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Articles Posted in Employment Law

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A common dispute that arises in overtime and minimum wage litigation is whether an individual hired by the defendant is an independent contractor or an employee.  Many companies choose to hire independent contractors to perform work instead of hiring employees.  Because independent contractors are not considered “employees” under the Fair Labor Standard Act (“FLSA”), the minimum wage and overtime wage provisions of the FLSA do not apply to independent contractors.  Hiring independent contractors might also be beneficial to companies for tax purposes.  However, as many companies have learned through litigation, labeling a worker an “independent contractor” will not automatically preclude that individual from being considered an “employee” under the FLSA.

Courts look to the “economic realities” of the relationship between the company and the individual the company hired to determine whether the individual is an “employee” or an “independent contractor.”  To determine whether the individual is an employee as a matter of economic reality, courts consider the following 6 factors: (1) the degree of control exercised by the company on the individual; (2) the individual’s opportunity for profit and loss based on managerial skills; (3) the individual’s investment in equipment or personnel; (4) the skill required to perform the work; (5) the duration of the relationship between the company and the individual; and (6) whether the services performed by the individual are integral to the company’s business.

As the 6 factors suggest, the determination of whether an individual is an “independent contractor” or “employee” depends on the specific facts of each case.  Adding more complexity to the analysis, courts do not mechanically apply the six factors.  The weight that courts attribute to each factor ultimately depends on the court’s analysis and on the facts of each case.  A good example of the distinction between “employee” and “independent contractor” is detailed in recent cases regarding adult entertainers.  For example, in Stevenson v. Great Am. Dream, Inc., 2013 U.S. Dist. LEXIS 181551 (N.D. Ga. Dec. 31, 2013), a class of adult entertainers sued the nightclub that hired them (the “Nightclub”) for minimum and overtime wages.  The court analyzed the facts in the case in relation to the six factors detailed above and found that the entertainers were “employees” because 5 of the 6 factors of the economic reality test suggested “employee” status.

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When an employee brings a claim for unpaid overtime under the Fair Labor Standards Act (“FLSA”), the employee must prove that he or she worked overtime without proper compensation.  If the employer kept accurate records of the employee’s work hours, the employee could easily prove his or her case by referring to those records.  For that reason, the FLSA requires that employers keep proper and accurate records of the hours its employees work.  However, employers sometimes fail to keep accurate time records.  As the Supreme Court has held, “[t]he solution … is not to penalize the employee by denying him any recovery on the ground that he is unable to prove the precise extent of uncompensated work.  Such a result would place a premium on an employer’s failure to keep proper records.”   Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).  Instead, when the employer fails to maintain accurate records, the employee could prove its case by (1) proving that he or she has in fact performed work without proper compensation and (2) producing sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.

In Brown v. ScriptPro, LLC, 700 F.3d 1222, 1230 (10th Cir. 2012), the employee, Mr. Brown, claimed that he worked overtime hours from home.  Neither ScriptPro, LLC, (“ScriptPro”) the employer, nor Mr. Brown kept time records for the hours that Mr. Brown allegedly worked from home.  Through his and his wife’s testimony, Mr. Brown provided uncontroverted evidence that he worked overtime at home.  However, Mr. Brown also had to prove the amount and extent of the overtime worked.  Mr. Brown argued that because ScriptPro violated its statutory duty to maintain proper and accurate time records, Mr. Brown’s burden prove the amount and extent of his uncompensated overtime work should be relaxed.  The court disagreed.

As the court noted, “courts only relax the plaintiff’s burden to show the amount of overtime worked where the employer fails to keep accurate records.”  Brown, 700 F.3d at 1230.  The court held that ScriptPro did not fail to maintain proper and accurate time records because ScriptPro had implemented a time-keeping system that employees were required to use to record their hours worked, and becuase ScriptPro’s time-keeping system was accessible to employees from their respective homes.  “Mr. Brown easily could have entered his hours; in fact, he was required to do so. … There was no failure by ScriptPro to keep accurate records, but there was a failure by Mr. Brown to comply with ScriptPro’s timekeeping system.”  Brown v. Scriptpro, LLC, 700 F.3d 1222, 1230 (10th Cir. 2012).  Under those circumstances, the court found that ScriptPro did not violate the FLSA.

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Because arbitration usually is cheaper and faster than litigation, employers often include arbitration agreements in their employment contracts.  However, courts do not always enforce arbitration agreements.  Although federal law favors arbitration, state and federal courts may find an arbitration agreement unenforceable for several reasons.  One such reason is when the arbitration agreement contains a provision that contrary a federal statutory remedy.

Generally, a “fee-splitting” provision is a contractual provision requiring that the parties to an arbitration agreement share (or “split”) the costs of arbitration.  Moreover, a “fee-shifting” provision is a contractual provision that requires the losing party in an arbitration proceeding to pay the prevailing party’s fees and costs associated with the arbitration, i.e., the costs of arbitration “shifts” to the losing party.  “Fee-splitting” and “fee-shifting” provisions would normally not render an arbitration agreement unenforceable.  However, the analysis changes when federal statutory rights are subject to arbitration.  The rule is as follows: an arbitration agreement is unenforceable if the cost of arbitration effectively precludes the employee from vindicating his federal statutory rights.  One such federal statutory right is the right to payment of minimum and overtime wages under the Fair Labor Standards Act (FLSA).

In Green Tree Financial Corp.-Alabama v. Randolph, 531 U.S. 79 (2000), the U.S. Supreme Court held that the “risk” that a party will be saddled with prohibitive arbitration costs is too speculative to render an arbitration agreement unenforceable.  Following Green Tree, several federal court have upheld the validity of arbitration agreement containing fee-splitting provision.  For example, in Maldonado v. Mattress Firm, Inc., 2013 U.S. Dist. LEXIS 58742 (M.D. Fla. Apr. 24, 2013), an employee argued that the arbitration agreement’s fee-splitting provision rendered the agreement unenforceable against his FLSA claim.  The federal court held that in order to prevail on his argument, the employee was required to present evidence of (1) the amount of costs he is likely to incur and (2) his inability to pay those costs.  A showing of the “possibility” of incurring prohibitive costs is not sufficient.  The federal court held that the arbitration agreement was enforceable despite the employee’s FLSA claim.

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The Fair Labor Standards Act (FLSA) requires that all employers covered by the FLSA pay their employees overtime wages for hours worked over 40 hours per workweek.  Generally, “overtime” wages are 1.5 times the regular wage.  The FLSA, however, identifies several classes of employees who are exempt from the overtime provision.  One such class of exempt employee is the “retail service commission” employee.

To qualify as an exempt “retail service commission” employee, three elements must be satisfied: (1) the employer is a retail or service establishment; (2) the employee’s regular rate of pay exceeds 1.5 time the applicable minimum wage; and (3) more than half of the employee’s compensation in a “representative period” must consist of commissions.  If the employee does not satisfy all three elements, the employer must pay overtime wages for those hours worked over 40 per workweek.

To satisfy the first element, the employer must be a retail or service establishment.  A retail or services establishment is one which sells goods or services to the general public.  Under federal regulation, typical retail or services establishments are as follows: “Grocery stores, hardware stores, clothing stores, coal dealers, furniture stores, restaurants, hotels, watch repair establishments, barber shops, and other such local establishments.”  29 C.F.R. § 779.318(a).  If the employer falls under any of those categories, the employer will likely qualify as a retail or service establishment.

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The use of computers in the workplace has become so pervasive that, whether or not employers officially permit personal use, such use has become the norm.  Where “reasonable” personal use is allowed, the lines between excessive use and acceptable or normal use may not always be easy to draw.

For example, Coleman v. Review Bd. Of the Ind. Dep’t of Workforce Dev., 905 N.E.2d 1015 (Ind. App. 2009), held that an employee who was discharged for violating the employer’s e-mail policy forbidding more than “de minimus use,” was entitled to unemployment compensation because the policy provided no ascertainable standard and the employee’s e-mail traffic was scarcely excessive.

Another example, Bowman v Butler Twp. Bd. Of Trs., 923 N.E.2d 663 (Ohio App. 2009), held that a town could not discharge its firefighter employees for viewing violent, but non-pornographic videos.  The court explained that the town provided no guidance other than that “ethical standards should be observed,” and also permitted its firefighters to use firehouse computers for personal use in their downtime.  Undefined “ethical standards” were too vague to be enforceable against the employees.

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Is there a right to privacy in an employee’s personnel file?  A recent Florida appellate court case Walker v. Rout, 2013 Fla.App. Lexis 6466 (Fla. 5th DCA 2013), analyzed this subject in depth.  The court observed that personnel files undoubtedly contain private information.  See, for example, Regan-Touhy v. Walgreen Co, 526 F.3d 641 (10th Cir. 2008), which explained that, while not categorically out of bounds, personnel files contain sensitive personal information, and trial courts are not unreasonable when being “cautious about ordering their entire contents disclosed willy-nilly.”  In Walker, the employee’s whereabouts were unknown and therefore, he did not have the opportunity to personally assert a privacy objection. The court explained that the employee’s absence did not necessarily mean that such important non-party rights should not be considered, or that the right to privacy and the right to knowledge should not be weighed during the discovery process.  When privacy rights are implicated, discovery should be narrowly tailored to provide access to discoverable information while safeguarding privacy rights.

The court observed that it was likely that the employee’s personnel file contained information about his compensation, benefits, pension, and the like which would not be relevant to the lawsuit, but would be highly intrusive to the employee’s privacy interests if disclosed.  In contrast, any information regarding the employee’s training, competence, abilities, and disciplinary history may be relevant to the underlying action.  Therefore, the appellate court in Walker concluded that the trial court erred when it allowed all of the contents in the personnel file to be disclosed without first conducting an in camera inspection to segregate the relevant documents which were discoverable from the irrelevant documents which were not.  See, for example, Beverly Enters. Fla, Inc. v. Deutsch, 765 So.2d 778 (Fla. 5th DCA 2000).

An employer has no privacy rights in an employee’s personnel file.  Although an employer lacks standing to assert its employee’s privacy rights in the employee’s personnel file, an employer has standing to oppose the production of private information within the file on the ground that the information was not relevant to the litigation.  See, for example, Alterra Healthcare Corporation v. Estate of Shelley, 827 So.2d 936 (Fla. 2002).

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When a prospective employer contacts a potential employee’s former employer for a job reference, what liability does the former employer potentially face when responding?  And is it prudent for a former employer to create potential liability issues by commenting on a former employee?

Prior to 1990, employers had a common law qualified privilege to discuss former employees with prospective employers without liability.  Thereafter the Florida Legislature enacted Florida Statutes section 768.095, which is the Legislature’s codification of the common law.  The statute provides that:

An employer who discloses information about a former employee’s job performance to a prospective employer of the former employee upon request of the prospective employer or of the former employee is presumed to be acting in good faith and, unless lack of good faith is shown by clear and convincing evidence, is immune from civil liability for such disclosure or its consequences.  For purposes of this section, the presumption of good faith is rebutted upon a showing that the information disclosed by the former employer was knowingly false or deliberately misleading, was rendered with malicious purpose, or violated any civil right or the former employee protected under chapter 760.

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The United States Court of Appeals for the Fourth Circuit, interpreting the Americans With Disabilities Act (“ADA”) before its 2008 amendments, recently ruled in Young v. United Parcel Service, Inc., 707 F.3d 437 (4th Cir. 2013), that an employee’s pregnancy does not justify a disability discrimination lawsuit.  The ADA is a federal law that prohibits discrimination against persons who are disabled, have  a record of being disabled, or are regarded as disabled.  An employee has three avenues to establish the existence of a disability under the ADA:

(1) a physical or mental impairment that substantially limits one or more major life activities of the employee;

(2) a record of such an impairment; or

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In March 2013, Mr. Mavrick successfully represented a corporate employer at trial in a worker’s compensation case in Broward County, Florida.  Mr. Mavrick presented testimony from four witness and conducted an extensive cross-examination of the Claimant-employee.  Crucial credibility problems emerged with the former employee’s case.  The Judge ruled in favor of Mr. Mavrick’s client.  In denying the former employee’s claim, the Judge cited inconsistencies in the  former employee’s testimony that became apparent at trial.

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Under the federal Family and Medical Leave Act (FMLA or the “Act”), an eligible employee may be entitled to take up to twelve weeks of unpaid leave per year.  During this time, the employee will be able to continue to collect medical benefits that he or she had before taking a leave of absence.  Moreover, the FMLA prevents an employer from permanently replacing the employee during the time that the employee is not working.

There are certain criteria that an employee must meet in order to be eligible for leave under the FMLA.  For instance, if an employee or the employee’s spouse gives birth to a child, has complications associated with a pregnancy, or adopts or fosters a child, the employee qualifies for unpaid leave.  In addition, if an employee or a family member experiences serious health problems, the employee can also take an unpaid leave of absence.  An employee is also eligible for the leave if she needs to care for a spouse, child or parent who has a serious health condition.

Although employees are entitled to various protections under the FMLA, employers also enjoy certain rights, such as:

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