Legal Bites

The U.S. Department of Labor has launched a new investigation of wage law violations related to the disbursement of DOL ordered overtime reimbursement by the Upper Crust pizzeria chain, which has 17 Massachusetts restaurants. Last year, the DOL ordered Upper Crust to pay over $340,000 to 121 workers for its failure to pay at the time-and-a-half rate for work over the 40 hour overtime threshold. This investigation comes on the heels of a lawsuit by former cooks accusing Upper Crust of deducting the compensation for the overtime reimbursement from their paychecks.

The example of Upper Crust should serve as a reminder of the importance of compliance with federal wage and hour laws in the restaurant industry. Restaurants should be particularly careful to maintain thorough records of wage history in order to demonstrate past compliance in the event of a complaint and/or investigation.

A recent Massachusetts Supreme Judicial Court opinion reaffirmed the limits of employer liability for employees’ actions outside the scope of employment. In Lev v. Beverly Enterprises-Massachusetts, the Court affirmed summary judgment in favor of the employer, ruling against the plaintiff who had been hit by a car driven by an intoxicated Beverly employee who was driving home in his own car after meeting at a restaurant with his supervisor to socialize and discuss work-related issues, during which time he consumed alcohol. The plaintiff had brought claims that (i) Beverly was vicariously liable for the employee’s negligence based on their employment relationship and (ii) that Beverly was liable under traditional negligence theories because it owed a duty to the plaintiff.

The plaintiff argued that Beverly should be vicariously liable for the employee’s negligence on the grounds that the employee was acting within the scope of his employment when he became intoxicated while meeting with his supervisor. The SJC rejected this argument, citing the precedent that travel to and from employment falls outside the scope of employment. When he was driving, the employee was no longer serving his employer and the employer is not liable for his actions.

The SJC also held that Beverly owed no common law duty to the plaintiff, rebuffing the plaintiff’s argument that the employer’s special relationship to its employees and ability to exercise control over them carried with it a duty to take reasonable steps to prevent the employee from consuming alcohol and from driving while intoxicated. The Court reasoned that an employer cannot be expected to foresee and take affirmative action to protect all potential plaintiff’s from an employee’s bad conduct. Based on its conclusion that Beverly owed the plaintiff no duty, the Court declined to credit Beverly’s substance, drug, and alcohol abused policy as setting forth a duty of care standard.

Overall, the SJC clearly confirmed the limits on the ability to bring actions alleging an employer’s liability for employees’ actions that harm plaintiffs based on a reluctance to impose “a potentially onerous burden” on employers to monitor their employees’ off-the-job conduct.

The Wage and Hour Division of the U.S. Department of Labor recently issued guidance on the definition of “son or daughter” aimed at members of non-traditional families seeking FMLA eligibility to take approved leave for the birth or adoption of a child, to care for a newborn or newly-placed child, or to care for a child with a serious health condition. This guidance provides an expansive definition of the parent-child relationship by including circumstances where there is no biological or legal parent-child relationship, but the employee has a caregiving relationship, nonetheless.

The FMLA language defines a “son or daughter” as a “biological, adopted, or foster child, a stepchild, a legal ward, or a child of a person standing in loco parentis [. . .].” The DOL guidance states that an employee may stand in loco parentis to a child if s/he has either day-to-day responsibilities to care for the child or provides financial support. The in loco parentis analysis is a fact-specific one that looks to the age of the child, the degree to which the child is dependent on the employee, the amount of support provided by the employee, and the degree to which the employee exercises duties regularly associated with parenthood. Neither the FMLA nor regulations restrict the number of “parents” a child may have for FMLA purposes.

Where an employer is unsure if an employee’s relationship to a child supports FMLA eligibility, the employer may require reasonable documentation of the family relationship, which can be satisfied by a simple statement asserting that the requisite caregiving relationship exists for in loco parentis situations for which there is no legal documentation.

In Skinner v. Salem School District, Judge Laplante of the District of New Hampshire recently considered whether one may bring Title II ADA employment discrimination cases based on disability discrimination or if such claims must be brought under Title I. The employer school district moved for a judgment on the pleadings based on its argument that Title II of the Americans with Disabilities Act could not be used by its former employee to bring an employment discrimination claim. The Court denied the employer’s motion for lack of support for the principle that the statute clearly excludes employment discrimination claims.

The Court commented on the current circuit split on this issue. The 11th Circuit has held that the DOJ’s regulatory construction allowing ADA employment discrimination cases deserves sufficient deference to permit such cases to go to trial. The 9th Circuit has rejected this view, stating that the overall construction and purpose of the ADA forecloses the view that Congress intended Title II to apply in the employment context. The 1st Circuit has not taken a clear view on the issue. As a result, Judge Laplante refused to grant the motion for judgment on the pleadings due to the ambiguity of the law as it currently stands, even though he expressed an affinity for the 9th Circuit view. This leaves the door open for ADA employment discrimination cases to proceed to trial in the 1st Circuit – at least until the “ambiguity” is resolved by a Supreme Court or circuit ruling on the issue.

A recent opinion by the Supreme Court clarified the time limit for bringing workplace race discrimination claims based on a disparate-impact theory of discrimination. In a unanimous opinion issued on May 24, 2010 in Lewis v. City of Chicago, the Court held that African-Americans who had taken the exam to become Chicago firefighters and earned scores in the “qualified” range, but not the “well qualified” range brought a timely disparate-impact claim because their claim was within the deadline of when the City applied those classifications, even if it would have been time-barred as to when the City first established the classification.

The Court highlighted that Title VII prohibits employers from using a particular employment practice that causes a disparate impact on the basis of race, color, religion, sex or national origin. The Court found that the City of Chicago had used the classifications from its 1995 firefighter exam each time that it selected applicants to advance from the eligibility list, which it did multiple times during the subsequent years. When it “used” the list, the City committed a new discriminatory act. Because the plaintiff class filed discrimination charges with the EEOC within 300 days after one such unlawful practice occurred, it was not time-barred under the Title VII requirements for a timely complaint.

The opinion noted that the effect of this opinion could allow for workplace race discrimination lawsuits challenging employment practices that had been in place for years, during which time the employer’s evidence of the business necessity behind the challenged policy might become diluted. Nevertheless, the Court found this to be the meaning intended under the disparate-impact section of Title VII of the Civil Rights Act of 1964 in 42 U.S.C. §2000e-2(k)(1)(A)(i).

After undergoing some revisions, a bill codifying the scope of allowable provisions in Massachusetts non-compete agreements is advancing on Beacon Hill. The legislation is a mixed bag for Bay State employers, in some places simply codifying common law doctrines, but elsewhere pulling back from restrictions found reasonable by the courts. In some areas, the legislation could actually assist employers by removing uncertainty as to the reasonableness of a non-compete’s terms, thus avoiding a costly legal battle over reasonableness down the road. The following is a list of notable provisions in the bill:

The Good

• The bill does not alter current law allowing prohibitions on a former employee soliciting customers or employees to jump ship to a competing employer.

• The bill’s provisions do not apply to restrictive covenants entered into as part of the sale of a business or assets of a business.

The Bad

• Non-competition agreements cannot be enforced against employees making less than $75,000 per year (adjusted upward by $1,500 for each year after the bill’s passage). This provision could be troublesome to employers who have key employees earning under the $75,000 threshold, especially in the central and western parts of the state where salaries are lower than in Boston.

• The bill creates a strict one-year limit for the duration on non-competition agreements, and further provides that non-competes lasting six months or less are presumptively reasonable. While this provision may cause difficulties for employers that have relied on non-competes lasting longer than six months, the bill could actually assist employers by making it easier to enforce agreements lasting six months or less.

• The bill provides that continued employment is not sufficient consideration for a non-competition agreement presented to the employee after employment has commenced. Instead, the bill states that consideration of ten percent of the employee’s annual salary will be deemed “presumptively reasonable” compensation. Thus delay could be costly.

• The bill mandates that employees be given notice that of a required non-competition agreement seven days’ prior to commencement of employment, or when a written job offer is communicated, whichever is earlier. If a job offer is oral, the prospective employee must either be simultaneously told of the required non-competition agreement, or be provided written notice prior to his or her resignation from a current job. If the bill passes, employers would be well advised not to rely on the “prior to resignation” provision, as a new hire’s decision to quit his or her old job a few days early could invalidate your non-compete agreement.

The Ugly

• The bill mandates that a court shall award attorneys’ fees and costs to an employee if the court declines to enforce a material restriction in the agreement or finds that the employer acted in bad faith, among other reasons. There is a provision allowing for the employer to be awarded attorneys’ fees, but such an award is left to the court’s discretion and requires the challenged provisions to be those deemed “presumptively reasonable,” the agreement to have been enforced without substantial modification, and the employee to have acted in bad faith. This is an extremely high standard for an employer to meet.

• The bill allows a court to refuse to enforce any provision in a non-competition agreement, even those deemed presumptively reasonable, in “extraordinary circumstances,” or “where otherwise necessary to prevent injustice or an unduly harsh result.” Expect these phrases to become standard in the lexicon of plaintiffs’ attorneys, as their vagueness could essentially serve as a catch-all to override the bill’s provisions.

Stephen D. Coppolo, a member of the Employment Counseling and Litigation Practice Group, contributed this report.

Emily Kysel has a rare and potentially fatal allergy to paprika. She is so sensitive to the spice that she had a serious attack and had to leave work after she smelled the buffalo wings that her co-worker was eating a few cubicles away. At one point, she nearly died from eating chili containing paprika. Recognizing Ms. Kysel’s disability, her employer, the City of Indianapolis, agreed to allow her to have a service dog in the office. The dog, a golden retriever named Penny, was trained to jump on Kysel whenever she smelled paprika. She cost Kysel $10,000. On the very first day that Penny went to work with Kysel, one of Kysel’s co-workers suffered an asthma attack because she is allergic to dogs. The City informed Ms. Kysel that afternoon that Penny was no longer welcome in the office. Kysel was offered indefinite unpaid leave if she felt she could not work without the dog. Kysel then filed a complaint with the Equal Employment Opportunity Commission, alleging that her employer violated the Americans with Disabilities Act by failing to accommodate her disability. A lawyer for the City thinks that it has done enough to accommodate Kysel’s disability, including barring employees from eating food that contain paprika at their desks. Kysel disagrees, pointing out that the City allows blind employees to bring their service animals to work.

To view the related article as published in the New York Times online, click here.

The manager and owner of French Gourmet, a San Diego bakery, were arraigned in federal district court on April 21, 2010, on charges that they conspired to engage in a pattern or practice of hiring and continuing to employee unauthorized workers, a misdemeanor, in addition to 14 felony counts, including making false statements and shielding undocumented alien employees from detection. If convicted, the manager and owner face a maximum of five years in prison and a $250,000 fine on each count. The indictment also seeks criminal forfeiture of proceeds gained from the restaurant’s unlawful activities. According to the indictment, the resaurant’s managers certified on the firm’s Employment Verification Forms (I-9) that the documents they examined appeared to be genuine, and to the best of the their knowledge, the employees listed on the I-9 were eligible to work in the United States. The managers then put the illegal workers on the company’s payroll and paid them by paycheck until they received letters advising them that the Social Security numbers of the employees did not match the names of the rightful owners of the Social Security numbers. The indictment alleges that the restaurant then conspired to pay the undocumented employees in cash until the workers produced a new set of employment documents with different Social Security numbers. The criminal case against the restaurant and its managers is supported by employee and payroll records seized by ICE agents in a May 2008 search of the restaurant, which also resulted in the arrest of 18 undocumented workers. The lesson to employers: ensure compliance with I-9 requirements and establish an I-9 policy that includes completion and retention of Form I-9 for all employees, a strict policy against the employment of individuals who do not provide the proper eligibility documents for Form I-9, periodic reverification of employees, I-9 training for all employees who are part of the hiring process, and regular auditing of employees’ status.

Last week, Santa Clara County, California voted 3 to 2 to pass an ordinance prohibiting restaurants from giving away toys with meals that contain high levels of fat, sugar, sodium, and calories.  This includes meals that contain more than 485 calories and 600 milligrams of salt.   It means that even Happy Meals that substitute apple slices instead of French fries will face the toy prohibition.  You can read the ordinance here: http://www.sccgov.org/keyboard/attachments/BOS%20Agenda/2010/April%2027,%202010/202926863/TMPKeyboard203046978.pdf

Restaurants in the county have 90 days to comply with the law.  They can either improve the health of their offerings or stop giving away toys.  The County cites the fact that 1 in 4 children in the County are obese, and that disproportionately, these children come from lower income homes that fast food chains typically market to. 

Interestingly, 87% of residents in the County oppose the ban.  Nutritionists, however, say it levels the playing field.  In their opinion, children don’t beg to go to Burger King or McDonalds because they love the taste of the food.  They go because they want the toy or to play on the playground. 

It will be interesting to watch where this leads.  Will it be found unconstitutional for interfering with interstate commerce?  Surely it will be extremely burdensome on restaurants to offer different foods in Santa Clara than elsewhere in the country.  It would also impact their business to stop giving away toys there.  While this is precisely what the County wants, it may violate the Commerce Clause.

Additionally, many parents are complaining that the “Happy Meal ban” infringes on their rights to parent their child.  They feel that if they choose to let their children eat an unhealthy meal on occasion it is their prerogative and the County should not be dictating what their children can and can’t eat outside of school.  The County argues, however, that this is a safety and welfare issue and is the same as controlling other food safety issues.

If this law is upheld, what will follow? Prohibiting restaurants from providing coloring sheets and crayons if they sell unhealthy foods? Will kid friendly restaurants be held to a higher standard? Should they be?  If this is successful, will other counties and states follow suit? Stay tuned. 

 For more information, see the following articles:

http://www.nytimes.com/2010/04/28/business/28mcdonalds.html

http://articles.chicagotribune.com/2010-04-27/features/ct-talk-happy-meal-ban-0427-20100426_1_happy-meals-toying-restaurant-meal

http://news.yahoo.com/video/business-15749628/where-happy-meals-are-illegal-19362009

Andy Stern, head of the Service Employees International Union, has announced his resignation.  

Stern has been a controversial leader in the union cause, concentrating on expanding union membership and weighing in on national policy debates, while some traditionalists argue he forgot the roots of the union movement as a local, workplace advocacy movement.   

For example, Stern leaves after helping the White House achieve its legislative victory with national health care overhaul.  The SEIU spent $60 million for the Obama presidential campaign.

Stern also developed the model for creating large-scale bargaining units for publicly funded, home-based direct care workers. Those jobs, often in health and child care, were largely held by minority and immigrant women previously deemed ineligible to join a union.

But the union movement generally nevertheless seems stalled notwithstanding the changing political tide.  For example, the Employee Free Choice Act has lost support and may never be passed notwithstanding predictions to the contrary upon Barack Obama’s election.  According to the Bureau of Labor statistics, union membership remains low in the private sector (7.2%) as compared to the public sector (37.4%), and while membership has remained steady these last couple years (7.9 mm members in the private sector in 2008 compared with 7.4 mm in 2009) membership is at a historical low (17.7 mm members in 1983, or 20.1 % of the workforce).   

Where will the union movement go now remains to be seen.  Whether the decline in union membership is inevitable or beneficial is the subject of debate.  Whether the Obama administration will pursue the EFCA or put it aside in favor of other priorities will be something to watch for. 

Tell us, what do you think?