pension Plan Employee Contribution;
  • Payroll Savings Plan;
  • United Way Contribution; and
  • Christmas/Hanukkah Club. 

I’ll leave aside the Christmas/Hanukkah Club for the moment (are there any employers still using that?) and merely note that the list is not exclusive. (Update: Indeed, the DOL has indicated to me since this was published that they have approved other types of deductions as well.) As noted on the CTDOL website: “IF YOU WISH TO USE IT TO AUTHORIZE ANY ITEMS LISTED FOR PAYROLL DEDUCTION, PLEASE COMPLETE THE INFORMATION IMMEDIATELY BELOW AND YOUR COMPANY WILL BE CONSIDERED FOR APPROVAL AND NOTIFIED BY MAIL. A REQUEST FOR ANY ADDITIONAL PAYROLL DEDUCTION ITEMS MUST BE SUBMITTED SEPARATELY.”

There’s more information available on the CTDOL website here.    And if you’re interested in the corresponding state statute it can be found at Conn. Gen. Stat. 31-71e.

As the dog days of summer drag on, the news from the employment law arena slows to a trickle.  But here are a few recent stories that may be of interest to employers in Connecticut.

With all the snow piling up, there’s been a lot I’ve been meaning to get to but haven’t. So, it’s time to bring back the "Quick Hits" feature where I recap some of the employment law tidbits you might have missed recently.

Now, excuse me while I go find some dog sleds so we can get to work in this snow! 

When new laws get passed, the complications that arise from the passage aren’t immediately clear.  But a look at Connecticut’s new family violence leave provisions (effective October 1, 2010) demonstrates how some of those complications are now making themselves apparent. 

As you may recall, the new Family Violence Victim leave law permits employees to take up to 12 unpaid days leave for medical care or counseling arising from a domestic violence situation or to attend court proceedings related to the same (or a variety of other listed reasons.)  If an employee has compensatory time or vacation time or the like, the leave can be paid. 

The law specifies that employers do not need to provide paid leave if (1) the employee is not entitled to paid leave pursuant to the terms and conditions of the employee’s employment or (2) the paid leave exceeds the maximum amount of leave due the employee during any calendar year. However, the bill requires the employer to provide unpaid leave if paid leave is exhausted or not provided.

Easy enough, right?

But when the statute is put in the context of other wage & hour issues, there’s bound to be some confusion.  And indeed, its interaction with exempt employees should have employers scratching their heads a bit.  Let me explain. 

To simplify, for exempt employees in Connecticut (using the standard white-collar exemptions), employers can deduct from an employee’s pay for one or more full days "if the employee is absent for personal reasons other than sickness or accident" or for "sickness or disability" if pursuant to a policy where deductions are made when sick days are exhausted.  Deductions can also be made for FMLA-covered leave in less than a full day increment.

So, suppose an exempt employee is injured during a domestic violence assault and sees a physician. Can the employer not pay the exempt employee for the days not worked without losing the exemption? Part of the answer depends on whether you consider the absence for a "personal reason" or whether its a "accident".    

Now, suppose that an employee is taking only a half day off, can the employer dock the employee for a half-day without losing the exemption? One could argue "no" because less than a day increments are only allowed for FMLA-related leave, not other types of leave.  Which then raises the question, can the employer requires that the family violence leave be taken in increments of not less than a full day?

Now, suppose the employee needs to attend a court proceeding relating to a family violence issue, is that absence also to be considered a "personal reason"? 

Still more questions to ponder: Does the Department of Labor have any jurisdiction to issue regulations or guidance on the impact of this new law? If not, who does and how can we get more guidance on these types of issues as they arise?

Obviously, these types of situations are not going to be the everyday-type of issues that employers have, but I highlight them because even well-intended laws like the new family violence leave bill, can have unintended consequences and raise unexpected issues.   Unfortunately, as history has shown, it is often only through litigation through the courts that we may ultimately get some answers to the interpretation of this law.

Continuing the summer series on the basics of various employment laws in Connecticut, one of the issues that employers have questions on is the withholding of wages.

Connecticut’s rule — under Conn. Gen. Stat. 31-71e — states that employers may not withhold wages unless one of three exceptions apply:

  1. the employer is required or empowered to do so by state or federal law,
  2. the employer has written authorization from the employee for deductions on a form approved by the commissioner, or
  3. the deductions are authorized by the employee, in writing, for medical, surgical or hospital care or service, without financial benefit to the employer and recorded in the employer’s wage record book.

Therefore a related question is: Can an employer advance vacation pay to an employee and then have the employee be required to pay it back?

Yes, according to the Connecticut Department of Labor. Indeed, it provides an online sample form for an employer to use on its website.  But note that to use this in your company, you must complete it and submit it to the Department of Labor for approval.  Once you receive notice back, this authorization then qualifies under the second exception listed above.

There may be other types of authorizations that you may wish to consider, such as a uniform rental/laundry service. If so, contact the Department of Labor to determine if the agency will bless those deductions.

Yesterday’s seminar on Wage & Hour Rx, sponsored by the CBIA, went very well and I thank all of the attendees for their great questions and comments. It made for a lively discussion about all things wage & hour.

What were some of the "hot topics"?

  • The difference between employees and independent contractors was a big one.  Here was one example we discussed. Suppose a HVAC company lands a big contract to install air conditioning in a school. It doesn’t have enough staff on its own right now to do the job. It can subcontract another company to do the work; in that case, it’s likely that the other company and the other company’s employees would be deemed to be independent contractors. However, if it hires people directly for this short term project (even for a few weeks), it may be more likely to be seen as an employer/employee relationship. 
  • Losing an exemption for an employee who would otherwise be exempt from overtime laws was also a topic of interest.  The example we discussed was an executive who is disciplined for violating an ordinary employment rule (such as sexual harassment) and gets suspended for two days without pay.  Under Connecticut law (as opposed to federal law), that may remove the individual from the executive exemption because if an employee works any time during a week, that employee must be paid for the entire week.  The CTDOL does list 5 ways that rule may be circumvented, but violating ordinary work rules isn’t one of them.
  • We also spent a little time on the new family violence leave provisions that will go into effect in October 2010.  Several attendees were surprised to learn of these new provisions.  I’ve previously discussed this bill  and now’s the time to start getting educated on these provisions. I confirmed with a CTDOL official yesterday that no regulations or guidance will be forthcoming from that agency on interpretation of the bill so there’s going to be a lot of unknowns when this bill starts.  

My thanks to the CBIA for inviting me and my colleagues to the seminar and to all the attendees.