Labor & Employment Insights

When employees are required to remain on premises or otherwise be available to the employer during an unpaid meal break, the issue arises whether the meal time is compensable time under the Fair Labor Standards Act (FLSA).   Two tests have been developed by the courts of appeal in other jurisdictions, one focusing on whether the employee was relieved from all duties during the meal break, and the other more common view focusing on whether the employer or the employee received the “predominant benefit” of the meal break.   In Babcock v. Butler County, No. 14-1467 (3d Cir. 2015) the Third Circuit finally weighed in, adopting the “predominant benefit” test to determine whether the time is compensable.

The Facts: Pursuant to a collective bargaining agreement, Butler County Prison correction officers received a one hour meal period each shift, of which 45 minutes were paid and 15 minutes were unpaid.   During the meal period corrections officers were not permitted to leave the prison without permission, were required to stay in uniform and in close proximity to emergency response equipment, and remain on call to respond to emergencies.    The corrections officers claimed they were entitled to pay for the full hour (e.g., the unpaid 15 minutes) under the FLSA because these restrictions prevented them from leaving the facility, smoking or engaging in other personal errands during the meal period.  The County claimed that the lunch hours was a non-compensable “bona fide meal period” under the FLSA because the corrections officers received the “predominant benefit” of the break period.

The Holding:  The Third Circuit agreed with the District Court’s ruling that under the facts presented, the corrections officers were the predominant beneficiaries of the meal break, and thus the time was not compensable time under the FLSA.   The court rejected the minority “relieved from all duties” test that would result in the time being compensable if the employee was not free to leave the premises, was on call or was otherwise restricted in any way from engaging in personal activities during the break.  Under the more flexible “predominant benefit” test adopted by the court, such restrictions would not necessarily negate the “bona fide meal period” status if on balance the restrictions did not predominantly benefit the employer. In ruling against the corrections officers, the court observed that the officers could request permission to leave the prison to eat their lunch and could eat away from their desks.   The court also relied upon the fact that the officers were protected by a CBA that provided them with a partially-compensated meal period and assured them payment for overtime payments.  Under the totality of the circumstances, the court reasoned that despite the restrictions, the meal break was predominantly for the benefit of the corrections officers.

In a prior post we discussed the new test adopted by the National Labor Relations Board for determining when two entities can be deemed “joint employers” equally liable for unfair employment practices in violation of the National Labor Relations Act.  Now, the Third Circuit Court of Appeals (with jurisdiction over federal courts in NJ, DE and Eastern PA), has announced the test for determining when two entities can be deemed “joint employers” equally liable for violations of federal anti-discrimination laws.

The bad news is that the Third Circuit’s decision in Faush v. Tuesday Morning, Inc., D.C. Civ. No. 2-12-cv-07137 (Nov. 18, 2015) may significantly impact companies who secure workers through staffing agencies or other third party providers. The good news is that the Tuesday Morning court rejected a broad test that would have made it easier for employees to establish “joint employer” status in favor of a narrower test that may make it easier for an employer to resist “joint employer” status.

The Facts: Matthew Faush, African American, was employed by Labor Ready, a staffing agency providing temporary workers to retailer Tuesday Morning, Inc.  Following his termination, Rauch filed suit against Tuesday Morning claiming race discrimination in violation of Title VII and the Pennsylvania Human Relations Act (PHRA). Tuesday Morning moved for summary judgment, claiming that Faush was not its “employee” and thus it could not be liable for employment discrimination under Title VII or the PHRA.  The court below agreed and dismissed the case.   Rauch appealed.

On March 1, 2015 most New Jersey employers with 15 or more employees became subject to the requirements of the “The Opportunity To Compete Act” (the “Act”), more commonly known as the “Ban the Box” law that places significant restrictions upon employer inquiries into an applicant or employee’s criminal history. As explained more fully in our prior article on New Jersey’s Ban the Box law, with certain exceptions the law precludes an employer from i) placing an advertisement indicating that applicants for employment with criminal record will not be considered; ii) require an applicant to complete an employment application that makes inquiry into the applicant’s criminal record  prior to the completion of an initial interview; or iii) asking any questions about the applicant’s criminal record during the initial interview.

Following the Act’s passage, many employers had residual questions about how the Act was to be implemented, including questions  about  whether there needed to be a time interval between the first interview (where the inquiry about a criminal record is prohibited) and the second interview (where the inquiry about a criminal record is permitted); whether an “interview” would include an email exchange or written questionnaire; the extent to which employers, including multi-state employers, could make references to criminal background checks in employment applications; etc.

The Final Rules and Agency Guidance: On December 7, 2015 the New Jersey Department of Labor and Workforce Development issued its Final Rules for implementing the requirements of the Act. In addition, the Department published specific “Responses” to comments submitted by employers  seeking clarification of the Act’s requirements and the proposed regulations.   The Department’s clarifications include (but are not limited to) the following:

A recent decision from the New Jersey Appellate Division serves as a warning to employers that arbitration clauses contained in employee handbooks are likely unenforceable.  In C.M. v. Maiden Re Insurance Services, LLC, (“Maiden Re”), the employee filed an action in the New Jersey Superior Court alleging that she was wrongfully terminated by Maiden Re for seeking a reasonable accommodation to her disability in violation of the New Jersey Law Against Discrimination.  Maiden Re moved to dismiss the Complaint and instead compel the employee to resolve the dispute before an arbitrator pursuant to the arbitration clause contained Maiden Re’s employee handbook.  The Trial Court granted Maiden Re’s motion, sending the matter to arbitration.   On appeal, the Appellate Division refused to enforce the employee handbook’s arbitration clause and remanded the matter back to the Trial Court for resolution of the discrimination claim.

Handbook Disclaimer Renders Agreement to Arbitrate Unenforceable: Like most employee handbooks, Maiden Re’s handbook contained a contractual disclaimer specifically providing that its terms and conditions, “should be regarded as management guidelines only…” and were “not intended to create contractual obligations…” nor “intended to create a contract…”  The inclusion of the contractual disclaimer proved fatal to Maiden Re’s efforts to compel the employee to arbitrate her claims.   The Appellate Division reasoned that Maiden Re “cannot selectively disavow the [disclaimer] language in the handbook to insulate the “arbitration” provision from the legal consequences of the disclaimer provision.”

The court also questioned whether the employees’ electronic acknowledgement of the handbook that failed to include language indicating that the employee was waving her right to adjudicate employment disputes in a judicial forum, was sufficient evidence of an ”unambiguous intention” to arbitrate statutory claims.  The court noted that it did not need to rule on the issue because the disclaimer rendered the arbitration provision unenforceable.

In recent years the National Labor Relations Board (NLRB) has issued numerous opinions that decidedly favor employee rights to engage protected activity under the National Labor Relations Act (NLRA) over employer rights to manage conduct in the workplace. However, a recent decision by a NLRB administrative law judge that Cooper Tire & Rubber violated the NLRA by unlawfully terminating an employee who made overtly racist statements on a picket line has many employers deeply troubled about how far the Board is willing to subordinate employer rights in the workplace.

The Facts: Following the expiration of Cooper Tire’s Collective bargaining agreement with the United Steelworkers, Cooper hired temporary replacement workers at its Findlay, Ohio plant until a new agreement was reached.   In response, the Union set up numerous picket lines at the facility and chanted various “scab” comments to the replacement workers, many of whom were African-American, as they crossed the picket line.   However, union member Anthony Runion was caught on camera yelling racist comments to the replacement workers, including the following: “Hey, did you bring enough KFC for everyone?”, “Hey, anybody smell that? I smell fried chicken and watermelon.”   The company terminated Runion for making racist comments in violation of its anti-harassment policy, and the union’s grievance of the termination was denied at arbitration.

The NLRB’s Ruling: On appeal to the NLRB, the Administrative Law Judge ruled that the Cooper’s anti-harassment policy was not controlling. Rather, the Judge reasoned that Runion was discharged for a reason prohibited under the under the National Labor Relations Act – the protected activity of engaging in picketing. In so doing, the Judge observed that while Runion’s comments were indeed racist and reprehensible, his conduct “did not tent do coerce or intimidate employees [crossing the line], nor did they raise a reasonable likelihood of an imminent confrontation . . . they were not violent in character, and they did not contain any overt or implied threats to replacement workers or their property. The Judge noted that serious acts of misconduct during union activities can negate the protections otherwise available under the NLRA, this was not the case here, and thus the statute’s protections trumped the company’s anti-harassment policy.

On July 15, 2015 the U.S. Department of Labor (DOL) issued an Administrator Interpretation aimed at eradicating what the DOL perceives as widespread improper misclassification of “employees” as “independent contractors” in violation of the Fair Labor Standards Act (FLSA). According to the DOL, misclassifying workers as independent contractors results in workers being deprived of important protections such as minimum wage, overtime compensation, unemployment insurance and workers compensation benefits available to employees. The DOL also pointed to the loss in payroll tax revenues to the government and the intentional misclassification by some employers to cut costs and avoid compliance with labor laws. Citing the “economic realities test” used by the courts to determine whether a worker is an employee or independent contractor under the FLSA, the DOL declared that “in view of the expansive definition of ‘employ’ under the Act, most workers are employers under the FLSA.”

The DOL’s expansive interpretation “employ” under the FLSA: The FLSA simply defines “employ” as “to suffer or permit to work.” Historically, the multi-factored “economic realities test” has been applied to determine whether an employer “suffers or permits” an individual to work within the meaning of the FLSA. The economic realities test considers whether:

• the work being performed is an integral part of the company’s business

In its recent landmark ruling in State v. Saavedra, the New Jersey Supreme Court ruled that a former school board employee who was pursing discrimination and retaliation claims against the school could be criminally prosecuted for removing confidential school documents she claimed would aid her in pursuing those legal claims. This decision was somewhat of a surprise in light of the court’s 2010 ruling in Quinlan v. Curtiss-Wright Corp., that an employee’s theft and use of confidential personnel documents to assist her discrimination lawsuit against her employer was protected activity under the New Jersey Law Against Discrimination (LAD).

The upshot if these two rulings is that while an employee who steals corporate documents may not necessarily be fired for doing so, they might be subject to criminal prosecution under certain circumstances.

The Facts: Ivonne Saavedra was a clerk for the North Bergen Board of Education (the Board) who filed suit against the Board alleging discrimination and retaliation claims in violation the LAD and the Conscientious Employee Protection Act (CEPA). During discovery, Saavedra produced over 350 documents, including original and copies of confidential documents in violation of Board policies. Many of the documents contained sensitive educational and medical information about students, information that the Board was prohibited from disclosing to third parties by federal and state law. The Board notified the Hudson County prosecutor who in turn secured an indictment against Saavedra for official misconduct and theft. Saavedra efforts to dismiss the indictment were unsuccessful at the trial and appellate level, and the Supreme Court affirmed.