Employers face additional burden in defending age claims

Today the U.S. Supreme Court made it harder for employers to defend themselves against a claim of age discrimination in Meacham v. Knolls Atomic Power Laboratory.  Knolls, a government contractor that contracted with the Navy and Department of Energy, was forced to reduce its workforce in the mid 1990s when the end of the Cold War reduced the government’s demand for nuclear reactors.  After eliminating over 100 jobs, Knolls had 31 left to cut.  Of the 31 salaried employees that Knolls laid off, 30 were at least 40 years old and, of that 30, 28 sued Knolls for age discrimination under two theories: disparate treatment (intentional discrimination) and disparate impact (discriminatory effect of a facially neutral policy).   The question before the Supreme Court was which party must allege and prove that a termination having a disparate impact on older workers was based on reasonable factors other than age.  The Supreme Court held that this burden falls on employers in both instances.

Genetic Information Non-Discrimination Act signed into law

On May 21, 2008, President Bush signed into law the Genetic Information Non-Discrimination Act ("GINA").  GINA prohibits employers from discharging, refusing to hire, or otherwise discriminating against employees on the basis of genetic information.  It also applies to employment agencies and labor unions. 

In addition, GINA precludes discrimination by group health plans and health insurers against individuals based on genetic information, and prohibits insurers from requiring genetic tests.  Insurance companies also cannot request, require, or purchase the results of genetic tests, and they are prohibited from disclosing personal genetic information. 

Medical Facility: Cure thyself. Look for symptoms of employment discrimination

The June 2008 issue of Washington Healthcare News includes an article by blog contributor Kathy Feldman, who practices employment law in Ater Wynne's Seattle office.  The article addresses employment discrimination, including the six protected classes of employees, and ways to prevent potentially costly claims of discrimination.   

Oregon Supreme Court gives employers a break

The Oregon Supreme Court handed Oregon employers a huge victory today, finding that employees have no private right of action for missed breaks under Oregon wage and hour laws.  The Court of Appeals in Gafur v. Legacy Good Samritan Hospital had interpreted BOLI’s administrative rule, OAR 839-020-0050, to require four hours' pay for every three hours and 50 minutes of work.  The Supreme Court reversed, finding that BOLI’s rest break requirement is intended to benefit the employees’ physical and mental well-being, not to provide a source of additional income from employers who violate the rule.

With the prevalence of class action wage and hour litigation, the Court of Appeals decision had been a huge concern to employers, many of whom rarely monitor break periods, for reasons including the difficulty of tracking the time and the desire to allow employees more flexibility and responsibility for their time management.  Absent close monitoring of employees’ time, any employee could claim that he or she missed a break on any given day and there would be little the employer could do to prove otherwise.  Today's ruling eliminates that possibility.

Read the Supreme Court case here.  Read our coverage of the 2007 Court of Appeals decision here.

Employers face litigation over tip policies

Proper handling of employee tips has emerged as a hot issue in employment litigation.  Last month, a San Diego superior court judge ruled that Starbucks Corp. must pay more than $100 million to  compensate thousands of baristas after allowing supervisors to share in the tip pool.  Chou v. Starbucks Corp., No. GIC836925 (San Diego Co., Calif., Super. Ct.).  In recent weeks, similar suits have been filed against Starbucks in Massachusetts, Minnesota, and New York.  In a federal lawsuit, DiFiore v. American Airlines, that returned a jury verdict earlier this month, nine American skycaps were awarded $325,000 after they alleged a new $2 per baggage fee for curbside check-in-service diminished their tips.  A similar suit against U.S. Airways Group Inc., Mitchell v. US Airways, was filed on April 11.

In the California Starbucks case, a former barista sued Starbucks over the company's policy of pooling tips and sharing them with managers and supervisors.  The case was later certified as a class action.  The plaintiffs' claims included a contention that the policy violates California Labor Code 351, which states no employer or agent can collect tips that customers leave for servers.

In federal court, employees claim that an employer violates the Fair Labor Standards Act if employees who are paid less than minimum wage do not receive enough in tips to make up the difference.  In a case filed against Ruth's Chris Steak House Inc., employees who work for less than minimum wage claim they spend more than 20% of their time folding napkins, cleaning tables and doing other tasks that don't generate tips.

The lesson for employers is clear:  Be alert to how you distribute employee tips.

Washington enacts domestic violence leave for victims and family

The Washington State Legislature passed a new law, effective April 1, 2008, which allows victims of domestic violence, sexual assault, or stalking to take reasonable or intermittent leave from work, paid or unpaid, to take care of legal or law enforcement needs or get medical treatment, social services assistance, or mental health counseling.  Family members of a victim may also take reasonable leave to help the victim obtain treatment or seek help.  An employee may choose to use sick leave and other paid-time off, compensatory time, or unpaid leave time.  The leave under this law is in addition to other rights to take leave available to employees under other regulations.

Evidence of immigration status allowed on claim for future wage loss under Washington law

In a case of first impression, Washington Court of Appeals, Division I, held yesterday that a plaintiff's immigration status may be admissible where plaintiff claims damages for future wage loss.

The case, Salas v. Hi-Tech Erectors, involved an injured worker's claims against a scaffold supplier for damages caused when the worker slipped from a scaffold ladder at a construction site.  Plaintiff entered the United States on a valid visa, which had since expired, and he had applied for citizenship.  Plaintiff sought to exclude evidence of his immigration status at trial.  The trial court found that if he chose to pursue his claim for impairment of future income, his status as a non-legal resident would be allowed as probative as to the extent of the future impairment.  The Court of Appeals affirmed, stating "we conclude that evidence of a party's illegal immigration status should generally be allowed only when the defendant is prepared to show relevant evidence that the plaintiff, because of that status, is unlikely to remain in this country throughout the period of claimed lost future income."

In the opinion the court discussed differing holdings from several other states.  Look for this and related immigration status issues in other appellate court cases across the country.

Washington business, labor and Legislature react to the Brink's drive-time ruling

Blog contributor Brenda Molner has published an article addressing the responses of business, labor, and the Washington legislature to the Washington Supreme Court's October 2007 ruling in Stevens v. Brink's Home Security, Inc.  The article is in the February 2008 edition of the Puget Sound Chapter of the National Association of Women in Construction's newsletter.  The Brink's case deals with payment of drive-time to employees who use company vehicles to commute to and from work.  The article is a follow-up to a previous article in the same publication.

You may access Washington HB 3294 and SB 6867, referenced in the article, by clicking on the links provided.

And just a few more new laws you may have missed...

New laws affecting Oregon employers that may not have hit your computer screen yet:

HB 2254: Employers who receive a request for a current or former employee's personnel file must now respond within 45 days or face a possible administrative penalty of up to $1,000.

SB 946: Requires employers of six or more employees to provide employees who are victims of domestic violence, sexual assault, or stalking with unpaid leaves of absence to obtain legal or medical assistance or counseling.  This law became effective last May, but BOLI's final regulations went into effect on January 1, 2008.

The Oregon minimum wage increased to $7.95.

President Bush signs FMLA leave expansion

On January 28, 2008, President Bush signed into law amendments to the Family Medical Leave Act.  The amendments grant additional leave under FMLA to employees who have family members in the military.  The legislation creates two new categories of FMLA leave:

1) Active Duty Family Leave -  Employees with a spouse, parent, or child who is on, or has been called to, active duty in the Armed Forces, may take up to 12 weeks of FMLA leave when they experience a "qualifying exigency."

2)  Injured Servicemember Leave -  Employees who are the spouse, parent, child or next of kin of a servicemember who incurred a serious injury or illness on active duty in the Armed Forces may take up to 26 weeks of leave in a 12-month period (including regular FMLA leave).

Medical leave and disability in a leanly staffed medical practice

The February 2008 issue of Washington Healthcare News includes an article by blog contributor Kathy Feldman, who practices employment law in the Ater Wynne Seattle office.  The article addresses the law governing leave and disability in a leanly staffed medical practice. 

New year, new laws from the Oregon legislature

Oregon greets 2008 with a raft of new legislation.  Laws affecting Oregon businesses include an expansion of the family medical leave law under House Bill 2635 to cover grandparents who must care for sick grandchildren.  New mothers must be given break time and a private place to express milk at work, per HB 2372.  Senate Bill 2 prohibits discrimination based on sexual orientation.  Health insurers are now required to include coverage for contraceptives (HB 2700) and for prosthetic and orthotic devices (HB 2517).  And HB 2513 makes it unlawful to sell gift cards that expire or have a face value that declines over time with lack of use.  See summaries of other new laws in this press release from the legislature. 

Whistle-blower wasn't wrongly fired, Oregon Court of Appeals holds

Under Oregon law, the firing of an at-will employee may be wrongful - and may entitle the employee to sue his former employer - if the firing results from the employee's exercise of some important public duty.  On Wednesday, the Oregon Court of Appeals demonstrated again that not all 'whistle-blowers' fall within the 'important public duty' exception to the at-will employment doctrine. 

In Lamson v. Crater Lake Motors, Inc., an employee of a car dealer claimed he was fired for, among other things, complaining to his supervisors about unlawful sales practices within the company.  Earlier case law shows that an employee fired for 'whistle-blowing' may have a wrongful discharge claim if he complains about significant issues of workplace health and safety.  But, according to the court, a complaint about sales tactics that may violate the Unlawful Trade Practices Act does not fulfill an important public duty and therefore does not give the employee a claim for unlawful discharge.

Washington legislature considers law barring workplace bullying

In January 2008, the Washington State legislature will hold hearings on legislation providing legal redress for workplace bullying, abuse, and harassment.  According to supporters of House Bill 2142, between 16% and 21% of employees directly experience health-endangering workplace bullying, abuse, and harassment, and this behavior is four times more prevalent than sexual harassment.  Sponsors of the legislation believe that existing workers' compensation plans and common law tort actions are inadequate to discourage this behavior or to provide adequate redress to employees. 

House Bill 2142 would make it an unlawful employment practice to subject an employee to an abusive work environment or to retaliate in any manner against an employee because he or she has opposed any unlawful employment practice under the law.

The bill defines "abusive conduct" as conduct of an employer or employee in the workplace, with malice, that a reasonable person would find hostile, offensive, and unrelated to an employer's legitimate business interests.  Abusive conduct may include repeated infliction of verbal abuse such as the use of derogatory remarks, insults, and epithets; verbal or physical conduct that a reasonable person would find threatening, intimidating, or humiliating; or gratuitous sabotage or undermining of a person's work performance.

The bill provides an affirmative defense for employers that exercise reasonable care to prevent and promptly correct the abusive conduct.  This provision is meant to encourage employers to stop the bullying of employees by demonstrating what actions they took when they were informed of the bullying.

Washington Supreme Court holds that pregnancy is not a "disability" under employment discrimination laws

Yesterday, the Washington Supreme Court held that an employer who refuses to hire a job applicant because of her pregnancy is liable for sex discrimination under Chapter 49.60 RCW (Washington's Law Against Discrimination), unless a bona fide occupational qualification justifies the hiring decision.

Significantly, the Court rejected the trial court's analysis of the plaintiff's claim under a  "disability" discrimination framework, where an "accommodation" test is used to determine whether an applicant's disability prevents her from performing an essential function of the job.  Read the full opinion in Hegwine v. Longview Fibre Co.

Beware: Those non-cash perks you give your volunteers may be wages

The Oregon Court of Appeals held this week that the retail value of full-season ski passes given to volunteers who worked at least 22 days at a ski racing event constituted “wages” subject to unemployment tax under ORS Chapter 657.  Under ORS 657.015, volunteers are not deemed “employees” subject to Chapter 657 when they donate services to a religious, non-profit, or governmental entity without expectation of remuneration.  However, in this case, the court held that individuals volunteering with the Mt. Bachelor Ski Education Foundation were employees because they were promised a season pass if they worked the requisite number of days and, therefore, expected remuneration for their services. You can read the full opinion here.

The decision is the third one this year in which the Court of Appeals gives an expansive reading to the scope of Chapter 657.  We reported on the earlier cases here and here.

Oregon Consumer Identity Theft Protection Act

The Oregon Consumer Identity Theft Act, enacted earlier this year, limits the use of social security numbers and imposes mandatory procedures for notifying consumers of any breach in the security of their personal information. These provisions went into effect on October 1, 2007. The types of information covered by the new law include social security numbers, drivers' license numbers, financial account, credit and debit card numbers, and passport numbers.

Additional provisions of the Act, which go into effect on January 1, 2008, require businesses to develop and implement programs to protect the security, confidentiality, and integrity of the personal information acquired and disposed of by the business. Businesses that already comply with more stringent requirements of state or federal law will be in compliance with the Act.

The Department of Consumer and Business Services provides education and guidance on the law and recommended practices here.

Push on by Democratic majority to re-make decades of labor law

With the change to a Democratic majority in the House and Senate last year, unions are finding a more receptive audience for proposed changes in labor laws. Earlier this year, Congress passed HR 800, the Employee Free Choice Act of 2007, which would have made sweeping changes to the National Labor Relations Act (NLRA). The bill, which failed in the Senate, would have made it easier for unions to represent a workforce by: (1) requiring the National Labor Relations Board (NLRB) to certify a union if a majority of workers signed union cards, eliminating the need for secret ballot elections; (2) requiring companies and newly certified unions that are unable to reach agreement on an initial contract within 90 days to enter into binding arbitration, with the resulting contract remaining in force for two years; and (3) increasing penalties imposed on employers, but not unions, for unfair labor practices committed during a union organizing campaign.

Also afoot is a movement to overturn the Oakwood/Kentucky River trilogy of cases decided by the NLRB last year, addresssing which employees qualify as supervisors under the NLRA.  The unions assert that the NLRB decisions will lead to a massive reclassification of workers as supervisors, who are ineligible for union representation.  The Re-Empowerment of Skilled and Professional Employees and Construction Tradeworkers (RESPECT) Act, introduced by Senators Dodd (D-CT), Kennedy (D-MA), and Durbin (D-IL) earlier this year, would amend the definition of “supervisor” under the section 11(2) of the NLRA to limit the number of employees who can be so classified.  The House Education and Labor Committee approved the House version of the bill (HR 1644) on September 19.

Regardless of whether the RESPECT Act succeeds, the introduction of pro-union legislation is likely an indication of things to come in 2008. Stay tuned......

Safety committees mandatory for all Oregon employers

Oregon HB 2222, effective January 1, 2008, requires all employers to establish and administer a safety committee or hold safety meetings. Previously, most employers of 10 or fewer employees were exempt under ORS 654.176. OR-OSHA is still working on the implementing regulation (presumably an amendment to OAR 437-001-0765). The proposed rule is likely to be available here within the next month or so.

Washington minimum wage increases to $8.07 in 2008

Effective January 1, 2008, Washington's minimum wage will increase to $8.07.  Washington law requires that the state minimum wage be adjusted each year acccording to the change in the federal Consumer Price Index for Urban Wage Earners and Clerical Workers during the 12 months ending August 31.  This year's 1.8 percent increase, applied to Washington's current minimum wage of $7.93 an hour, generated an increase of 14 cents in next year's minimum wage.

California Law Limits Use of Employees' Social Security Numbers

California employers are required to provide itemized statements with employee paychecks that include employee Social Security numbers or other personal identification numbers under Labor Code 226.  As of January 1, 2008, however, only the last four digits of a Social Security number or any other personal identification number may be shown on the statements. If your company has California employees, now is a good time to check that your payroll system is in compliance, or will be by the first of the year.  Employers (even those without California employees) may also wish to review California's Recommended Practices on Protecting the Confidentiality of Social Security Numbers (California Department of Consumer Affairs, Office of Privacy Protection April 2007).

Governor signs bill limiting non-competition agreements

Earlier this week Gov. Ted Kulongoski signed into law Senate Bill 248, which significantly restricts Oregon employers' ability to require employee non-competition and arbitration agreements.  The new law applies to agreements entered into beginning January 1, 2008.  See our earlier coverage of the legislation, including a description of its key elements, here.

Payments to corporate directors are subject to unemployment tax, Court of Appeals holds

The Oregon Court of Appeals ruled today that a corporation's payments to members of its board of directors constitute "wages" for "employment" under ORS Chapter 657, and thus are subject to state unemployment taxes.  In that chapter, the legislature chose to define the term "employment" as any service for an employer that is performed for remuneration.  This broad definition brings corporate directors within the scope of the unemployment insurance system.  The court cautioned that its holding Necanicum Investment Co. v. Employment Department does not mean that directors are deemed "employees" for any other purpose.

Reminder - Federal minimum wage increases to $5.85 on July 24

We previously reported on the increase in the federal minimum wage, which begins with an incremental hike to $5.85 on July 24, 2007.  Effective that same date, employers must post the updated federal minimum wage poster.  A free copy of the poster is available here.

To see our earlier report on the federal wage and hour increase, go here.

Oregon legislature curtails employee non-competition and arbitration agreements

At the end of its 2007 session, the Oregon legislature passed a bill that imposes significant new restrictions on employee arbitration and non-competition agreements.  If the governor signs Senate Bill 248 into law, both arbitration and non-competition agreements between employers and employees will be unenforceable unless (1) the employer informs the employee of the agreement by a written offer received at least two weeks before the first day of employment, or (2) the agreement is entered into upon subsequent bona fide advancement of the employee. 

In addition, aside from some restrictions specific to the broadcast industry, non-competition agreements will not be enforceable at all unless

• the employee is exempt from overtime pay under ORS 653.020(3),
• the employee has access to trade secrets or other competitively sensitive business information, and
• the employee's annual gross compensation at termination exceeds the median family income for a four-person family under Census Bureau guidelines. 

The bill provides that non-competition agreements will not be enforceable for a period longer than two years.

The new law says that the foregoing restrictions do not apply to employee or customer nonsolicitation agreements.  But it is unlikely that courts would uphold such nonsolicitation agreements where the employer is unable to show a protectable interest or that the restrictions as to time and/or scope are reasonable.

The new law will apply to arbitration and non-competition agreements entered into on or after January 1, 2008.

Ater Wynne scores victory for National Guardsman

Last week a federal court jury in Portland awarded nearly $1 million in damages to a member of the Oregon National Guard who was wrongfully discharged from his employment with Target Corp.  Ater Wynne attorney Mark Turner represented the plaintiff, James Patton, at trial.  See the Oregonian's coverage of the case here.

Oregon Court of Appeals allows private cause of action for rest break violations

On Wednesday the Oregon Court of Appeals held that employees may sue employers who fail to provide a paid rest period as required by state law.  BOLI regulations mandate a ten-minute paid rest period for each four-hour segment worked.   The court agreed with the class action plaintiffs' argument that employees are entitled to four hours' pay for every three hours and fifty minutes of work, and that for each rest period missed, employers owe employees an additional ten minutes' pay.  See the court's opinion in Gafur v. Legacy Good Samaritan Hospital here.

This result is contrary to a 1999 ruling from Oregon's federal district court -- Talarico v. Hoffman Structures, Inc., 1999 U.S. Dist. LEXIS 20909 -- which held that, while a failure to provide paid breaks may result in administrative sanctions, it does not create a private right of action for lost wages.   

In addition to wages for each missed break, an employee will presumably be entitled to penalty wages for failure to pay all wages due pursuant to ORS 653.055 and, if the employee's employment has ended, an additional final pay penalty under ORS 652.150.  The Court of Appeals decision will undoubtedly result in a significant increase in class actions for missed break periods.

Congress may overturn controversial Supreme Court opinion on employment discrimination

This week Congress may take the first steps to undo a recent U.S. Supreme Court decision that curtails employment discrimination claims.  On May 29, the Supreme Court decided Ledbetter v. Goodyear Tire and Rubber Co., Inc., dismissing a claim for twenty years of sex discrimination manifested as discriminatory pay.  A jury had awarded Ledbetter, a female employee who worked in a male-dominated workforce, $3,514,417 in damages, which the trial court later reduced to $360,000. The decision resulted in the dismissal of plaintiff’s Title VII claim because, the court said, she waited too long to file it. 

A claim under Title VII must be filed within 180 days after the last discriminatory act occurs.  The "act" may be a discrete event, such as a termination or demotion.  Or it may consist of a series of events that are not individually actionable, but cumulatively violate the statute, such as harassment that becomes “severe” and thus, actionable, over time.  The act underlying plaintiff’s claim was a history of discriminatory performance evaluations that resulted in lower pay raises.  As the evaluations all occurred more than 180 days before she filed a claim with the EEOC, the majority of the court held that the claim was time barred.  The court reasoned that to hold otherwise would allow a plaintiff to pursue a claim based on a decision that occurred twenty years ago, even if she knew the circumstances at the time.

Well, not exactly, according to Justice Ruth Bader Ginsberg.  Writing for the four dissenters, Justice Ginsberg pointed out that employees like Ledbetter who are subject to discriminatory pay practices have no immediate cause to suspect discrimination. (In fact, according one report, Ledbetter learned of the discrimination when she was 60 years old and on the verge of retirement, when she received an anonymous letter stating her pay was significantly less than that of her male co-workers.) Many employers don’t share information about pay differentials, and pay disparities often occur in small increments over time, as they did here.  Moreover, employers are not defenseless when employees raise stale claims.  They can assert defenses such as waiver, estoppel, and equitable tolling.  Reading her dissent from the bench, Justice Ginsberg urged Congress to “correct” the Court. 

Congress may grant Justice Ginsberg’s request.  Although it cannot revive Ledbetter’s claim, the House Education and Labor Committee is scheduled to hear testimony from Ledbetter today to consider legislation to overturn the Supreme Court’s decision.

Feds to increase minimum wage for the first time in a decade

Congress and the president have agreed to increase the minimum wage to $7.25 per hour in three stages over two years. That amounts to an increase of $2.10 over the current rate of $5.15 per hour. The minimum wage increase was part of the larger bill (HR 2206) to fund the Iraq war, which President Bush signed on May 25th. Read more about the bill here and here.

The first stage of the increase is a seventy cent raise to $5.85 per hour that becomes effective 60 days after the President signed the bill.  The federal increase in the minimum wage will have no impact on wages for workers in Oregon, where the minimum wage is $7.80 per hour, the second highest in the nation. The state with the highest minimum wage is Washington, at $7.93 per hour.

Washington State legislature passes paid family (really parental) leave act

Washington is now only the second state in the United States to provide for paid family leave – the other state is California.  Under the recently enacted Engrossed Second Substitute Senate Bill 5659,  employees will be able to apply to the state for up to two hundred and fifty dollars per week in wage replacement benefits for parental leaves of absence lasting up to five weeks.  Such paid leave becomes available October 1, 2009.  Leave is available for bonding with a newborn or newly placed adopted child.

The enacted bill is less comprehensive than a prior version that would have in addition provided paid leave for the employee's serious health condition or for the serious health condition of a family member.  It also leaves unresolved how the paid parental leave will be funded.  The enacted bill simply establishes a task force charged with determining the most appropriate method of financing and administering the paid leave program.  The task force is required to report to the legislature by January 1, 2008.

Employers may be charged for unemployment benefits even when employees are physically or mentally unable to do their jobs

If you thought that an employer that discharges an employee for inability to do his job couldn’t possibly be responsible for unemployment benefits, you would be wrong, just as the employer was in Vavrosky Maccoll Olson Busch & Pfeifer, PC v. Employment Department.  In that case, decided last week by the Oregon Court of Appeals, the employer law firm terminated the employment of an attorney whose bipolar disorder and the medication he used to treat it interfered with his ability to work. The employer sought relief from charges under ORS 657.471(5)(b) after the employee was granted unemployment benefits. That statute creates an exception from charges when an employee is “unable to satisfy a job prerequisite required by law or administrative rule.”  The Court of Appeals gave the law a narrow interpretation, holding that it applies only when the employer has no choice but to discharge the employee due to the employee’s inability to satisfy a readily ascertainable legal requirement, such as licensing. Even if the attorney discharged in this case was unable to satisfy the standards of his profession, he remained licensed to practice law. Consequently, the court affirmed the Employment Department’s refusal to grant the employer relief from charges.

Court of Appeals upholds mandatory arbitration in employment contract

This week the Oregon Court of Appeals reversed the trial court's finding of unconscionability and upheld a mandatory arbitration clause in an employment contract, sending an employee's discrimination and other claims to an arbitrator instead of a jury.  Upon initial employment with the defendant, plaintiff signed an agreement to arbitrate all disputes rather than file suit in civil court.  Both federal and Oregon law favor arbitration, but the enforceability of any arbitration agreement in Oregon is governed by Oregon contract law.  "Unconscionability" is one defense to the enforcement of contracts in Oregon.  The test for "unconscionability" has two parts, one procedural and the other substantive.  A contract is procedurally unconscionable, and therefore not enforceable, if there is "oppression" or "surprise" in the "conditions of contract formation," but unequal bargaining power alone is insufficient for a finding of procedural unconscionability.  A contract is substantively unconscionable if the "terms" of the contract are "unreasonably" one-sided, such that their "effect" makes the parties' respective obligations "so unbalanced as to be unconscionable."

The Court reviewed the terms of the arbitration ageement in light of the foregoing, and held that the agreement was enforceable, sending the case back to be litigated in the agreed-upon arbitration forum.  In doing so, the Court noted that the agreement did not unfairly impair the employee's rights because it provided for the same law as would have applied in court, and for many of the same procedures followed by the courts.  Further, the agreeement did not impose restrictions on the type or amount of recovery that could be awarded by the arbitrator; did not exclude punitive damages or attorney fees; did not impose unreasonable limits on discovery or admissible evidence; and did not impose tight deadlines on the filing of claims.  To read the entire opinion in Motsinger v. Lithia Rose-FT, Inc., click here.

7th Circuit prohibits mandatory exhaustion of paid leave benefits during paid FMLA leave

Most employers require employees who want to take family medical leave (FML) -- which is typically unpaid -- to use accrued paid leave (e.g., vacation and sick leave) benefits during the period of absence.  If an employee has not yet used his annual paid leave benefits, this requirement has the effect of limiting the amount of time employees can spend away from work each year.  Requiring the use of paid leave during an unpaid portion of FML is permissible under state and federal law.  However, an employer's ability to require the use of paid leave is not absolute.

In Repa v. Roadway Express, Inc., the 7th Circuit Court of Appeals recently found an employer in violation of the Family Medical Leave Act when it required an employee who was receiving disability pay (from a health and welfare benefit fund to which the employer contributed) to use her accrued sick and vacation leave benefits.  The court relied on a Department of Labor Regulation, 29 CFR 825.207(d), which provides that when an employee is receiving disability or workers compensation pay, the leave is not unpaid and the section of the regulation allowing for the substitution of paid leave is inapplicable.  Although Roadway argued that the regulation contravened Congressional intent and was therefore invalid because it allowed employees to take time off in excess of 12 weeks, the court refused to consider the argument because Roadway failed to assert it in the lower court.

As the federal regulation remains intact for now, Oregon employers who are subject to the Federal Family Medical Leave Act (those with 50 or more employees) are well advised to follow it.  However, employers who are only covered by the Oregon Family Leave Act (those with 25 to 49 employees), should be aware of the difference between state and federal law on the subject of exhaustion of paid leave benefits.  Under OFLA regulations, the employer, with the employee's consent, may make deductions from the employee's sick leave while the employee is receiving workers compensation, provided the sick leave payments make up for, but do not exceed, the employee's daily wage that is not covered by time loss benefits.  See OAR 839-009-0280(3) (citing ORS 656.240).  OFLA regulations do not otherwise limit an employer's ability to require employees to use paid leave benefits concurrently with other types of paid or unpaid leave.

Dissent highlights weaknesses in Wal-Mart class action

Last week the Ninth Circuit affirmed the creation of the largest class action in history:  1.5 million current and former female Wal-Mart employees claiming discrimination in promotions.  The ruling was hailed as a landmark, but it may be only a temporary one.  A strong dissent by Andrew Kleinfeld, one of the judges on the three-judge panel, raises questions about whether majority's ruling will survive later review, by either an en banc panel of the Ninth Circuit or the Supreme Court.  Judge Kleinfeld dissented on several grounds, including these:

1.  To proceed as a class action, a case must present issues of fact or law common to the class.  Judge Kleinfeld writes that the only issue shared by the huge class is whether Wal-Mart's promotion criteria are "excessively subjective."  He contends that this is too slim a reed on which to hang the case; the existence of subjective criteria is not the same as employment discrimination. 

2.  Plaintiffs claim that injunctive or declaratory relief is an appropriate remedy for the class as a whole, but in fact many class members no longer work for Wal-Mart and cannot benefit from an injunction requiring, for example, the adoption of objective criteria for promotions.

3.  The district court order requires that the jury, if it rules in favor of plaintiffs, may set a lump sum amount of punitive damages.  A special master would then devise a formula to distribute the funds to individual plaintiffs, without any adjudication as to whether each individual plaintiff was in fact injured by discrimination.  Judge Kleinfeld contends that this methodology violates Wal-Mart's due process rights.

Given the trend within the Ninth Circuit of deciding more cases en banc -- which means a rehearing by a 15-judge panel -- last week's decision may not be the final word from the Ninth Circuit.

See coverage of the Dukes v. Wal-Mart ruling here, here, here, and here.

Ninth Circuit revisits employees' expectation of privacy in workplace computers

Earlier this week, the Ninth Circuit revised its opinion in United States v. Ziegler, 456 F.3d 1138 (9th Cir. 2006), in which it held that an employee had no objectively reasonable expectation of privacy in his workplace computer.  On reconsideration, the court concluded that the employee did have a reasonable expectation of privacy - at least with respect to government intrusion under the Fourth Amendment's prohibition on unreasonable search and seizure - because his computer was password protected and kept in a locked office that was not shared with others.  United States v. Ziegler, Case No. 05-30177(9th Cir., Jan. 30, 2007).  However, the court also concluded that, although the employee had an expectation of privacy vis-a-vis the government, the employer was not prevented from giving valid consent to a government search of the employee's computer as a "third party with common authority" over its office space and equipment.  The court relied heavily on the fact that the employer "had complete administrative access to anybody's machine," routinely monitored Internet traffic, and apprised its employees of its monitoring through training and an employment manual.

Although the new Ziegler decision represents a retreat from the Ninth Circuit's earlier position that an employer's computer-use policy could absolutely preclude an employee's expectation of privacy in his or her workplace computer with respect to government warrantless searches, it recognizes that the employer's rights under such a policy as a "third party with common authority" can effectively defeat an employee's Fourth Amendment objection to a search by the government.

Labor Commissioner proposes change to Oregon’s employee non-competition law

House Bill 2257, proposed by Oregon’s Commissioner of Labor and currently under consideration by the state legislature, would change Oregon’s employee non-competition law by making non-competition agreements unenforceable in circumstances where the employee is “laid off.”  Under the proposed new law, a layoff is “the permanent termination of an employment relationship for reasons that are beyond the employee's control and that do not reflect discredit upon the employee.  Reasons for a layoff include, but are not limited to, the elimination of the employee's position, a lack of available funding or work, a reduction in the size of the workforce and changes in the workplace that affect staffing needs.”

To track HB 2257 and other legislative measures, go here.

Employers in San Francisco Must Provide Paid Sick Leave

Companies that have employees working in San Francisco need to be aware of Proposition F, which requires employers to provide paid sick leave to employees working in San Francisco, whether or not the company maintains an office there.  Paid leave accrues at the rate of one hour for every 30 hours worked, up to designated maximums that depend on the size of the employer.  Unused leave carries over from year to year, limited to the stated maximums.  Leave may be used for the employee's illness or that of a family member, domestic partner, or designated person.  The ordinance, which goes into effect on February 5, 2007, requires employers to post information about the paid leave law.  Obtain a copy of the required poster here.

BOLI issues proposed rule on sick leave deductions under OFLA and workers compensation leave

BOLI has issued a proposed rule regarding the deduction of sick leave for absences that qualify for OFLA and workers compensation leave.  The new rule provides that when the leaves run concurrently, the employer may make deductions from the employee's accrued sick leave only with the employee's consent, and only to the extent the amount deducted covers the portion of the employee's daily wage that is not covered by time loss benefits.  The amendment is intended to make the rule consistent with ORS 656.240.

BOLI is accepting comments until November 30, 2006. Comments may be sent to Marcia L. Ohlemiller, Rules Coordinator, 800 NE Oregon St. #1045, Portland, OR 97232 or via email at marcia.l.ohlemiller@state.or.us.

BOLI Proposes Rule Changes to Clarify Time Limitations

On October 10, 2006, the Bureau of Labor and Industries filed Notices of Proposed Rulemaking for amendments to Division 3 Civil Rights Rules.  The proposed changes to OAR 839-003-0025 and OAR 839-003-0065 are intended to clarify time limitations for notifying respondents of civil rights complaints and for respondents to respond to civil rights complaints. 

The proposed rules state that BOLI will provide a written notice to the employer within 30 days after an administrative complaint is filed.  The rules impose a 14-day deadline on parties responding to the complaint.  The 14-day response time, which runs from the date of the notice, as opposed to the date on which the notice is received, may provide inadequate time for some employers to investigate and submit a written response.

BOLI is accepting comments on the proposed rules until November 28, 2006.  Comments may be mailed to Marcia Ohlemiller, c/o BOLI, 800 NE Oregon St. #1045, Portland Or. 97232 or emailed to Marcia.L.Ohlemiller@state.or.us.         

Sixth Circuit expands successor liability under FMLA

When assessing liability for another company's corporate obligations, courts distinguish between a purchaser of stock and a purchaser of assets, typically imposing liability on the former but not the latter.  When the liability sought to be imposed is an employment obligation, the scope of liability is often broader, and may result from either a stock purchase or asset transfer, depending on the circumstances.  However, in a case of first impression, the Sixth Circuit held that neither a merger or transfer of assets is a necessary prerequisite to imposing successor liability under FMLA.

In Cobb v. Contract Transport, Inc., the plaintiff worked as a trucker for Byrd Trucking, driving a Philadelphia-Denver route for the United States Postal Service (USPS).  The contract specified, among other things: (1) the type of truck required; (2) hiring criteria for truck drivers; and (3) the employees' wages, hours, and health insurance.  When the USPS selected Contract Transport as the successful bidder for the Philadelphia-Denver route, Contract Transport hired drivers who had previously driven the same route for Byrd.  Plaintiff drove the route in the same manner, making the same stops, and using the same transfer point for Contract Transport as he had for Byrd.

Several months after he started working for Contract Transport, Cobb became ill, requiring emergency surgery. Shortly after notifying Contract Transport of his need for medical leave, Cobb was fired for making himself "unavailable for work."  He sued under FMLA, but the district court found him ineligible and dismissed the case because he worked for Contract Transport for less than 12 months, which is the minimum threshold for eligibility under FMLA.

On appeal, plaintiff argued that he was, in fact, an "eligible employee" because the three years he worked for Byrd counted toward his FMLA eligibility under the theory of successor liability.  The Sixth Circuit agreed, reasoning that the FMLA implementing regulations do not require a merger or transfer as a precondition to imposing successor liability.  Examining earlier cases that decided successor liability under Title VII and labor law, the court concluded that the courts "apply an equitable, policy-driven approach."

Successor liability is imposed in labor law if the court determines that it would be equitable to impose such liability considering 1) the defendant’s interest, 2) the plaintiff’s interest, and 3) federal policy embodied in the relevant statutes in light of the particular facts of the case and the particular duty at issue. See EEOC v. MacMillan Bloedel Containers, Inc., 503 F.2d 1086, 1089-91 (6th Cir. 1974) (adopting labor approach to successor liability in a Title VII case).

The court in MacMillan deemed the following factors relevant in determining whether to impose successor liability: 

(1) whether the successor company has notice of the charge; (2) the ability of the predecessor to provide relief; (3) whether the new employer uses the same plant; (4) whether there has been substantial continuity of business operations; (5) whether the new employer uses the same or substantially same workforce; (6) whether the new employer uses the same or substantially same supervisory personnel; (7) whether the same jobs exist under substantially the same working conditions; (8) whether [the defendant] uses the same machinery, equipment and methods of production; and (9) whether [the defendant] produces the same product.

MacMillan, 503 F.2d at 1094. These factors have since been codified in FMLA regulations at 29 CFR § 825.107.

Based on the FMLA regulation and prior cases, the Sixth Circuit reasoned that the duty to provide leave under FMLA has no relationship to a company’s physical assets. Rather, the duty "arises through statute and an employee’s tenure." Consequently, the court saw "no reason to hold that a merger or transfer of assets is a precondition to the imposition of the duty." Stretching this reasoning to the extreme, the court said:

Plaintiff has carried U.S.mail on the exact same route, with the exact same relay stops, for the past three years. In reality, it as if Plaintiff works for the USPS and not for one particular trucking company. Only the management, not the job, has changed.

The Cobb case is probably the most expansive reading of successor liability for employment obligations to date. While the case is not binding in the Ninth Circuit, companies should be aware that any merger, consolidation, asset purchase or other transaction that involves the continuation of business operations with the same employees may result in liability for the predecessor's employment obligations.

Washington minimum wage will increase January 1

Washington’s minimum wage will increase 30 cents to $7.93 an hour beginning January 1, 2007.

Don’t forget September 30 is the deadline for filing EEO-1 reports for 2006

Employers of 100 or more employees, and federal contractors with government contracts of $50,000 or more and 50 or more employees, must file an EEO-1 report each year. The EEO-1 Report is a government survey that requires employers to provide a head count of their employees by job category, and then by gender and designated race and ethnicity categories within each job category. The report must reflect employment numbers from any pay period in July through September of the reporting year.

Covered employers that have not received the EEO-1 packet should contact the EEO-1 Joint Reporting Committee Toll Free at (866) 286-6440, or by e-mail at e1.techassistance@eeoc.gov. General information about the EEO-1 Report is available at the EEOC’s web site at www.eeoc.gov. Aggregate EEO-1 data will be made available on the EEOC’s web site, in addition to being compiled in an annual public report.

January 2007 Deadline Looms For Health Care Employers

Any entity receiving (or making) annual payments under Medicaid of at least $5 million has until January 1, 2007 to comply with employment provisions contained in the Deficit Reduction Act of 2005. These provisions require covered entities to educate their workforce about the False Claims Act. The False Claims Act prohibits the submission of false claims to the government for payment and provides protection against retaliation to employees who report suspected violations.

Specifically, the Deficit Reduction Act requires covered entities to: (1) establish written policies for all employees, contractors and agents that provide detailed information about the federal False Claims Act and related administrative and state laws and whistleblower protections under such laws; (2) include in such written policies detailed provisions regarding the entity's policies and procedures for detecting and preventing fraud, waste, and abuse; and (3) include in any employee handbook a specific discussion of the False Claims Act and related laws and the rights of employees to be protected as whistleblowers and the entity's policies and procedures for detecting and preventing fraud, waste, and abuse.

Failure to implement these policies could disqualify a covered from eligibility for Medicaid payments.

OFCCP issues new standards for determining compensation discrimination

The OFCCP, the agency responsible for enforcing Executive Order 11246, the anti-discrimination law applicable to federal contractors, has issued new standards that address systemic compensation discrimination. The OFCCP will be applying these standards when it conducts compliance reviews to determine whether contractors’ pay practices are discriminatory.

The new interpretive standards represent a departure from OFCCP’s prior use of the controversial “pay grade theory” of analyzing compensation practices. Under the pay grade theory, OFCCP compared the compensation of employees who were in the same pay grade or range based on the assumption that by creating the pay grade, the employer either “recognized that certain jobs are essentially similar in terms of skill, effort and responsibility” or “already identified certain jobs as having similar value to the organization.” The new standards codify the adoption of the “similarly situated” standard from Title VII. Employees are deemed similarly situated if they perform similar work and occupy positions involving similar responsibility levels, skills, and qualifications.

The interpretive standards have three components, the first of which is the adoption of the similarly situated standard. The second component is the adoption of a statistical technique called “multiple regression analysis” to assess the combined effects of the multiple, legitimate factors that influence employers’ compensation decisions. OFCCP will compare the compensation of similarly situated employees, while controlling for legitimate factors that influenced employers’ pay decisions, such as education, experience, performance, productivity, etc. The third component is an emphasis on the importance of anecdotal evidence of discrimination for a determination of whether systemic compensation discrimination exists.

OFCCP intends to continue using analysis of pay grade information, supplemented by the cluster regression, as indicators of potential compensation discrimination. However, the pay grade analysis, the cluster regression analysis, and other generalized approaches are only indicators of potential compensation discrimination. These techniques fall far short of the type of fact-intensive investigation and tailored analysis required to make and sustain an allegation of systemic compensation discrimination under Executive Order 11246 and OFCCP regulations.

The OFCCP publication of the final interpretive standards includes a discussion of comments that the OFCCP received in response to proposed interpretative standards published in the Federal Register on November 16, 2004.

Sustainability in Employment

If you missed my article entitled "Sustainability in employment: It's about achieving balance" in the Portland Business Journal last Friday, here is a link to it.

California Court of Appeals rejects exception to ban on noncompetes

On August 30, 2006, the California Court of Appeals ruled in Edwards v. Arthur Anderson LLP, 2006 WL 2498013, that there is no “narrow restraint exception” to California’s Business and Professions Code section 16600, which prohibits most noncompetition agreements. The court left intact the statutory and “trade secret” exceptions to section 16600.

The case was brought by Raymond Edwards, an employee in Arthur Anderson’s (AA’s) Los Angeles office. When he was hired in 1997, Edwards signed a noncompete that precluded him from soliciting or working for certain AA clients for 18 months following the termination of his employment. AA sold the tax practice for which Edwards worked to HSBC, which extended offers of employment to AA’s Los Angeles office personnel. However, as a condition of employment with HSBC, AA allegedly required its managers to sign a Termination of Non-Compete Agreement (TONC) that contained a broad release of claims against AA. When Edwards refused to sign the TONC, HSBC withdrew its offer and AA withheld severance benefits. Edwards sued AA for intentional interference with a prospective economic advantage, among other things.

Until now, two Ninth Circuit opinions, General Commercial Packaging v. TPS Package Engineering, Inc., 126 F3d 1131 (9th Cir 1997) and International Business Machines v. Bajorek, 191 F3d 1033 (1999), allowed narrow exceptions to California’s ban on noncompetition agreements under section 16600. In TPS, the Ninth Circuit upheld a contract prohibiting TPS from directly soliciting work from General Commercial Packaging’s (GCP’s) major client, for whom T