Employment Law Outline

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Outline of basic principles of employment law



Employment Law Outline – Spring 2008 I.

Moskowitz Working Copy

Introduction a. Who is an employee? i. Lemmerman v. A.T. Williams Oil Co. (N.C. 1986) ii. Issue/Holding: was the 8 yr old son of a gas station attendant also an employee of the gas station? Yes. iii. Facts: boy came to gas station routinely after school, did his homework, etc. and performed odd jobs: picking up trash, taking out garbage, stocking drinks iv. Rationale: didn’t matter that he was illegally employed (too young, didn’t withhold taxes, etc.); boy took direction and payment from gas station 1. Rule: failure to comply with procedural formalities of employment is not determinative on whether someone is an employee b. KS Compare: same facts at Lemmerman, different result i. Hadley v. Security Elevator Co. Kan. 1953 ii. 13 yr old boy killed while working illegally in a grain elevatoriii. Issue/Holding: Was he an employee? No, so not covered by Worker’s Comp laws and his father can bring a wrongful death action against the owners of the elevator c. Donovan v. Dial America Marketing (3d Cir. 1985) i. Issues/Holdings: were home-researchers, who found phone numbers of customers with soon-to-expire magazine subscriptions, employees of DialAmerica, thus requiring the company to pay minimum wage and keep records under FLSA? Yes. How about the distributors, who took the telephoneresearch cards to the home researchers? They were independent contractors. ii. The Court found that the distributors were independent contractors, primarily because their opportunity for profit or loss was based on their skill in recruiting and retaining their own home researchers. iii. Rationale: court applied Sureway Cleaners six factor test 1. employer’s right to control the manner in which the work is to be performed 2. employee’s opportunity for profit or loss depending upon his managerial skill 3. employee’s investment in equipment or materials required for his task 4. whether the services requires a special skill 5. degree of permanence of the working relationship 6. whether the service is an integral part of the employer’s business d. Common Law Answers: Employee or Independent Contractor? i. IRS handout is helpful for making determination 1. Behavior Control a. Instructions the business gives the worker b. Training the business gives the worker (IC’s use their own methods) c. The key consideration is whether the business has retained the right to control the details of a worker’s performance or instead has given up that right. 2. Financial control


a. The extent to which the worker has un-reimbursed business
expenses (IC are more likely to have unreimbursed expenses) b. The extent of the worker’s investment c. The extent to which the worker makes services available to the relevant market d. How the business pays the worker e. The extent to which the worker can realize gain or profit 3. Type of Relationship a. Written contracts describing the relationship b. Whether the business provides the worker with employee-type benefits c. The permanency of the relationship d. The extent to which services performed by the worker area key aspect of the regular business of the company 4. Advantages to hiring an independent contractor a. Don’t have to withhold pay, taxes (SS, medicare, unemployment) Hiring e. Legal Restrictions on Access to Jobs i. Immigration Reform and Control Act of 1986 (IRCA), pp. 368 i. Overview of IRCA. 1. Under the IRCA it is unlawful for an E to knowingly recruit, hire, or continue to employ illegal immigrants. 2. E’s must complete an INS form I-9 for each new EE and retain those forms for three years. INS is responsible for enforcing IRCA. 3. Covers all E; even if only 1 EE. 4. It is unlawful to knowingly hire or recruit for a fee an unauthorized alien. §1324a(a)(1)(A) 5. Unlawful to continue to employ a person after it knows the alien is unauthorized. §1324a(a)(2) ii. Record keeping requirement. 1. E must verify EE is not an alien by examining either 1 document listed in (B) or a document from (C) and one from (D). §1324a(b)(1)(A)(i) & (ii) 2. Documents must reasonably appear on their face to be genuine. Actual knowledge of forgery would trump this. §1324a(b)(1)(A) iii. Affirmative Defense. E who can show it complied in good faith with the requirements in (b) has a defense. §1324a(a)(3) House Natural Resources 1. §1324A(b)– Employment Verification System Committee: Northern Marian Islands will be covered by US a. employer must attest that it has verified that his employee is not immigration laws to deal with an alien, by examining certain documents (passport, resident guest workers and failing alien card, social security card, drivers license, etc.), employee public employee pension must attest to his legal status, and the employer must keep the system; concerns about security including human verification form for three years, or a year after employee’s trafficking, abuse of foreign termination workers, and forced b. *see statute, photocopy pp. 16 – some documents are good prostitution enough by themselves, for others you need a combination of two I.


post-Hoffman cases  see Handout FLSA: immigration status irrelevant for claims for time actually worked (Cal., NY) Worker’s comp: undocumented workers entitled to benefits (all or some) (Cal., Minn., Ga., and OK (only med – not voc. rehab) Workplace safety laws: immigration status does not bar claims (NY)

ii. Sanctions – Administrative & Monetary 1. §1324A(e)(4)(A) Cease and desist order with civil $ penalties 2. §1324A(f)(1) Criminal penalties and injunctions for pattern or practice violations a. and $3,000 for each unauthorized alien; 6 month imprisonment 3. §1324A(f)(2) Attorney General can bring a civil action for an injunction 4. § 1324c – Penalties for document fraud a. activities prohibited: both making, using, and assisting forgery iii. Illegal Aliens Can Lose Rights to Recover from Employer’s Misdeeds 1. Hoffman Plastic Compounds, Inc. v. NLRB (U.S. 2002) 2. Issue/Holding: can an illegal alien, who was fired in violation of the NLRA (i.e., he attempted to unionize) receive back-pay ordered by the NLRB? No. Relief is foreclosed by the federal immigration policy in IRCA. a. No backpay b. No reinstatement c. Can’t mitigate damages without further IRCA violation 3. Facts: Jose Castro worked in Hoffman’s factory. When hired, he presented a friend’s social security card. Jose got fired for trying to unionize. Three years later, the NLRB discovered the violation and ordered Hoffman to give Jose back-pay for what he would have been earning all this time. A year later, Jose slipped up and mentioned that he was an illegal alien. 4. Rationale: although Hoffman had seriously violated the NLRA, the NLRB had no discretion to remedy those violations by awarding reinstatement and back-pay to someone who himself had committed serious criminal acts. 5. Class Notes: a. NLRB held that the back-pay ended at the time Hoffman learned that Castro was undocumented b. IRCA makes it illegal for people to use fraudulent papers to gain employment c. Court doesn’t want to “trivialize” the statute by allowing Castro to get ANY back-pay… doesn’t want to encourage people like Castro, d. BUT it encourages the employers to play dumb iv. “Knowing” Violators of IRCA Have No Protection Against Suits 1. Williams . Mohawk Industries, Inc. 11 Cir. 2006 2. Holding: current and former employees of Mohawk may proceed with their suit alleging that the company violated RICO by conspiring with labor recruiters to hire illegal workers with the aim of depressing wages for legal workers 3. Facts: Alleged that the company “fired” illegal workers and encouraged them to come back with different names, gave fake social security cards, destroyed documents, helped them evade gov’t authorities, made them agree not to file worker’s comp claims…. All with the goal of depressing wages and avoiding v. Singh v. Jutla, N.D. Cal. 2002



1. Holding: Permitting an undocumented worker to bring a FLSA retaliation case against a “knowing employer” 2. Facts: (although plaintiff was not seeking back-pay for work not performed, i.e. work that was performed for which he was never pair). 3. Rationale: Distinguished from Hoffman: knowing employer and he actually worked 4. plaintiff was not seeking pay for work not performed, as in Hoffman a. §1324b, aka §102 – Prohibition of Discrimination Based on National Origin or Citizenship Status b. applies to employers with four of more employees c. (earlier statute – T. VII – only applies to employers with 15 or more employees) vi. ICRA: Can’t Discriminate Based on National Origin/Citizenship a. Discrimination. §1324B i. Applies to Es with four+ EEs. (§102(a)(2)(A)) ii. Prohibits discrimination on the basis of national origin or citizen status iii. Title VII says it’s illegal to discriminate for national origin, but doesn’t say anything about citizenship; iv. Title VII also only applies to E’s with 15+ EE b. National origin §102(a)(1)(A) i. If Title VII applies, IRCA does not. §102(a)(2)(B) (S p. 364) 1. IRCA applies to Es with 4-14 EEs. Title VII trumps at 15 EEs. c. Citizenship status. §102(a)(1)(B) (S p. 364) i. Applies to citizens or intending citizens. d. Exceptions. i. OK if required by another law, regulation, or executive order. §102(a)(2)(C) (S p. 364) ii. Can prefer citizens over non-citizens when applicants are equally qualified. §102(a)(4) i. Complaints are adjudicated administratively by the DOJ. The Employer’s Information-Gathering Process i. Job Applications 1. Federal Potential Employers Can’t Call Previous Employer a. Sullivan v. USPS (W.D.N.Y. 1996) b. Issue/Holding: Did the post office violate Sullivan’s privacy rights (under 5 U.S.C. § 552a(b)) and constitutional rights when they called Sullivan’s current employer (when Sullivan had asked them not to) thus alerted his employer that he was seeking other employment? Yes/No: post office may have violated privacy rights, but not constitutional rights c. Facts: Sullivan identified current employer on his application, but checked “no” on application part that asked if the Postal Service could contract them. They contacted them anyways, and Sullivan got fired. i. Privacy Act – 5 U.S.C. § 552a: “no agency shall


disclose any record which is contained in a system of records…to any person, or to another agency, except pursuant to … prior written consent of the individual to whom the record pertains…” ii. “no agency”: e.g. applies only to federal gov’t d. Rationale: didn’t matter that the postal service didn’t disclose specific information on the record, but enough that it disclosed that such a record existed. Case sent to trial in order to determine whether the disclosure was “intentional or willful” i. Sullivan must show damages. 1. See Doe v. Chao 540 U.S. 614 (2004): a. statutory minimum damagers are $1,000, but held: b. plaintiff must be able to show some actual damages c. Damages are what we would have earned at his previous job; d. this is not a failure to hire case, which would look for what he would have made at USPS e. damages: lost wages from previous job f. note: was an EE-at-will at previous job, so can’t sue that E ii. Note: Privacy Act applies to federal agencies, including the USPS 2. Kinko’s Job Application a. Must fill out the form, not just submit a resume b. Legal requirements  work permits for child labor  immigration/citizenship information  criminal background (theft/dishonest)  American w/ Disabilities question  Education  References  employment history: why you left, gaps in employment, may we contact your supervisor?, c. tiny print: “certify the information is true, authorize references and anybody else whom Kinko’s contacts, to provide Kino’s any and all information concerning my previous employment and any other pertinent information that they may have….. can be terminated by either party at either time, no other promises, employee at-will.” a. NOTE: Privacy Act does not apply to Kinko’s!. If you can show that the Kinkos guy knew you and did not like you, and decided to try to get you fired, might be able to sue for tortious interference. b. Notes


i. Assume employee fired for some reason (not for lying on app), sues alleging age discrimination and retaliation for whistle blowing. During discovery, they find out he lied on application and there was some on-the-job misconduct. Employer says if we knew these things, we would’ve fired him anyway. Does this defeat employee’s entire remedy? It depends on the reason for which he is suing in the first place:



McKennon v. Nashville Banner Publishing 1995: Age Discrimination in Employment Act (statutory claim). McKennon took some docs home and copied them (wrongfully). They did a reorganization and eliminated one job – hers. She claims age discrimination. During court she reveals she’d copied the confidential documents, they sent a letter firing her for that. Nashville claimed they would’ve fired her and that she wasn’t eligible to ever work there again b/c of what she did. SC said her remedy (back-pay) is cut off at the point at which they discovered the bad thing she did. Employer bears the burden of showing the bad thing was something that would in fact have caused them to fire her. (note this gives employers incentive to find bad things employees have done) But see, e.g., Gassman v. Evangelical Lutheran Good Samaritan Society 1997: common law claim: breach of implied K. They find out that he did something wrong. Court said McKennon was based on balancing w/ fed law. If employer bears the burden of showing the thing he did was bad enough that he would’ve been fired at the time had they known, then summary judgment is granted. So he lost his whole claim, not just part of his remedies.

Inaccurate applications: If application is false – a hired applicant may be fired upon that discovery… as long as that’s the reason

e. Private Sector Equivalent: Tortious Interference i. Difficult to find a cause of option 1. Tortious interference w/ contract has an element of willfulness. 2. Improper interference w/o justification probably requires more than just ignoring the no don’t call on the application. ii. Claim requires… 1. existence of a business relationship 2. knowledge of the relationship 3. but for the conduct of the defendant, 4. plaintiff was reasonably certain to have continued to the relationship, and 5. damages suffered by plaintiff 6. as a direct or proximate result of defendant’s misconduct c. Don’t Ask Certain Questions: i. age, sex, race, national origin ii. (not per se illegal, but STUPID) d. After-Acquired Evidence of Fired EE’s Misdeeds i. EE claims she was fired for age discrimination, tells E she copied private financial statements to prove it; E says he would have fired her for copying those! ii. Ask: public policy/discrimination?


iii. If yes, EE entitled to backpay up until E learned of the
misdeed 1. “second firing” must be a real reason to fire any EE 2. resume fraud: back-pay up until E learns iv. If not public policy issue, (e.g. breach of contract) EE loses his claim entirely! ii. References 1. Free-rider Problem. a. The prospective E or the EE benefit from a candid evaluation of person’s skills. b. The old E does not benefit at all, but could be subject to liability for defamation. 2. Defamation a. statement, b. published to third party, c. intent to harm, d. falsity, e. injury to the plaintiff 3. Employers have a “qualified privilege” to give bad Recs a. Defense is a matter of law, unless facts in support of the defense are in dispute 4. Chambers v. American Trans Air, Inc. (Ind. App. 1991) a. Issue: Can a former employee bring a suit for defamation against her former employers, when she suspected they were giving her negative references? b. No. No showing of reckless disregard for the truth, so the qualified privilege protected them. c. Rationale: had a qualified privilege i. Elements of the “qualified privilege,” 1. applies to “communication made in good faith 2. on any subject matter in which the [they] have an interest/duty, 3. either public or private, either legal, moral, or social, 4. if made to a person with a corresponding interest or duty. ii. Examples of Relationships: 1. employers/employees, 2. business partners, 3. creditors/credit agencies iii. Protects communication between former employers and prospected employers, concerning a former employee iv. No privilege when . . . 1. statement was motivated by ill will, 2. excessive publication,

Okay to give a bad reference, there’s a qualified privilege


Holding an employer liable for defaming the employee

Employer’s duties to former employees

3. or when made without belief or grounds for believing it’s true 5. Employees can overcome the Qualified Privilege and Sue a. Meloff v. New York Life Ins. Co. (2d Cir. 2001) b. Issue: Can a former employee bring a suit for defamation against former employer, when she misused her corporate credit card and the employer sent an email to her coworkers, saying she’d been fired for defrauding the company? Yes. c. Facts: It was really unclear whether she knew she was misusing the credit card to pay for her commuter tickets; she didn’t get an opportunity to explain before she was fired. d. Rationale: Employer relied on the qualified privilege to defamation, … i. but employee showed that there was a material issue of fact as to whether the e-mail was sent only for the purpose of malice or with knowledge that it was false 6. Okay for Employer to publicly investigate EE’s Misdeeds a. Llyod v. Quorum Health Resources, L.L.C. (Kan. Ct. App. 2003) b. Issue/Holding: can an employee bring a claim against his employer for tortious interference w/ contractual relations, defamation, and invasion of privacy, when the employer conducted an investigation to corroborate reports that the employee was sexually harassing his nurses? No. c. Facts: Dr. Lloyd was accused of making inappropriate comments to the nurses, so the hospital conducted a thorough investigation. d. Rationale: the hospital’s conduct in reporting the allegations to the State Board of Nursing was… i. within its official capacity and was ii. without malice. 7. Kansas Blacklisting Statute: 44-117 to –119 a. The essence of a civil action for blacklisting is that a former employer attempted to prevent a former employee from gaining subsequent employment. It has been held that only unsolicited statements by a former employer are actionable; responses to inquiries from a prospective employer are privileged. b. Not really used anymore, must have a criminal conviction from the prosecutors before plaintiff can bring a claim c. 44-117: Employers are not allowed to prevent a discharged employee from obtaining employment elsewhere d. by using words, signs, or writing of any kind, i. except by furnishing in writing, 1. on request, 2. the cause of the employee’s discharge e. 44-118: Penalties: upon conviction of a misdemeanor i. shall be fined for each offense $100


OK to ask for Criminal Records

ii. or 30 days in jail 119: those guilty are liable to the injured party an amount equal to 3 times the sum he may be injured, plus attorney’s fees i. Anderson v. United Telephone Co. of Kansas, Inc., (10th Cir. 1991) 1. Use of the word “guilty” – has to apply to a criminal conviction 2. Court found that -118 (criminal conviction) was a condition precedent to -119 (civil liability) 8. Employer can request EE’s Criminal History a. Kansas Criminal Record History Statute: b. 22-4720 (c): an employer may require a job applicant to… i. sign a release allowing the employer ii. to access the applicant’s criminal history record information iii. for purposes of determining the applicant’s fitness for employment c. 22-4720 (d) : can charge an employer a reasonable fee for preparation of a report d. 22-4720 (e) the bureau is immune from any claims arising from the release of criminal history records i. notes: 1. statute passed, because before employers couldn’t make the record a condition on employment 2. no litigation under this statute 9. KS’s Statutory Protection for Employer’s Immunity a. Kansas Statute: 44-119a b. An employer who discloses information about a current or former employee to a prospective employer shall be qualifiedly immune from civil liability (44-119a(a)) c. Absolute immunity for information regarding i. date of employment, ii. pay level, iii. job description and duties, iv. wage history. 1. 44-119a(b) d. Absolute immunity for i. responding in writing to a ii. written request for employee evaluations, and iii. whether the employee was voluntarily/involuntarily released and the reason. 1. 44-119(c) a. no case law under this statute iii. Generally, Not Okay to Ask EE’s to Take Lie Detector 1. Employee Polygraph Protection Act of 1988: 29 U.S.C. §§ 2001-09 a. §10 Savings provisions: state laws which are stricter are not f.


“Arrested Development” pictures – Henry Winkler hooked up to polygraph machine) Accuracy --People who think polygraphs work are more likely to tell the truth while being polygraphed or show deception when lying while people who do not think they work can easily beat it --No unique physiological response to lying --Work best with regard to specific instances --Over 20 million polygraphs being performed on employee or prospective employees --20 states had polygraph laws so employers would cross state lines to perform them




preempted by this statute §3(1): employer can’t require, request, cause or suggest any employee OR prospective employee to submit to a lie detector test As noted below, there are three exceptions to the ban on the private sector use of polygraphs: i. A polygraph may be given in connection with an ongoing investigation involving economic loss or injury to the employer’s business. ii. May be performed on prospective employees of an employer whose business consists of providing security services for the protection of nuclear power, electrical power, public water supply, radioactive or toxic waste, public transportation, currency, negotiable securities, precious commodities or instruments or proprietary information. iii. An employer that manufactures, distributes, or dispenses controlled substances may test prospective employees who will have access to such activities or current employers in connection with an investigation involving controlled substances. Remember that these above three exceptions are qualified. An individual tested pursuant to the “investigation” exception must have had access to the property in question….EE must have RS…the employee may not be discharged on the basis of the polygraph alone without additional supporting evidence. Exemptions §7: i. 7(a) Federal, state or local government employers ii. 7(b)(1)(A) federal gov’t, in counterintelligence, testing any expert or consultant under contract with the DoD, or any employees of the contractor 1. Applies to private sector and gov’t EEs who work in national defense. iii. 7(b)(1)(B): any expert/consultant under contract with the DoE, etc. iv. 7(b)(2) employees of the NSA, DIA, CIA, or the NIMA v. 7(c ) FBI contractors vi. (d) okay for ongoing investigations to request if… 1. economic loss/injury to the employer’s business (theft, etc.) 2. AND the employee had access to the property in question 3. AND the employer has reasonable suspicion that the employee was involved 4. AND the employer makes a statement, and provides it to the employee that – says the


specifics of the investigation, signs it, keeps it for three years, and contains the specific economic loss, how the employee had access, and the reasonable suspicion a. §8(a)(1) Under this exemption, still can’t fire employee for refusing to take the test, w/o additional supporting evidence vii. (e) employees of security services (armored car, security system, security personnel protecting things of public concern or money) viii. (f) employees of drug manufacturers f. “reasonable suspicion” defined i. 29 CFR § 801.12(f)(1) – photocopy pp. 55 1. Need observable, articulable basis in 2. Potential opportunity alone is not reasonable suspicion g. Remedies for Violations i. §6(a)(1) civil penalties: paid to the government, not more than $10K per violation ii. example: 1. 1 employee asked to take test and refused, 2. he was fired, 3. another took the test and passed, 4. the third took the test 5. and was fired a. 5 violations = $50,000 penalty iii. §6(b) Injunctions 1. Courts will have the power to order injunctions and equitable relief: employment, reinstatement, promotion, and backpay. iv. §6(c) private civil action: 1. with 3 year statute of limitation, 6(c)(2) 2. reinstatement, 3. cost, 4. benefits v. §6(d) employees cannot waive their rights, unless it’s part of a settlement to a pending action h. Summary of Remedies: The EPPA is enforced by the Sec. of Labor. The Sec. of Labor is authorized to bring an action in federal court to enjoin violations of the EPPA. Private civil remedies are available by an affected applicant or EE. The available remedies include employment, reinstatement, promotion, and payment of lost wages and benefits. Remember private civil actions may be brought in state or federal ct. and have a three year statute of limitations.


iv. Generally, Medical Screening is NOT okay 1. Americans with Disabilities a. Definitions i. § 101(5) “covered entity” employer engaged in commerce with 15 or more employees ii. § 101(6) – Illegal Use of Drugs 1. listed under the Controlled Substance Act, not prescription drugs iii. § 101(8) – Qualified Individual w/ a Disability 1. an individual w/ a disability who, w/ or w/o reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires a. Almost always have to litigate whether § 3(2): disability is an someone actually qualifies as an impairment that substantially individual with a disability; examples: limits one or more major life b. see handout, “Summary of Outcomes in activities of an individual and a Title I ADA cases from 2005” record of that impairment b. § § 102(d)(2) Pre-Employment i. Obvious Disability: Don’t ask specifics about an injury, but okay to ask “can you re-shelve books w/ reasonable accommodation?” ii. Hidden Disability: give EVERY applicant a test to see if they can re-shelve books, catches applicants with dyslexia iii. § 102(d)(2)(A) a covered entity 1. can’t conduct a medical exam or ask questions 2. as to whether that person had a disability 3. or (if disability is obvious) about how severe their disability is iv. § 102(d)(2)(B) can ask whether… 1. the applicant can perform job-related functions v. § 102(d)(3) entrance exam 1. can require an exam after the offer of employment 2. must be the “last thing,” after the reference and KBI test 3. but prior to commencement of the employment duties if.. a. § 102(d)(3)(A) all employees are subjected to the same exam, regardless of disability Rules for Post-Offer/Preb. § 102(d)(3)(B) the exam results are kept Commencement Medical on separate forms and treated as Exams confidential, except..


Exams for CURRENT employees…

ADA Defenses: rules are job related; prevent a direct threat

i. (i) can inform supervisors about necessary restrictions ii. (ii) can inform first aid personnel if the employee might require emergency treatment iii. (iii) can tell gov’t officials investigating ADA compliance c. § 102(d)(3)(C) exam results are only used in accordance with ADA vi. § 102(d)(4) Exams for Current employees 1. § 102(d)(4)(A) a. can’t require exams or questions about whether someone is disabled, unless… i. the exam/question is shown to be job-related and ii. consistent with business necessity 2. § 102(d)(4)(B) Acceptable Inquires a. voluntary exams pursuant to employee health programs b. can ask whether employees about the employee’s ability to perform jobrelated functions c. (C) information must be kept confidential, except for necessity d. examples of acceptable exams: i. Blood testing for lead levels (which is required by another federal statute) ii. Employee acquires a disability and wants an accommodation iii. Exams for those claiming Family Medical Leave benefits 2. § 103: Defenses to ADA Violations a. In general, the defenses involve either business justifications or misconduct on the part of the employee. With regard to business justifications, it does not violate the ADA for an employer to hire a more qualified and experienced nondisabled, incumbent employee rather than a disabled applicant. b. Standards are Job-Related & Necessary i. § 103 (a) okay if [standards] that screen out … or otherwise deny a job … to an individual with a disability if they’re 1. job-related AND 2. consistent with business necessity, AND 3. such performance cannot be accomplished by reasonable accommodation


Employees on drugs…


c. Protecting from a Direct Threat i. § 103 (b) okay for “qualification standards” …that require that an individual shall not pose a threat to anyone’s health or safety d. Direct threat to complaining EE, himself, is enough to satisfy defense; Religious Employer Prefers its own Followers i. (c ) religious entities can still hire people who are followers e. Controlling Infectious Diseases i. § 103(d)(2) employer can refuse to hire someone has one of those diseases that is transmitted through handling food, which cannot be eliminated by reasonable accommodation f. Employee’s “Disability” is not really a Disability i. Illegal Drugs and Alcohol ii. § 104(a) Qualified Individual w/ a Disability does NOT include anyone who is currently engaging in the illegal use of drugs iii. BUT… iv. § 104 (b)(1)-(3) recovered or recovering drug users and alcoholics ARE included in ADA protection 1. E’s should let EE have time off to go to rehab 3. Illegal Drugs & Alcohol i. § 104 (b)(3) not a violation to drug test to make sure that a recovered or recovering using is no longer using ii. § 104 (c) it’s okay to prohibit drugs and alcohol at the workplace, being under the influence while at work iii. § 104 (c)(4) employer may hold an alcoholic to the same qualification standards for employment/performance that it requires of the other employees iv. (d) Drug testing is NOT a medical exam 1. Alcohol is! 2. Testing for booze IS a medical exam; the negative implication of 104(d) (2) b. § 510: Illegal Use of Drugs i. (a) “individual w/ a disability” does not include someone engaging in illegal use of drugs,… ii. (c): an individual can’t be denied health services, or services provided in connection with rehab, on the basis of current illegal use of drugs if the individual is otherwise entitled to such services c. § 511: Definitions – Gays i. (a) gay or bisexual people do not have disabilities 4. Non-Disabled Plaintiff has standing to sue for ADA violation a. Griffin v. Steeltek, Inc. (10th Cir. 1998) b. Issue: whether a non-disabled individual has a cause of action under the ADA


Born Loser cartoon and article on testing high school students for weekend alcohol use

c. Holding: non-disabled people may bring claims under ADA when employers ask improper questions d. Facts: Application asked: “Have you received Worker’s Compensation or Disability Income payments? If yes, describe” and “”Have you physical defects which preclude you from performing certain jobs? If yes, describe” e. Rationale: Congress wanted to curtail all question that would serve to identify and exclude person w/ disabilities 5. Pre-Employment Inquires and the ADA a. What if, for a pre-employment drug test, you ask which prescriptions they are taking, which would illicit information about a disability, which is not necessarily related to business? i. Pre-offer drug tests: employer can ask applicants about their legal use to drugs to explain a positive result. EEOC says this is okay, even though it’s technically against ADA. v. Employees on Drugs 1. 104(c): Authority of a Covered Entity - may prohibit the illegal use of drugs and the use of alcohol at the workplace a. “may hold a [drunk] employee to the same qualification standards for employment/job performance [as it does everyone else], even if any unsatisfactory performance or behavior is related to the drug use or alcoholism b. can fire for lateness, and poor performance, etc. c. good idea to grant request for leave of absence for rehab visit vi. Drug Testing – Not Covered by the ADA 1. Encouraged to Drug Test: 1986 Executive Order 12,564 a. Required executive agency heads to develop plans for a drugfree workplace. b. Each plan had to includes a drug testing program for employees in sensitive positions. c. The Order authorized drug testing under four circumstances: i. Where there is reasonable suspicion of illegal drug use ii. In conjunction with the investigation of an accident iii. As a part of an employee’s counseling or rehabilitation for drug use through an Employee assistance program (EAP) iv. To screen an job applicant for illegal drug use 2. Drug-Free Workplace Act of 1988, 41 U.S. C 701 et. Seq. a. Federal contractors and recipients of federal grants must certify that they will (1) provide a drug-free workplace by notifying employees that illegal drugs are prohibited; (2) establish a drug free awareness program; (3) sanction or require the partipciation in a drug rehab program for any employee convicted under a criminal drug statute; (4) make a food faith effort to maintain a drug free workplace…Applies to Universities 3. Omnibus Transportation Employee Testing Act of 1991, 49 U.S.C.


45101 a. Requires drug testing, including alcohol testing, of employees in the transportation industry 4. Possible Limitations from the Fourth Amendment a. The right of the people to be secure in their persons, houses, papers, and effects…. ii. Drug testing is a search. iii. Don’t waive constitutional rights when go to work for the gov’t—but may take slightly different forms. i. Urine testing and breath testing are searches. f. Must meet reasonableness requirements i. Neither a warrant ii. nor PC iii. nor any measure of individualized suspicion 1. is an indispensable component of reasonableness in every circumstance. 2. meaning, there’s no one key factor needed – only justify it iv. Von Raab SC 1989: Balance individual’s privacy expectations with government interests: gov’t has an interest in testing border guards who carried guns and policed for drugs; guards were warned as to when upcoming tests were. The Court held that a drug test is a search subject to the Fourth Amendment, the tests of the employees could be conducted without a warrant, probable cause of any individualized suspicion (noted directly above). v. Skinner SC 1989: Drug tests following accidents. Tests were administered automatically without a warrant, probable cause, or individualized suspicion. Court held that these were searched under the 4th Amendment, but that the g’ment had demonstrated compelling interest due to the safetysensitive nature of the positions involved. g. Federal EEs. Searches. i. When 4A intrusion serves special gov’t needs beyond needs of law enforcement balance individual’s privacy expectations with gov’t’s interests. h. Gov’t interest in stopping drug trafficking and securing borders allowed routine testing of EEs upon promotion to sensitive positions when EEs knew tests were coming. i. Need a reason, “political statement” not good enough i. Testing of political candidates not allowed b/c law was passed for symbolic purposes and no wide-spread evidence of drug use. Chandler v. Miller j. Suspicionless searches allowed when targeted individuals i. have a history of drug abuse, ii. hold a unique position, iii. or have the potential for creating risks of catastrophe if


impaired. 1. Ohio AFL-CIO v. Ohio Bureau of Worker’s Comp (striking down law which required testing of all EEs filing for workers comp) 5. Testing for Promotion is Bad, Testing for Initial Employment OK a. Loder v. City of Glendale (Cal. App. Ct. 1997) b. Issue/Holding: are drug tests, which were required as a condition of promotion, valid? No. How about drug tests as a condition of initial employment? Those are okay. c. Facts: employment-related drug testing program adopted by the City of Glendale, which was imposed on all city positions, and without regard to suspicion d. Rationale: i. must be “reasonable” under the Fourth Amendment. ii. Employers have a stronger interest in testing applicants than in current employees, because the employer has had the opportunity to observe the current employee’s behavior. Still undecided after Von Raab: random, 1. E’s don’t have the opportunity to observe drugsuspiciousless testing of incumbent free like behavior from job applicants employees iii. Searches were not for law enforcement purposes, but it would be okay to turn results over to the cops, because the search was initially legal iv. Also, ADA shows that it’s okay to require medical exams as a condition of employment – low expectation of privacy when applying for a job. v. Suspicion in the Applicant Pool 1. well-documented problems association w/ abuse of drugs 6. Drug Arrest and Work Absence is Reasonable Suspicion a. Relford v. Lexington-Fayette Urban County Gov’t (6th Cir. 2004) b. Issue/Holding: can a plaintiff, who the employer thought had been jailed for drug possession (was really possession of paraphernalia), bring a claim against the employer for violating his 4th Amendment rights by “failing to abide by its written procedures and requiring him to undergo a random drug test? No. The employer acted properly. c. Facts: employee called in sick, but was really in jail. Employer found out, suspended him, and made him take a drug test. d. Rationale: employer had “reasonable suspicion,” / individualized suspicion … under 4th Amendment to require the test, when the EE was dishonest to his E i. Do not need “probable cause,” it’s something less than that 7. OK to Test School Athletes a. Vernonia School District 47J v. Acton (U.S. 1995) b. School can require interscholastic athletes to submit to random






drug testing. School has a compelling interest in preventing injuries, discipline, etc. OK to test students in extracurricular activities a. Bd. of Educ. of Ind. School Dist. No. 92 (U.S. 2002) b. Okay for school to require all students who participate in competitive extracurricular activities (i.e. even non-athletes) to submit to drug testing NOT okay to test Bus Dispatcher or Driving Teacher a. Gonzalez v. Metropolitan Trans. Authority (9th Cir. 1999) b. Bus dispatcher and driving instructor could proceed with their claims that their drug testing was unjustified, because they shouldn’t be classified as safety-sensitive i. workers pose substantial immediate threat to public safety if impaired ii. testing procedure would be reasonably effective in determining impairment iii. tests as performed would constitute undue invasion of privacy c. Re: Omnibus Transportation Employee Testing Act of 1991 OK to have different gender watch you pee in cup a. Booker v. City of St. Louis (8th Cir. 2002) b. Constitution does not require same-sex monitoring of drug testing Drug Testing and ADA a. The ADA is neutral on the issue of drug testing; the tests are not encouraged, prohibited, or authorized. b. ADA provides that a “test to determine the illegal use of drugs shall not be considered a medical examination.” c. (b) Means that Drug tests unlike medical examinations can be performed at the pre-employment stage.

d. Background Checks
Lewis v. Ohio Professional Electronic Network LLC Facts: Lewis filed suit against defendants claiming that they falsely reported criminal history to prospective employers. He sues under the Fair Credit Reporting Act, which can apply to info given to employers if they hire a 3d party (private investigator, reporting agencies, etc.) – that 3d party agency could be a consumer reporting agency. He alleged that he couldn’t find a job b/c of the mistaken information. i. Notes: a. If employers do their own background checks, the employer itself is NOT considered a consumer reporting agency. b. Employer must get authorization from the applicant for getting that info, and before taking any adverse action it must give the applicant a copy of the report. c. Applicant rights include challenging inaccurate info. The reporting agency must try to verify the accuracy of the info and delete it if it can’t. If the agency thinks it is right and the info stays in, the applicant can write his own letter which goes in the file – but that still means they probably don’t get the job. d. p. 93 KSA 22-4710: crim history reverence info is: data initiated or collected by crim justice agency, pertaining to a recordable event (issuance of arrest warrant; arrest; acquittal; conviction; imposition of sentence; commitment to correctional facility…) i. (a) and (b) say employers can’t do it, but (c) thru (f) seem to just take that rule away e. The three different types of criminal records laws are those that require, permit, or prohibit the use of criminal records



If an employer fails to perform a state-mandated criminal record review, this fact may be introduced as evidence of negligence in a negligent hiring case, although the states differ over whether the non-compliance constitutes negligence per se, prima facie negligence, or some form of negligence. In deciding which standard to use, the courts consider the legislative intent and state evidentiary principles.

g. Negligent Hiring h. Basics: Negligent hiring is a direct cause of action against an employer for injuries to an employee or third party caused by an E’s intentional or negligent acts. The P’s action against the employer is based upon the negligence of the employer is hiring the employee and not vicarious liability. No action for negligent hiring will lie if the E is liable under respondeat superior. i. Example: Sausage Video 1. How foreseeable was it that the baseball player would hit a sausage? 2. E must use excessive care to reasonably commensurate with the perils and hazards likely to be encountered in the performance of EE’s duties a. As in any negligence action, the starting point is the existence of a duty, which is a question of law. The duty to a third party or fellow employee is based on the foreseeability of harm. The court needs to determine if the E owed a duty of care to a particular P. b. Question of law i. Randall Simon suspended for 3 games and fined $2,000 after hitting Italian sausage with bat during sausage race; Mandy was employee of Brewers – rec’d 2 bats from Randall afterwards ii. Generally. E primary liability for intentional tort committed by EE. 1. Negligent hiring (failure to do a background check) or 2. negligent retention (on-the-job signs E should investigate background) 3. E is subject to liability only for such harm as is within that risk. a. Theory of negligent hiring requires plaintiffs to argue that IF employer had done a background check of employee, then employer would never have hired ee and ee would not have been in position to inflict the harm. 4. Negligent hiring depends greatly on type of job involved a. Does er have some duty to customers in that particular line of work? b. Will ee have large amount of access or be alone with customers in isolated situations? c. Does job involve direct unsupervised contact with public? iii. Method to impose primary liability on E for acts which it would not be liable secondarily through respondeat superior. 1. e.g., Intentional torts outside the scope of employment. iv. Elements. Malorney v. B&L Motor Freight (p. 102) 1. E owes a duty to π 2. Foreseeability. a. Precise injury does not have to be foreseeable. 3. E must exercise care reasonably commensurate with the perils and hazards likely to be encountered in the performance of EE’s duties.


a. Ex. Repair workers, daycare workers, truck drivers, hotel
workers. 4. Not dependent on foreseeability alone. Includes considerations of public policy and social requirements. 5. Existence of the duty is a question of law. iv. How far the duty extends 1. Kansas. Not going to extend the duty so far as to make Es guarantors of their EEs. a. Schmidt v. HTG Kan. (student murdered by co-worker/dishwasher; dishwasher wasn’t in a position where he’d deal with people and murder didn’t happen at work, or even while victim still worked there) b. Liability results when E had reason to believe that an undue risk of harm to others would exist as a result of the employment of the alleged tortfeasor. i. Kansas State Bank v. Specialized Trans. Services (disabled girl complaining about bus driver. Driver left alone w/ vulnerable children  negligent). The SC found a tort for negligent supervision—liability results, not under respondeat superior, but because the employer had reason to believe that an undue risk of harm to others would exist as a result of the employment of the alleged tortfeasor. The employer is subject to liability only for such harm as is within that risk. v. Breach. 1. Whether duty was breached is a question of fact. 2. The jury will consider whether the employer has breached the duty by hiring or retaining the employee. Jury will look to the type of position, the information available to the E, the cost and availability of obtaining additional information and foreseability of the harm. v. Case Law: vi. Malorney v. B&L Motor Freight, Inc. (Ill. App. 1986) 1. Issue/Holding: Did the defendant freight company have a duty to investigate its psycho employee’s non-vehicular criminal record and Employer liability to 3rd to verify his negative response (on his job application) regarding criminal parties (tort victims and offenses, prior to letting him drive a truck with sleeping facilities? prospective employers) a. Questions of fact regarding the costs of such checks and the foreseeability of the tragedy should be answered by a jury 2. Facts: 17 year-old hitchhiker raped by a truck driver, who had a history of raping hitchhikers 3. Rationale: court wasn’t sure that it agreed with defendant’s argument that backgrounds checks would be too expensive, a. An employer/vehicle owner has a duty to deny the entrustment of a vehicle to a driver it knows, or through due diligence could’ve known, is incompetent. b. The jury should decide whether or not B&L breached the duty to hire a competent driver by not conducting a background check. 4. This is a common issue: Appropriate weight to be given the employer’s


failure to review an individual’s criminal record. The majority rule seems to be that, absent special circumstances, the employer has no duty to investigate whether an individual has a criminal record. Even the existence of a special circumstance, however liability of an employer is not to be predicated solely on failure to investigate criminal history of an applicant BUT rather in the totality of the circumstances surrounding the hiring, whether the employer exercised reasonable care. vii. Must have a “duty to disclose” to be liable for “failure to disclose” to Prospective Employer --1. Still, can’t give affirmative misrepresentations 2. Richland School District v. Mabton School District (Wn. App. 2002) 3. Issue/Holding: did employer #1 breach a duty to employer #2 when it failed to disclose its former employee’s criminal arrest and history of reprimand? No. 4. Facts: school custodian was charged with child molestation, but his employer knew that it was really just a family squabble; wrote glowing letters of recommendation to employer #2. Employer #2, when they found out about the custodian’s past, fired him and because of union arbitration, chose to pay him $100K rather than reinstate him. Employer #2 sued employer #1 for negligence based on misrepresentation and nondisclosure. a. Rationale: i. In order to be negligent, must first have a duty before you can breach it ii. The recommendation letter didn’t have any false information iii. Duty to disclose arises in a quasi-fiduciary relationship, when 1. (1) a special relationship of trust/confidence exists; 2. (2) one party relies on the superior specialized knowledge of the other; (3) etc. (4) etc. … a. No fiduciary relationship between former and potential employer iv. Court also rejected expansive view on negligent misrepresentation: imposing liability on anyone who gives an affirmative misrepresentation presenting foreseeable/substantial risk of physical harm to a third person – on these facts, there was no harm 5. Worker’s Comp Effect– Sue the Former E, not Current E a. Moore v. St. Joe Nursing Home b. Nursing home EE murdered a co-worker, EE’s former E didn’t disclose his the EE’s violent past and reason for his dismissal; Victim sued former E for wrongful death; (didn’t want to sue current E because that’s capped by Worker’s Comp)


i. Negligent hiring cases are often between strangers to the
employment relationship, b/c is something happens between 2 co-workers, then the E would be protected by Worker’s Comp. ii. The Court held that a “former employer has no duty to disclose malefic information about a former employee to the former employee’s prospective employer. iii. Although no general duty to disclose such information when the former E to seek out prospective E and inform them about a former EE, the courts ought to recognize a duty to disclose such information when the former E is specifically asked by a prospective E… this is especially true when the former EE has displayed violent tendencies in the past and is being considered for position involving public contact. c. Washington since has found that former EE have a duty to disclose-in response to case involving school teacher who’d been fired from two other districts for viewing porn and molesting a child. Wage & Hour Regulation i. Fair Labor Standards Act (FLSA) i. Contains four major requirements: a minimum wage, an overtime standard, restrictions on child labor, and equal pay. ii. There are three types of coverage: (1) individual employee, (2) enterprise coverage, and (3) coverage of public employees. iii. Basic Provisions and Coverage: Definitions 1. § 3(d) “employer” a. any person acting in the interest of an employer in relation to an employee; includes a public agency, but not a labor organization 2. § 3(e) “employee” a. an individual employed by an employer; special rules for employees of public agencies; doesn’t include family farm workers, volunteers for public agencies 3. § 3(g) “employ” a. to suffer or permit work 4. § 3 (r) “enterprise” a. related activities performed by any person for a common business purpose… doesn’t include activities done by an independent contractor, independently-owned retail/service stores 5. § 3 (s)(1) “enterprise engaged in commerce/production of goods for commerce” a. (A)((i) has employees engages in commerce/production of goods for commerce, i. or that has employees handling, selling, or otherwise working on goods or material that have been moved in or produced for commerce by any person; AND



b. (ii) has an annual gross volume of sales made or business done
Who receives the federal minimum wage? --people covered by FLSA • ee’s engaged in commerce • ee’s employed for employers engaged in enterprise • ee’s of the public sector • non-exempt ee’s





not less than $500K, OR i. is engaged in the operation of a hospital or school; OR ii. is an activity of a public agency c. If E meets the enterprise test as to one EE, then all EEs are covered. § 6 (a) “minimum wage” a. 6(a)(1) every employer shall pay to each of his employees who work in any workweek is engaged in commerce … wages at the following rates: i. $5.85 (enacted May 25, 2007) ii. (2)-(5): numerous exceptions before 1961: there was individual employee coverage/traditional coverage, where EACH employee’s activities had to be examined separately a. e.g. whether they were engaged in interstate commerce, or involved in the production of goods for interstate commerce. b. NOW, all employees of a covered enterprise are automatically covered without regard to the duties of each individual worker. Now, ALL employees who work for an enterprise engaged in interstate commerce are covered by FLSA. a. To qualify for enterprise coverage a business must satisfy three requirements: i. The statutory definition of enterprise ii. A commerce standard iii. And a Dollar Volume Test Can’t artificially separate employees into different enterprises -a. Brennan v. Arnheim & Neely (U.S. 1973) b. Facts: Sec of Labor sued for injunction against real estate management company for FLSA violations of the min. wage, overtime, and recordkeeping provisions c. Issue: whether the employees were “employed in an enterprise engaged in commerce…” d. Practical Issue: whether the management activities of the company at all the buildings should be aggregated as part of a single enterprise e. Holding: Yes they should. i. No challenge as to whether gross rentals equaled gross sales for dollar volume test, probably would have won f. Rationale: the employer didn’t own buildings, just leased and managed them, but employer has i. (1) related activities, ii. (2) unified operation/common control, and iii. (3) common business purpose; 1. irrelevant that their was an agency relationship between the building owners and the management company and that they kept separate bank accounts for each owner…


the employees of each building were under common control 10. Primer on the 11th Amendment a. Judicial power…shall not be construed to extend to any lawsuit commenced against a state by a citizen of another state b. Interpreted to mean that there’s no federal jurisdiction over suits brought by individuals against states unless i. (1) the state consents, or ii. (2) Congress has abrogated the states’ immunity pursuant to a valid grant of constitutional authority Oreo demonstration th Amendment right – cookie 1. Extended to suit in state court. (Alden v. Maine) Filling is a 14 represents Congressional authority  must be c. Key Cases: proportional to the size of the right i. Can’t sue states for FLSA violation Nevada Dep’t of HR v. Hibbs: the perfect oreo 1. Seminole Tribe v. Florida (U.S. 1996) FMLA violations; Π – man whose wife had 2. Congress can’t abrogate the state’s immunity been injured in an accident; he wanted twelve weeks off to care for her; Nevada refused under the Indian Commerce Clause --Court found congruence and proportionality -3. Lower courts apply this reasoning to FLSA 14th A § 5 legislation allowable ii. Ditto 1. Alden v. Maine (U.S. 1999) 2. state probation officers sued for FLSA overtime; state retained immunity 3. however, immunity does not bar all judicial review of state compliance with valid federal laws 4. possible for the states to consent to suits – which was done when the 14th Amendment was approved with its §5 enforcement power 5. also: sovereign immunity may bar suits against states, but not lesser entities 6. Sec. of Labor can bring suits against a state for FLSA violations iii. Can’t sue states for ADEA violations 1. Kimel v. Florida Bd. of Regents (U.S. 2000) 2. Age Discrimination in Employment Act was not a valid abrogation of state immunity because ADEA wasn’t “appropriate legislation” intended by the §5 enforcement power, because age is not a suspect class for equal protection iv. Can’t sue states for ADA violations 1. Bd. of Trustees of U. of Ala v. Garret (2001) 2. ADA also wasn’t “appropriate legislation” under §5 v. CAN sue states for FMLA violations, *gender 1. Nevada Dept. of Human Res. v Hibbs (2003) 2. FMLA subjects states to liability because it’s gender-based protection iv. Wages & Hours



31 states and DC have state minimum wages higher than federal (see Green handout; New Mexico – passed new minimum wage on 3/20 - $6.50 in 1/2008 and 7.50 in 1/2009)

1. Section 6 of the FLSA requires the payment of a minimum hourly wage→$5.75, to all covered employess who are not specifically exempt. SEE 206(a)(1). 2. “States take Lead to Raise Minimum Wage: Bypassing Federal Rate” a. Congress refused to raise the federal minimum wage in almost a decade b. Many states + D.C. have set higher wages i. §18 Savings Provision 1. FLSA doesn’t preempt states from having higher minimum wages 2. 5 states (Ala., La., Miss., S.C., and Tenn.) have no minimum wage c. currently, minimum wage is worth less (accounting for inflation) than in years past, back ‘til 1955 d. some states have their wages tied to inflation e. 2007 Senate passes steps to raise to $7.25/hr by 2009 f. 2007 House passed bill to $7.25/hr and tax breaks (§6(a)(1)) i. initially vetoed as part of the Iraq funding/time line 3. Questions (pp. 109) a. Current wage is $5.85/hr (§ 6(a)(1)) b. Wage was last raised in 2007 c. Only need to pay employees who are engaged in interstate commerce and work for an enterprise engaged in interstate commerce d. Compliance is measured over a “work week” §6(a) – 7 consecutive days, 168 hours e. People who are paid a salary or for piece work are not exempt from the minimum wage requirements i. total straight-time compensation / #hours in the work week (should) = $5.85 f. must pay minimum wage to covered nonexempt employees in cash or its equivalent, free and clear, with two exceptions: i. §3(m) lodging/food can count for wages, if lodging/food is customarily furnished by the employer 1. meals must be “customarily furnished” and “voluntarily accepted,” but doesn’t really matter whether they eat it ii. tipped employees: 1. § 3(t) “Tipped EE any employee that receives more than $30 a month in tips. 2. §3(m)(1): E has to pay a cash wage of $2.13 AND 3. An amount equal to the difference b/w tips the EE made and the minimum wage of 5.85. 3(m) (2) a. If EE does not make at least 3.72/hr in


Fixed Salary for Fluctuating Hours § 778.114(a): Since the salary in such a situation is intended to compensate the ee at straight time rates for whatever hours are worked in the workweek, the regular rate of the ee will vary from week to week and is determined by dividing the number of hours worked in the workweek into the amount of the salary to obtain the applicable hourly rate for the week. (c): The fluctuating workweek method of OT payment may not be used unless the salary is sufficiently large to assure that no workweek will be worked in which the ee’s average hourly earnings from the salary fall below the minimum hourly wage rate applicable under the Act, and unless the ee clearly understands that the salary covers whatever hours the job may demand in a particular workweek…

tips over the workweek, E must make up the difference. b. Tip pooling is allowed iii. “Opportunity Wage” for Teenagers 1. § 6(g) newly hired employees younger than 20 yrs old, during their first 90 calendar days…. $4.25/hr 2. designed to promote summer jobs 3. can’t fire employees to hire teenagers, instead iv. No Maximum Hours for FLSA, BUT penalties 1. § 7(a)(1) says any hours more than 40 must be paid at 1.5 times their usual rate 2. § 7(e) determines the amount of overtime: v. “regular rate” 1. (e)(1) : is everything paid to the employee, except… a. gifts, rewards, vacation payments, travel expenses, discretionary bonuses, payouts from profit-sharing plans, “talent fees,” contributions to pensions, overtime, increased wages for working holidays, and stock options i. *see statute, pp. 256, for smallest statutory subsection g. Overtime Examples: i. Furniture Store pays employees $10/hr for non-overtime hours, and $15/hr for overtime, and a $100 bonus for more than $5,000 in sales in a week. Kate works 50 hrs/week and sells $7,500 worth of furniture. Store pays her $650. ($10/hr x 40) + ($15/hr x 10) + bonus. 1. Did Store did not comply, because her $100 bonus was not discretionary, so it needed to be counted as her regular rate. 2. $100/50hrs = $2/hr + $10/hr = $12/hr for regular rate; 12 + 6 = $18/hr for overtime. ii. Employee works 44hr/week for a salary of $400. 1. check to see what the original employment contract was for. If it was for 40 hr/week 2. $400/40 = 10/hr reg. rate; 15/hr x 4 = $60 3. should be paid $460 for this week 4. most employees don’t get caught a. even if the agreement is for 44 hr/week, then you still have to pay overtime… really just symantics iii. fluctuating workweek. 1. Overtime compensation is then an additional half (not 1.5!!) of the regular rate b/c the salary


is intended to compensate all hours worked. iv. Salary, Nonexempt EEs. 1. Overtime requirements still apply when EE works > 40 hours. 2. salary/hours works can’t be less than $5.85/hr 3. Regular rate will vary from week to week. §778.114(a) 4. Formula. Amt of the salary/the number of hours worked in the workweek. 5. Overtime compensation is then an additional half (not 1.5!!) of the regular rate b/c the salary is intended to compensate all hours worked. 6. ER has to keep records of salaried (nonexempt) EE’s hours (EEs still qualify for OT) 7. Salary must be sufficiently large that in no workweek will EE be paid lower than minimum wage. §778.114(c) 8. EE must have a clear understanding that his Wal-Mart and DOL settlement: $33 million to resolve FLSA allegations for 80,000 employees pay covers all hours worked. §778.114(c) – 1/25/07 a. (No signature, just accept the job after the employer tells them). h. Uniforms: i. Can require to wear a uniform, but employer can’t credit the cost against the minimum wage ii. See pp. 114 v. Compensable Time 1. EE’s time that E must pay for, includes all time spent in production and related activities, whether or not EE is required to do it and it can be work EE takes home, even if E didn’t require it a. Knew, or should have known, standard Defining compensable time: “to employ = to 2. Employees must be paid not only for all time spent in physical or mental suffer or permit to work” exertion (whether burdensome or not) controlled or required by the Tennessee Coal, Iron & RR Co. v. Muscoda (cited in IBP) employer and pursued necessarily and primarily for the benefit of the • Defines work to be exertion employer or his business, but also for idle time or time spent in incidental Armour & Co. activities. • Exertion not required for work; 3. Portal-to-Portal Act § 4(a) • compensable time includes all time spent in production and related a. Relief from liability under FLSA, etc. for failure to pay activities; minimum wage or overtime compensation • all time where employee is permitted to engage in production whether b. Walking, riding, or traveling to and from actual place of employee is required to do so (taking performance of the principle activity AND activities which are work home, etc.; secretary arriving at 7 am example) preliminary/postliminary to the principle activity are NOT • Employer knew or should have compensable known that employee was doing c. Even using the employer’s vehicle, for commuting purposes, is extra work Employers must have clear OT policies to not compensable prevent accrual of lots of OT unknowingly (to 4. DOL Regulations on FLSA (pp. 118-20) keep costs down) a. Cases involving waiting time always invoke the catchy but


Renfro v. Emporia (10th Cir. 1991) Firefighters on call so frequently call back; entire call back time was compensable

conclusory distinction between periods when EE are “engaged to wait” and when they are “waiting to be engaged.” The critical issue: Whether EE can make effective use of the time for their own purposes. If they can not, the time is considered primarily for the E’s benefit, the EE are engaged to wait and the time is compensable. b. §785.17: On-call time i. is compensable only if 1. required to be on employer’s premises, or 2. so close that he can’t use the time effectively for his own purposes ii. those who go home and leave word where to be reached are NOT on-call iii. EMT’s were waiting to be engaged, shouldn’t be paid 1. Dinges v. Sacred Heart St. Mary’s Hospital (7th Cir. 1999) 2. Facts: team of “first out” responders must be at the hospital in 7 minutes. Plaintiffs were allowed to do personal things at home and within 7 minutes of the hospital; couldn’t drink or leave town, could trade shifts if they needed to, limited activities with her children, needed a babysitter. 3. Rationale: depends on whether employee has been “engaged to wait” or is “waiting to be engaged,” whether they can use the time effectively for personal uses, frequency of callback: EMT’s have less than a 50% chance that there will be a call. Although FLSA overrides private employment contracts, in close cases it makes sense to let private arrangements endure, because there would be unintended consequences. If new rule imposed, the hospital would require the EMTs to sleep at the hospital. No one wants that. c. §785.18: Rest time i. is compensable if… 1. 5-20 minutes (about) 2. *no federal requirement to give breaks, states might require d. §785.19 Meal time i. IS NOT compensable ii. Longer than 30 minutes iii. Meal times doesn’t include coffee or snack breaks iv. Not meal time is the employee is asked to perform any duties, while eating; e.g., secretary answers phone during lunch


1. Movie Clip: Clint Eastwood on his lunch break,
but stops bad guys robbing a bank 2. Clint wasn’t completely relieved from duty, so he must be paid for the entire 30 minute meal period v. Still meal time, even if the employee is required to stay on the premises e. Sleeping, etc. i. §785.20 General 1. it’s possible to be asleep and working at the same time ii. §785.21 Those working less than 24-hour shift 1. is working, even if permitted to sleep or engage is personal activities 2. example: telephone operator iii. §785.22 Those working a 24 hour + shift 1. employer and employee may agree to exclude mean and regularly scheduled (< 8 hr) sleeping periods 2. sleeping facility furnished by employer 3. employee can generally have uninterrupted sleep 4. no more than 8 hours can be excluded for sleep time a. if no implied/expressed contract to the contrary, the employee will be paid for the 8 hours 5. if scheduled sleep time is interrupted by a call to duty, then the employee must be paid for the interruption 6. if employees do not get at least five hours’ sleep during a sleep period, the entire time is compensable. iv. §785.23 Employees who live on-site 1. are not compensated for their sleeping time 2. hard to determine hours works, so any reasonable agreement of the parties which takes into consideration all the pertinent facts will be accepted. 3. example: switch-board operator who works from her own home v. Sleep Time Summary: Sleep time is compensable under certain circumstances. EE who are on duty for less than 24 hours are considered to be working even if they are allowed to sleep during party of that time. EE who are on duty for 24 hours or more may agree with their E to exclude from compensable time bona fide meal periods and bona fide sleeping periods of

Sleeping: Central Mo. Telephone Co. v. Conwell Working entire time even if allowed to do other things if less than 24-hour duty


not more than eight hours. The E must furnish adequate sleeping facilities, and EE must normally have interrupted sleep period. Any actually interruptions for calls to duty are compensable, and if EE do not get at least five (5) of sleep during a sleep period, the entire time is compensable. vi. Portal to Portal Provisions regarding the above:
1. if the ee works more than 24 hour a day, the e'or and ee may agree to exclude up to 8 hours a night for sleeping from pay as long as ee is given sleeping conditions. 785.22(a). If the ee only gets 4.5 hours of sleep, then under (b) the entire period must be counted as hours worked. When there is no agreement speaking to this, then 8 hours of sleeping time will constitute hours worked. 785.22(a). 2. If the employee works more than 24 hours, the employer doesn't have to pay the 8 hours of sleep time if the Employee and employer have agreed to this arrangement before hand. If there is no agreement, then the sleep hours are compensable. 3. The sleeping arrangements are a question of fact... i.e. if the ee has a cot in the employment office (weird, but possible) whether or not that constitutes sufficient sleeping quarters will be a question of fact.


Travel Time i. §785.33 Generally 1. whether the time is compensable depends on the “kind of travel involved” ii. §785.34 Effect of Portal-to-Portal 1. commuting time is still compensable if by express contract or by custom or practice that such time is compensated 2. even if employer agrees to pay for the time, it doesn’t need to be counted for overtime reasons iii. §785.35 Ordinary situation (home to work) 1. not covered, doesn’t matter whether the work location changes daily iv. §785.36 Emergency Situation 1. will be compensable if the employee travels home, and then is asked to return later that night to tend to an emergency v. §785.37 One-day assignments in another city 1. such travel can’t be regarded as ordinary hometo-work travel 2. travel qualifies as an integral part of the principle activity


In response to Anderson v. Mt. Clemens Potter Co. (1946) (finding that all time spent on activities after employee passed threshold of employer’s property until leaving as compensable), Congress passed Portal to Portal Act PPA, § 4(a): activities not compensable (1): walking to and from actual place for performing work (2): preliminary and postliminary activities IBP came along after PPA where question raised: when does work day start and end, when employees are only paid for principal activities?

vi. §785.38 Travel all in a day’s work

1. example: employee travels from work site to work site to work site 2. this travel time must be compensated vii. §785.39 Travel away from community 1. is compensated when it cuts across the employee’s workday, but not time spent as a passenger outside of the workday; also includes weekends viii. §785.40 Use of private automobile 1. doesn’t matter if employee is granted permission to take his own car or take the train ix. §785.41 Work performed while traveling 1. is, of course, compensated 5. Integral & Indispensable parts of Principle Activities are Compensated a. IBP, Inc. v. Alvares (U.S. 2005) b. Issue: whether time is compensable, in light of the Portal-toPortal Act, when employees don protective clothing on the employer’s premises before they engages in their principle activity c. Holding: the donning time is compensable (wouldn’t it be if it was just hard hats and gloves), but what about the walking? It’s covered if it happens after they perform an integral activity (and the court held that donning was such an activity) i. “principle activities” also means any activity which is an “integral and indispensable part of the principle activity” ii. ex: showering to remove toxic battery acid (Steiner v. Mitchell (1956)). Continuous workday doctrine – requires iii. De minimus Doctrine: don’t have to pay for putting on all donning and doffing time to be paid non-unique safety gear that doesn’t take must time 1. De Minimus Doctrine was articutaed by the SC, and renders noncompensable otherwise compensable time because of the small amount of time involved. 2. It is only when the EE is required to give up a substantial measure of his time and effort that compensable working time is involved. 3. Three factors test for the De Minimus Doctrine: Administrative difficulty of recording time, the sign of the aggregate claim, and whether the EE performed the work on a regular basis. d. Facts: Employees arrive at the plant, in the locker room: donning of special safety gear; walk to work station on plant floor (principle activity is to hack carcasses); walk back to locker


room; doffing; employee leaves the plant e. One important factor is whether the employer or the employee is the primary beneficiary of the activity. Ex: Showing after working at a toxic plant. 6. “Comp Time” – Public Es only a. A gov’t EE may receive compensatory time off (“comp time”) in lieu of overtime pay. §7(o)(1) b. Must be 1.5 hours for every hour for which overtime pay would be due. c. Limitations. i. EE shall not accrue > 240 (160 hours of OT) hours of Comp Time comp time or > 480 (320 hours of OT) hours of comp can be accrued but limited to 240 hours (160 time if EE is engaged in a public safety, emergency OT hours worked) except for public response, or seasonal activity. Must pay overtime. 7(o) safety/seasonal/emergency response (3)(A) employees (480 hours, 320 OT worked) d. Taking Comp time. • once ceiling is hit, OT must be paid in cash or employees must take i. An EE who has requested to take comp time, shall be time off permitted to use the time within a reasonable period § 7(o)(2)(A)(i): if union in place, union must after making the request, as long as operations are not approve comp time alternative unlawful for covered employees in private disrupted. §7(o)(5)(B) sector ii. E can require EE to take comp time. It is not property of the EE. Christensen v. Harris Co e. EE leaves. i. if EE leaves the employment with unused comp time, E has to pay for that at either the average regular rate received by the EE during the last 3 years, or the final regular rate, which ever is higher. §7(o)(4) ii. If E foresees the leaving, can make EE take time. Christensen v. Harris Co vi. Exemptions – a. The White-Collar exemptions, contained in section 13(a)(1) for those employed: i. in a bona fide executive ii. Administrative iii. Professional Capacity b. Relieves the E from both the minimum wage and the overtime requirements. c. Accounts for most uncovered EE’s d. The “New” White Collar Regulations i. Raised the minimum salary for all 3 job categories to $455 per week, or $23,660 per year ii. eliminate the difference between the long and short duties test iii. eliminate the percentage limitations on non-exempt work contained in the former long tests iv. Establish a new category of “highly compensated


employees” who are exempt if they have a total annual compensation of at least $100,000 and customarily and regularly perform any one of the duties of an exempt professional, administrative, or professional employee. These employees must receive at least $455/week on a salary basis. 29 C.F.R. 541.601(a), (b)(1) e. Versus the “Old” White Collar Regulations i. Under the “old” white collar regulations, there were two duties tests, the long test and the short test. ii. The long test, which contained man more duties, including percentage limitations on the amount on nonexempt work that the employee could perform, applied to workers who were paid at least $155 per week on a salary basis. iii. The short test, which looked much like the duties test under the new regs, applied to workers who were paid at least $250 per week on a salary basis. 1. Congress voted to increase the minimum wage on Northern Marioano islands, but not American Samoa island, which is controlled by industry from Starkist (parent company is Delmont) whose headquarters is in the same place as Nancy Pelosi, 2. NOW: Employees will be exempt executives if their primary duty is management of the enterprise in which they are employed or a customarily recognized department or subdivision of that enterprise; they customarily and regularly direct the work of two or more employees; and they have the authority to hire or fire other employees or their suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight. 3. FLSA § 13 – Exemptions 4. (a) minimum wage and overtime requirement don’t apply to… a. (1) anyone employed in a bona fide executive, administrative, or professional capacity (including teachers, i. most important exemption: §13(a)(1) cuts across industries. The rest are industry-specific ii. DOL is directed to promulgate regulations to define the terms bona fide executive, administrative or professional capacity 1. As long as Secretary’s regulations are within meaning of the statute, they are upheld b. (3) World’s of Fun/camp counselor c. (5) fish hatchery d. (6) small/family farm workers, etc. e. (7) anyone the SOL says so by regulations f. (8) newspaper boys


Handout: “Justices to Decide Suit on Home Care Aids” Π argued: before 1974, home aides (not hired directly by families) were covered by FLSA; Congress wanted to expand FLSA, so its intent was not to exempt worker hired by 3rd party agencies; argue that legislative history equated elderly companions with babysitters… nowadays, that’s not a fair assumption, because home care aids are often the sole breadwinners

Computer employees – 541.400 Professionals in software design are usually paid hourly 13(a)(17) – exempts particular computer employees Hourly basis must be at least 27.63/hour ($1100/week) ---In writing new regs – exempt as professionals under (a)(1) or (a)(17)

g. (10) switchboard operators h. (12) seamen i. (15) babysitters and elderly companions (see newspaper clipping) j. (16) criminal investigators k. (17) computer systems analyst, etc., whose primary duty is …… 5. (b) overtime requirements don’t apply to… a. (1) anyone picked by the Sec of Transportation b. (2) rail operators c. (3) airline workers d. (5) buyers of poultry e. (6) seamen f. (9) news announcers, editors, radio/tv .etc. g. etc. etc. etc. h. (15) maple sap processors i. (17) taxi cab drivers j. (20) firefighters and policemen … if the department has fewer than 5 employees k. (21) any employee engaged in domestic service (and lives in that house) l. (24) orphan caretakers m. (27) movie theater workers n. (28) tree keepers o. (29) recreational workers in national parks p. (30) criminal investigators 6. Focus on White Collar Exemptions a. 13(a) – employees exempt from both minimum and overtime b. 13(b) – some employees exempt from just overtime requirements c. several industry-specific (fish hatchery, switchboard operators, maple syrup collectors), reflect lobbying d. duties test (last modified in 1949) e. salary amount (added in 1954, updated in ’75) f. salary basis test - casebook, pp. 146 7. 29 CFR § 541: Defines the Exemptions for Executive, Administrative, Professional, Computer and Outside Sales Employee a. Subpart A – General Regulations i. Intro, repeats FLSA 13(a)(1) ii. 541.2: a job title alone is insufficient to establish the exempt status iii. 541.4 FLSA is just the minimum, employers must comply with states that choose higher standards b. Subpart B – Executive Employees i. 541.100: compensated at least $455/week, 1. primary duty is management of the enterprise, 2. customarily/regularly directs the work of two+ full-time employees (or 1 full, and 2 part-time), 3. has authority to hire/fire other employees (or at least has valued input in hiring/firing)


ii. 541.101 any employee who owns 20%+ equity interest
in the enterprise, and actively engaged in the management 1. 541.102 “management” is interviewing, selecting, training employees; setting rates of pay; directing the work of other employees; maintaining production or sales records for use of supervision/control; appraising employee’s productivity; handling complaints; disciplining employees; planning the work; determining techniques used; apportioning work among employees; providing for safety of employees, etc. etc. 2. 541.106 Concurrent duties a. dual duty of exempt and nonexempt work does not disqualify an employee from the executive exemption c. Subpart C – Administrative Employees i. 541.200 General Rule 1. compensated on a salary of fee basis of at least $455, 2. and whose primary duty is the performance of office or non-manual work 3. directly related to the management or general business operations of the employer, 4. and primary duty includes the exercise of discretion and independent judgment w/ respect to matters of significance ii. 541.201 “directly related” 1. for example, means working with tax, finance, accounting, budgeting, auditing, insurance, quality control, purchasing, procurement, advertising, marketing, research, safety and health, personnel management, human resources, employee benefits, labor relations, public relations, gov’t relations, internet and database administration. iii. 541.202 Discretion and independent judgment 1. involves the comparison and the evaluation of possible courses of conduct, 2. and acting or making a decision after the possibilities have been considered iv. 541.203 Examples 1. insurance claims adjusters, financial services, an executive assistant, human resources managers, purchasing agents, v. 541.204 Educational Establishments

541.700: primary duty means the principal, main, major or most important duty that ee performs; based on all facts; time spent performing exempt work can be a useful guide to determing whether exempt work is primary duty of ee (541.3(a) – exemptions not applicable to manual laborers)


1. gets at least $455/week, or at least equal to the entrance salary for teachers in that school, and primary duty is academic instruction 2. also includes special schools for the disabled d. Subpart D – Professional Employees i. 541.300 general rule 1. compensated at least $455/week and 2. whose primary duty is the performance of work requiring knowledge of an advanced type in a field of science or learning 3. customarily acquired by a prolonged course of specialized intellectual instruction, 4. OR requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. 5. Ex: Registered Medical Techs., Nurses, Dental Hygienists, Physician Assistants, Chefs etc. ii. 541.301 Learned professionals 1. Primary duty test includes three elements: a. Must perform work require advanced knowledge b. That knowledge must be in a field of science or learning, and c. That knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction 2. law, medicine, theology, accounting, architecture, teaching, physical/chemical/biological sciences, pharmacy 3. doesn’t necessarily require the employee to have an advanced degree 4. Examples: a. Exempt: Certified medical techs, R.N.s, dental hygienists, physician assistants, CPAs, Executive chefs, athletic trainers, funeral directors, b. Not exempt: LPNs, paralegals, 5. 541.302 Creative Professionals a. maybe field reporters, but not if subject to substantial control, so probably not 6. 541.303 Teachers 7. 541.204 Law & Medicine e. Subpart E – Computer Employers i. Exempted…CFR §541.400(a) f. Subpart G – Salary Requirements i. Generally, $455/week, or entry level salary of teachers, ii. special rule for computer employees 1. $27.63/hr


iii. 541.601 Highly Compensated Employees
1. $100K/year is deemed exempt under 13(a)(1) 2. a high level of compensation is a strong indicator of an employee’s exempt status, 3. thus eliminating the need for detailed analysis of the employee’s job duties, 4. so he’s exempt if he performs one or more of the exempt duties or responsibilities of an executive, administrative or professional employees (even if they don’t meet all the requirements of the exemption) 5. still doesn’t include blue collar laborers iv. 541.502 Salary Basis 1. “not subject to reduction” b/c of variation in quality or quantity of work performed 2. lots of exceptions and safe harbors for breaking this rule a. 541.602(b)(5) exceptions (i.e. absences of one day or more for personal reasons) b. and also permit deductions from pay for disciplinary suspensions of a full day or more imposed in good faith for infractions of workplace conduct rules. 3. Effect of improper deductions: a. the exemption is lost during the time when the deductions were made ONLY for employees in the same job classification working for the same managers responsible for the actual improper deductions. 541.603(b) 4. Window of correction: a. improper deductions that are either isolated or inadvertent will not cause a loss of the exemption if the employer reimburses the employees; 541.603(c) 5. Safe harbor – if the employer a. Has a clearly communicated policy prohibiting improper deductions and containing a complains mechanism i. Reimburses employees for any improper deductions, and ii. Makes a good faith commitment to comply in the future, b. The exemptions will not be lost unless the employer willfully violates the policy after receiving complaints; 541.603(d)


v. “Subject to Reduction:”
1. Meaning of the Requirement that an exempt EE’s salary not be subject to reduction, except for certain specified reasons. In Auer v. Robbins, the SC upheld as reasonable the SoL interpretation that the salary basis test is not met when an EE compensation may as a practical matter be adjusted in ways inconsistent with the test. That standard is met if there is an actual practice of making such deductions or a policy that creates a likelihood of such deductions. Thus, if there have been no actual deductions, there must be a clear and particularized policy-one effectively communicates that deductions will be made in specified circumstances. vii. Child Labor 1. Direct Violation: a. §12(c) prohibits the employment of “oppressive child labor” in commerce (etc.) 2. Indirect Violation • Children actors working in middle of a. 12(a) “the hot goods provision” prohibits the shipment in night killed during filming of movie • Elizabeth Dole, as Secretary of commerce (etc.) produced in an establishment where oppressive Labor, made surprise sweeps child labor has been employed within the proceeding 30 days. targeting industries Unlike the direct prohibition, the hot goods ban applies without • 2005 settlement with Wal-Mart $135,540 to resolve child labor regard to the nature of the work performed by the minor or the violations (allowing teenagers to enterprise in which the minor worked. operate hazardous equipment 3. 3(l) defines oppressive child labor and authorizes the SOL to issue regs governing some aspects of child labor 4. Exemptions: a. 12(c), (d), and (f) provide some exemptions for child labor b. Ages 16-17: may be employed, except where the SOL has found the occupation to be hazardous (there’re 17 of these, e.g., coal mining) c. Ages 14-15: office, sales, work, retail, food service, etc. as long as it doesn’t interfere with their education, health, or well-being. SOL regs limit the number of hours, both per day and per week i. Hours/wk limitations that change depending on whether Newspaper delivery and wreathmaking are school is in session or not. completely exempt from wage, OT and child labor requirements ii. This is where most of the violations occur --DOL has also proposed rules about d. Under 14 – can’t work at all; permissible jobs and occupations for 14 & 15 year-olds i. controversial exemption for agriculture; §13(c)(1) Inspect workplaces and records (§ 11 – e. Enforcement – record keeping requirements) For public suits, often record-keeping i. SOL prosecutes violations of §§ 12(a) and 12(c). violation (not allowed in private suits) ii. Civil penalties, § 16(e), Issue regulations, opinion letters, iii. injunctive relief, § 17, and interpretations of regulations


iv. criminal prosecution for willful violations, §`6(a). f. Civil penalty, §16 is $10K per violation; i. No private c/o/a for wrongful death or injuries to minors employed in violation of the Act. viii. FLSA General Enforcement 1. The FLSA authorizes five enforcement actions, three by the Sec. of Labor, one by private Ps, and one by the Department of Justice. 2. FLSA §§15(a), 16, 17; PPA§§ 6, 10, 11] 3. FLSA § 15(a) a. Unlawful for any person to transport (etc.) with knowledge that the shipment is intended, any goods in the production of which any employee was employed in violation of the minimum wage and overtime requirements b. “hot goods” injunction – only Sec of Labor can do (refers to § 17) c. Doesn’t apply to common carriers, i. but Citizens Industrical Credit v. Brock, 107 S. Ct. 2694 (1987) held that §17 applies to secured creditors d. (3) unlawful to discharge or discriminate against any employee because he filed any complaint regarding FLSA 4. Who can bring suit? § 16(b) a. Sentence 1. Authorizes the private party c/a. i. liable to the employee(s) affected in the amount of their unpaid minimum wages, or their unpaid OT compensation, as case may be, and in an additional equal amount as liquidated damages. ii. The liquidated damages provision puts some teeth into the statute w/o inserting ‘punitive’ damages. Compensates employee for not having the use of the money in addition to not having the money b. Sentence 2. Authorization for the Sec of Labor’s c/a (on behalf the EEs for the public interest). c. Sentence 3. Also authorizes the private party c/a, in state or federal court i. Most suits end up in federal court even if filed in state court – b/c of removal d. Sentence 4. regarding representative actions: must have consent in writing to become a party  very few FLSA class actions i. Opt-in class action (unlike other class actions in FRCP 23 Incentive for employer to comply Net which are opt-out – have to send back the post card; capturing claims going back as far as SOL; each new paycheck after claim filed as a new Congress unhappy with representative suits) SOL and become part of the suit e. Sentence 6. Right of the Sec of Labor to bring suit trumps the EE’s If employer changes practice and comes into compliance right: Sentence 3 & 6. Do not pay for back overtime, but i. If EE brings suit first, that suit remains, but would probably compensate appropriately want to join w/ gov’t’s claim. Every day that goes by after compliance – paychecks are not captured by suit b/c those ii. Anyone who hasn’t filed yet, can’t do so after the Sec files. checks are lawful 5. § 16 (a) Fines and Imprisonment (must be willful, not sent to prison


PPA means “knew or showed reckless disregard” for whether the conduct violated FLSA; question of fact for jury Not liable for willful violation if had sought and rec’d an opinion letter from an attorney about conduct

until the second conviction). DOJ brings these actions. a. any person who willfully violates FLSA shall be fined $10K, or to imprisonment for not more than six months, or both. b. No person shall be imprisoned except for an offense committed after the conviction of such person for a prior offense under this subjection 6. 15(a)(5) record keeping: 7. 15(a)(3): anti-retaliation a. violation of Act to discharge or discriminate against someone b/c a person has filed a lawsuit or testified in someone else’s lawsuit b. May also be enforced under 16(b) 2. § 17 - SOL injunction action– refers to 15, which includes the prohibition on child labor and the record keeping violations a. Sec of Labor is allowed to bring an action for injunctive relief to restrain violations of the act. b. Suit for unpaid minimum wages and unpaid overtime. “Want E to stop w/holding unpaid minimum wages.” c. Sec will often use this b/c it moves across the docket faster. E can’t demand a jury trial. d. Eliminates recovery of liquidated damages, though 3. Statute of Limitations a. Originally, FLSA didn’t have a SOL, but there was also no private c/o/a clause. SOL added by PPA §6: i. two years for violation, ii. three years for willful violation; 29 USC §255 b. Every new paycheck creates a new two year SOL. i. Can only capture damages for the preceding two years. 4. Safe Harbor for E’s who Rely in Good Faith to DOL Handbook c. Added by PPA, d. partial good faith defense to awards of liquidated damages (subjective and objective grounds that E had reasonable belief that it wasn’t violation FLSA) e. complete defense where there’s reliance on rulings from the Wage/Hour Administrator (§10 opinion letters) i. Marshall v. Baptist Hospital, Inc. ii. Issue/Holding: whether X-ray tech students who worked at the hospital were entitled to minimum wage? Yes, but the hospital has safe harbor iii. No punishment for backpay, but have to pay from this judgment forward iv. *had they not relied on the handbook, then E would be liable for backpay 1. can’t leave out key facts when you write to the opinion letter 8. Rules for Settlements of FLSA Back Wage & Liquidated Damages a. Brooklyn Sav. Bank v. O’Neil i. Not going to allow private settlement b/c it gives unfair advantage to E


b. Lynn’s Food Stores v. U.S.
c. Ways to resolve FLSA claims… i. §216(c ) payment supervised by the DOL, OR ii. employees bring claim in court under FLSA, court determines that a settlement proposed by an employer & Now – can settle if DOL supervises or employees is fair and reasonable, court enters stipulated if it is done through lawsuit/settlement judgment of lawsuit 1. E’s can’t trick EE’s into signing away rights 2. FLSA is mandatory, can’t contract around it 3. Doesn’t matter that E recorded conversations in an effort to prove that it was fair 9. “Hot Goods” in the Stream of Commerce can cause irreparable harm, justifying an injunctive order a. Herman v. Fashion Headquarters (S.D.N.Y. 1998) b. Some of the company’s suppliers hadn’t been paying EE’s properly, company still liable to pay before they ship/sell goods j. State Wage Regulation i. Minimum Wages. FLSA does not preempt state minimum wages when they are more generous than $5.85. 1. State law regulates to greater extent than FLSA what deductions can be taken from the paycheck. Under FLSA, as long as deductions don’t reduce the pay below the min. wage for that workweek, it doesn’t care what deductions are taken out. 2. States may have a lower minimum wage than the federal wage (e.g., Ohio & Kansas) 3. where it’s $2.65 – 19,000 workers affected (not engaged in interstate commerce or < $500) ii. KS Wage Payment Laws. Dictates when an EE must be paid. 1. employee’s wages get preference when a business goes into receivership. 44-312 2. must get paid at least once a month; can’t have a pay period end more than 15 days before a regular pay day; 44-314 3. after employment terminates: employee must get paid on the next regular pay day; 44-315 (penalty is 1% of unpaid wages for each day 4. When an EE leaves, to be paid by the next pay period. KSA 44-3159(a) 5. Some states you have to be paid the last day of work. iii. Withholding of Wages. 1. E may only withhold EE’s wages for certain purposes a. Okay i. State/fed law requires or allows it (e.g. taxes and union dues) ii. Deductions for medical service (as long as no benefit to the employer) iii. Signed authorization by the employee for deductions for a lawful benefit to the employee iv. According to KDHR 1. contributions to employee benefit plans


2. employee personal savings accounts 3. union dues 4. actual cost to employer of meals and lodging obtained from employer. K.A.R. 49-20-1(a)(1) (A)-(G) b. Okay, even if not in writing i. Deductions required by State/fed law ii. Deductions for medical care, as long as no benefit to employer iii. Deductions made to correct over-payment, even if it was employer’s error iv. Deductions to cover earlier requests for cash advance v. Deductions for excess cash expense allowances advances made by employee which are not receipts c. Not Okay i. Doesn’t matter if the employee agrees to it in writing 1. deductions for cash shortages, breakage, etc. 2. deductions for uniforms/special tools which are not necessary to the performance of duties a. Note: okay to deduct for uniforms under FLSA, but NOT in KS! d. Important Rules under the KS Wage Payment Act i. Unused vacation time, at the time of termination, constitutes “wages” ii. E can’t change vacation policy w/o notice iii. Can impose changes in wages, but must be before those wages are earned iv. Penalties under KWPA only if E willfully pails to pay an E wages (design, purpose, intent) 1. A.O. Smith Corp. v. KDHR


Facts: Former EE’s couldn’t figure out how to change their vacation plan – they kept writing employee handbooks changing the policy but then would tell the HR person at the plant not to tell the employees – they wanted to keep it a secret. New owner - All EEs are going to stay at the same place, doing the same work, the only thing that will change is that the sign outside the plant will be changed and the name on their paycheck is changed. They get same pay and nearly identical benefits. But the new owner is concerned about accrued vacations. You have to work an entire year before you can take 2 weeks of vacation. The CST (new) people got indemnification contracted into the buyout contract. A.O. had said don’t worry about the vacation policy, we changed it to earn as you go. So the sale goes thru, all the EEs see the memo about vacation and get mad b/c they worked the entire year w/o vacation, accruing vacation pay for the next year, but now they have to earn more. On appeal, before the Supreme Court was whether the damages award should stand a. Was the vacation pay “wages” w/in the meaning of the wage payment act – did they suffer a

3. Rationale


b. c.

“discharge” and was AOS’s failure to pay them “willful” w/in the meaning of the pertinent section 44-315: whenever an ER discharges EE, he shall pay the EE’s earned wages Vacation is a form of compensation, earned thru their labor – 44-313(c) They were discharged. It was willful w/in the meaning of the statute – they intended not to pay them.


k. Family and Medical Leave Act i. Remember: FMLA does not affect FLSA status 1. §FMLA §102(c) & FLSA Regs.§541.602(b)(7) ii. First bill signed in the first Clinton administration iii. Many states have their own leave act for smaller employers – but not Kansas i. Different states are creating niche time-off provisions • Volunteer fire fighting • Volunteer with Red Cross • Attend school conferences • Donate bone marrow iv. Covered Es. Any person engaged in commerce who employs 50 or more EEs. §101(4)(A)(i) 1. Count all EEs of the company at all locations, within 75 miles a. §101(2)(B)(ii) b. car miles, not as the crow flies; Hackworth v. Progressive Car Ins. Co (10th Cir. 2006) ii. Eligible EEs. 1. Generally. An EE who has been employed by E for at least 12 months and had at least 1,250 hours of service w/ E in the last 12 months. §101(2)(A)(i) & (ii) iii. Triggering Events. 1. Birth, 2. adoption, 3. care for spouse, child, family member with a serious health condition, 4. EE has a serious health condition. a. §102(a)(1)(A)-(D) i. Birth or adoption, the time must be taken within a year of the birth or placement. §102(a)(2) 5. Serious Health Condition. a. Inpatient care or continuing treatment by a healthcare provider. §101(11)(A) & (B) i. (a)(2) continuing treatment. Reg. §825.114(a)(2)(iii) 1. incapacity of more than 3 consec. Days + (i) treatment 2 or more times by HC provider or (ii) treatment by a health care provider at least once with a resulting regimen of continuing treatment under the


provider’s supervision. 2. (ii) pregnancy 3. (iii) chronic serious health condition 4. (v) multiple treatments b. Leave Allowed: 12 weeks / per 12 months i. 12 workweeks of leave during any 12-month period. §102(a)(1) 1. E chooses method to tabulate 12-month periods: calendar year, E anniversary date, date EE takes leave. Must pick method and stick with it. a. See handout… b. 29 CFR 825.200(b)(3) “calendar” c. 29 CFR 825.200(b)(4) “rolling” options besides 12 full weeks ii. Intermittent Leave. reduced leave schedule –101(9) 1. Leave for a birth or adoption shall not be taken intermittently unless E and intermittent leave – 102(b) could continuously take EE agree. §102(b)(1) (p. 303) 1.85 hours/day 2. Leave for serious medical condition may be taken intermittently or on 9.23 hours/week reduced leave when medically necessary. §102(b)(1) 40 hours/month 60 days/year a. Reduced leave. §102(9) (p. 302 b. When an EE requests intermittent or reduced schedule leave, the E may temporarily transfer him/her to a different job that can better accommodate the recurring periods of leave, as long as the EE is qualified for the job and the new job has equivalent pay and benefits.

iii. Spouses of Same E. 1. For birth, adoption, or caring for sick parent, the couple may take an
aggregate of 12 weeks. §102(f)(1) & (2) (p. 304) 2. Not Married? Each get to take 12 weeks! a. “same E” is construed broadly. State of KS is the employer for many people. c. EE burden to prove condition. i. E can require certification by healthcare provider. §103(a) 1. DOL provides a form to avoid ADA problems. 2. § 103(b): what constitutes sufficient certification ii. E can require a second and third opinion at the expense of E by a doctor designated by E. §103(c)(1) 1. Healthcare provider can not be employed by E on a regular basis. §103(c)(2) 2. Can also get recertification, after EE has been on leave for awhile iii. Case: E didn’t believe EE, so hired a private investigator rather than ask for a second opinion… this is okay, E doesn’t have to reinstate the lying EE d. EE’s notice. i. Foreseeable leave. When need for leave is foreseeable (birth or adoption) EE shall provide at least 30 days notice unless that is impracticable. ii. Generally. EE has the obligation to give E notice he needs FMLA time, but does not have to specifically name the Act. Reg. §825.208(a)(2) 1. Enough to state a qualifying reason for the needed leave. a. Bryne v. Avon Products


b. Nightshift worker sleeping on the job, secretly suffering a mental breakdown, don’t tell employer, but E calls sister and says he’s sick; gets fired for missing a meeting, but he missed because he want currently attempting suicide c. Holding: don’t have to say, “I need to take my FMLA leave right now,” this sort of circumstantial evident is enough to constitute notice. Question of Fact i. Was this change in behavior enough to notify a reasonable E that EE suffered from a serious health condition? d. Mental illness is hard to tell, could be anything
2. Novak v. Metrohealth Med Center a. Facts: Novak accrued a bunch of points for poor attendance and was about to be fired for too many absences. Then she takes her last absence and Metro fires her. She argues the last absence was for an FMLA leave-qualifying reason – she has a bad back and her daughter is suffering from post-partum depression. She argues the last absence can’t be counted against her. b. Issue: was that last absence because of a serious health condition (hers or her daughter’s) c. Holding: d. Rationale: She got a certification but there were a lot of blanks in it – he hadn’t seen her since the yr before, Metro wasn’t convinced and they eventually reject her certification as insufficient, resulting in enough points for discharge. ii. She says their only choice was to get a 2d opinion, not just rejecting her cert iii. Where necessary leave is foreseeable, the EE must notify the ER – the ER has to tell the EE that it qualifies for FMLA leave and that’s how it’s going to count it, so the EE might want to think about that


e. E’s Obligations During Leave.
i. Don’t have to pay EE, unless they’re otherwise entitled to paid leave §102(c) ii. E can require EE to take EE’s accrued vacation or sick leave instead of FMLA time; §102(d)(2) iii. Won’t have an effect on FLSA exemptions for salaried employees; §102(c) iv. Must maintain her healthcare benefits as if she were still at work. §104(c)(1) 1. If the EE stops paying her portion of the premiums during this time, it’s a good idea for E to pick up that slack to avoid FMLA liability – just take that money when she gets back v. Reinstatement. EE must be reinstated to her position or an equivalent position. §104(a)(1) & (2) 1. Exception for Highly Compensated/KEY EE. a. Defined. Salaried EE who is among the highest 10% of the EEs with w/in 75 miles of EE’s facility. §104(b)(2) b. Denial of Restoration. E has burden to show: §104(b)(1)(A)-(C) i. Needed to prevent substantial and grievous economic injury 1. as in, the E had to hire another highly compensated EE, and would have to breach their contract with the new EE and pay damages ii. E notifies the EE of intent to deny iii. The EE elects not to return to employment E’s Rights. i. EE fails to return to work when leave expires. 1. E may recover (e.g., sue) the premium for healthcare benefits. §104(c)(2)(A) a. Unless, EE fails b/c (i) health condition continues or (ii) circumstances beyond EE’s control. §104(c)(2)(B)(i) & (ii)



b. deemed returned to work if back at work for 30 days

g. Remedies. i. E is liable to EE for wages or benefits lost b/c of the violation. OR §7(a)(1)(A)(i)(I)
(p. 310)

ii. If no wages were lost, a sum equal to actual monetary losses sustained by EE as a
result of the violation, up to 12 weeks worth of wages. §7(a)(1)(A)(i)(II) 1. If you have your mother-in-law as a babysitter, can’t recover “actual” damages for childcare iii. Interest on amt in (i) §7(a)(1)(A)(ii) iv. Liquidated damages equal to amount in (i) & (ii) v. Unless E has a good faith defense, in which case EE can still get (i) and (ii), but not liquidated damages. §7(a)(1)(A)(iii) vi. E Can’t Interfere with or Retaliate against EE who uses FMLA time 1. Prima facie showing for interference w/ FLMA leave a. EE was entitled to leave b. Some adverse action by the E interfered w/ EE’s attempt to use leave c. That E action was related to the EE’s attempt i. Makes an inference, intent doesn’t matter 2. Prima facie showing for retaliation against EE for using FMLA a. Availing self of protected right under statute b. Employment decision adversely affected employee c. Causal connection b/w two actions i. Intent required 3. The FMLA creates three separate causes of action for violations (FROM HORNBOOK) a. First COA: Entitlement or Interference Claim→ Prohibits employer’s from interfering with the “the exercise of or the attempt to exercise, any right” provided by the FMLA. To prevail under this section, the P must show only that he or she was denied a substantive benefit under the FMLA, such as leave or restoration from leave. Interference can include not only the denial of leave entirely, but actions such as discouraging employees from taking leave, or requiring them to perform work related tasks while on leave. b. Second COA: “Retaliation” or Discrimination Claim→ It is unlawful for an Employer to fire or otherwise discriminate against an employee “for opposing any practice made unlawful” by the FMLA. This claim requires proof that the E’s actions were motivated by retaliatory or discriminatory animus, and the courts use the burdens of proof developed under Title VII of the Civil Rights Act of 1964 to analyze such actions. c. The Third COA: The FMLA prohibits discrimination against individuals because they have filed charges, given information, or testified in any proceeding under the Act. 1. Jones v. Denver Public School a. Sketchy EE absent all the time, gets fired; EE claims FMLA reason; sees doctor and the beginning and end of the month, tries to reclaim 5 missed days that happened at the beginning b. Court: Two trips to the doctor must occur w/in the initial incapacity c. Serious health condition: must be bad enough that you have gone to your doctor and rec’d treatment with a continuing treatment plan OR you’ve seen your doctor more than once OR you have been hospitalized


d. could not trump firing by returning to doctor later Victims of Domestic Violence i. KSA 44-1131 &-32 ii. Get 8 days off for domestic violence and sexual assault, even if you don’t have accrued paid time off iii. Must keep confidential iv. Problems w/ Statute 1. no definition of employer 2. no penalty; how do you enforce? m. Military Leave i. USERRA 1. Applies to all employers, regardless of size, including the federal and state governments and their political subdivisions. 2. Employers are prohibited from discriminating against individuals who are members of, apply to be members of, perform, apply to perform, or have obligations to perform service in a uniformed service. 3. The USERRA prohibits discrimination in initial employment, reemployment, retention in employment, promotion, or any benefit of employment. The Act codifies the “motivating factor-same decision” burden of proof: the employer will have found to have discriminated against the service member if his or her service, application for service, or obligation of service was a “motivating factor” in the adverse employment decision, unless the E can prove that it would have taken the same action in the absence of the service, application for service, or obligation of service. ii. EE gets same benefits when he returns from military service 1. Rogers .v City of San Antonio (5th Cir. 2004) a. Issue: benefits b. Illustrative of legislative history c. 4316(a): codifies escalator principle as to seniority rights d. 4316(b): for non-seniority rights, person must be treated the same as someone coming back from the most generous leave of absence the employer offers 2. Escalator a. §4316(a): escalator principle for seniority rights (EE treated like he’s been there the whole time and made advancements). l.


4316(a) escalator principle: for seniority rights and benefits based on seniority: while the person is off in Iraq, their seniority continues to rise. When they get back, the step back in where their rank has risen to as if they’ve been continually employed. For rights not based on seniority (SEE BELOW), the ER has to treat the returning svc member the same way it would treat another EE who has returned from a long-term leave of absence. Whatever the most generous terms are for a long-term leave is what they have to do for the returning service member. And they must also provide COBRA-like health coverage in their healthcare plans for both the svc member and his/her eligible dependents for up to 24 months




3. On Best Leave of Absence a. §4316(b): non-seniority rights: EE must be treated like they were on the most-favored leave of absence the E has 4. Health Care a. §4317: COBRA leave: EE gets health plan coverage for up to 24 months (EE still has to pay 10% premium) b. Employers must provide COBRA-like coverage in their health plans for both the employee who is absent and for his or her eligible dependents. c. Coverage must be continued for the lesser of the 18 period beginning on the date on which the EE’s absence begins, or the day after the date on which the EE fails to apply for or return to employment as required by the Act. d. Unlike COBRA, the continuation requirements of USERRA do not contain COBRA’s restrictions to “group health plans” as defined by COBRA or its 20 employee size threshold; ALL employers covered by USERRA that provide health plans are required to offer this continuation coverage. 5. Notice a. §4312(a)(1)-(3): in order to get re-employment rights, EE must notify the employer of his or her intention to return to work. Varies with the length of military service. b. If the service was less than 31 days, of if the reason for the absence was a fitness-for-service examination, the individual must report to his or her employer by the beginning of the first full regularly scheduled work period on the first full calendar day that begins at least 8 hours after the individual returns home. If this is impossible, and not attributable to any fault of the EE, they should report as soon as possible. c. If the length of the service was between 31 and 180 days, the service member submit an application for reemployment no later than 14 days after completion of the service. Again, if this is not possible, then he or she must submit it on the next calendar day when submission is possible. d. If the service was for more than 180 days, the individual must submit an application for reemployment not later than 90 days after the completion of service. i. All of these periods can be extended for up to two years if the individual is hospitalized for, or convalescing from a service-related illness or injury. e. If the EE fails to report to apply within the applicable time period, he or she does not automatically lose reinstatements rights, but rather becomes subject to the E’s regular rules and policies concerning absence from work. 6. Limit a. EE gets to return to previous job, as long as military-related absences w/ that employer don’t exceed 5 years


7. Covered Employer a. §4303(4)(A): all employers, regardless of size 8. Definition of Uniformed Services a. §4303(13): includes weekend warriors 9. No Discrimination/Retaliation a. §4311 b. EE just has to prove membership was a motivating factor. §4311(c) c. E’s defense. Must show same decision would have been made regardless of service. 10. ReEmployment Positions a. §4313 b. An individual whose service was for no more than 90 days must be “promptly reemployed” in the position he or she would have occupied if continuously employed with no uniformed service, unless he or she is not qualified for the job and cannot become qualified after reasonable efforts by the E to qualify him or her. c. If the individual cannot qualified for that job, he or she must be reinstated to the preservice position she or he held. d. If the individual cannot become qualified for either of these positions, the E must place him or her in any other position that is the nearest approximation to these position with full seniority. e. The same rule applies to EE whose service was for more than 90 days, excepts that each contingency, the employer has the option of placing the individual in a position of equilvent seniority, status and pay. 11. Exceptions to Duty to ReEmploy a Returning Service Member a. USERRA provides only three exceptions to the duty to reemploy a returning service member: i. If the E’s circumstances have so changed as to make reemployment impossible or unreasonable; ii. In the case of an individual who is not entitled to reemployment because he or she is no longer qualified despite the E’s efforts at requalification, if reemployment would impose an undue hardship; iii. If the employment the individual left was for a brief, nonrecurrent period with no reasonable expectation of continued employment. 12. For Cause Termination a. After the individual has been reinstated, the E can fire that person only for cause for a period that depends on the length of service.
job protected… “cause” – a job related reason for firing the person must be shown in order for them not to be rehired (huge protection, most people don’t get this). As stated below, if the period of service before the reemployment was more than 180 days, the cause protection lasts one year; if the period of service was more than 31 days and less than 180 days, the cause protection lasts only 180





c. §4316(c ): not to be discharged except for cause d. if an at-will EE, can’t fire just for being gone, e. when they come back for more than six months, the have “for cause” protection for up to a year (c)(1) f. when they come back from a leave of LESS than 6 months, they only get protected for 6 months (c)(2)

13. Koehler v. PepsiAmericas, Inc.: enlisted w/ nat’l guard under 8 yr K; he temporarily left
Pepsi to attend training; when he returns he faces attendance discipline for the 1st time. The co had a policy of making up b/w military pay during call of active duty and the pay he made while at work. They never paid the difference, so it starts accruing. They go around on that issue. Pepsi deposits the $ they allegedly owe him, then a couple of days later, they w/draw it (can this be done?!). Held it violated USERRA b/c it penalized him for his service by not giving him the benefit they’d promised (the pay deferential), even though it’s not required by the act. They were required to once they promised to do it – they obligated themselves to do it and failing to do so was a punishment, which is a violation under the act.


14. Remedies/Complaint Process under the USERRA a. Complaints alleging violations or impending violations of the USERRA may be filed with the Sec. of Labor, who is then required to investigate. b. In suits brought by the US and brought against private employers by in individual, jurisdiction lies in the federal district courts. c. Remedies for violations may include an order requiring compliance with the Act, compensation for lost wages or benefits suffered because of the failure to comply, and in the case of willful violations, an equal amount as liquidated damages. d. No Statue of Limitations may apply to USERRA actions. Health Care Coverage and Other Fringe Benefits n. COBRA (ERISA § 601-609 – stat. Pp. 203) i. Requires sponsors of group health plans to offer participants and beneficiaries the chance to elect continuation coverage under the plan when a “qualifying event” that would otherwise cause a loss of coverage occurs. ii. COBRA applies to group health plans maintained by all E’s excepts churches, federal government entities (including DC and US territories and possessions), state and local government entities that do not receive funds under the Public Health Service Act, and employers that normally employed fewer than 20 employees on a typical business day during the proceeding calendar year. o. Part of ERISA (Employee Retirement Income Security Act); passed due to failure of pension plans due to bankruptcy of companies like Studebaker i. Also tackled other fringe-benefit plans like health care ii. Until Cobra – no substantive requirements for these other fringe benefit plans, just procedural requirements iii. COBRA is continuation coverage (even though it stands for consolidated omnibus budget reconciliation act of 1985 and there is a cobra or obra every year) p. Applies to E’s with 20+ EE’s §601(b) q. E does not have to supply health care coverage, but if it does, then ERISA governs. r. COBRA


i. If E offers an ERISA health care plan, then COBRA requires them to continue to offer it to a discharged employee 1. Fink v. Dakotacare (8th Cir. 2003) 2. Issue/Holding: Is the daughter a qualified beneficiary, when Mom quits her job, then her daughter checks herself into a psychiatric hospital for treatment, thinking she was covered under COBRA? Yes 3. Facts: Plan covered unmarried children, enrolled in an accredited school, under 25, qualified as a dependant are covered. Family then switches to a new health care provider. 4. Rationale: Daughter checks into hospital during school break, but stays hospitalized and doesn’t return to school. – Daughter loses her dependant status, which is the second qualifying event. Dakotacare had a duty to give her notice that she was eligible to extend her continuation coverage until 36 months after the date of the initial qualifying event. (Mother also had a duty to notify the administrator of the second event, but she had 60 days to do this, which hadn’t expired) s. Key COBRA parts i. General 1. §601(a)- health care sponsor (usually employer)- plan must offer coverage to all qualified beneficiaries who would lose plan as a result of a qualifying event gets continuation ii. Continuation Coverage § 602 1. Must be Same Type of Benefits a. 602(1): identical to the coverage for similarly situated beneficiaries; if E modifies it for everyone then it’s okay to modify for someone on COBRA coverage 2. Qualified Beneficiary. Any person who, on the day before a qualifying event, is a beneficiary under the plan as a spouse or dependent child. §607(3)(i) & (ii) a. A qualified beneficiary is an employee who was covered by the plan on the day before the “qualifying event,” as well as the covered EE’s spouse or dependent children who were covered on the day before the qualifying event. b. “Qualified Beneficiary” includes a child born to or placed for adoption with the covered employee during the period of COBRA coverage. 3. Qualifying Event a. An event is a qualifying event if it would result in loss of coverage under the plan but for the right to elect continuation coverage. b. For employees, there are two qualifying events: i. A termination of employment for any reason other than discharge for “gross misconduct” ii. A reduction in Hours 4. Period of Coverage a. 602(2): must have coverage from the date of the qualifying event


until one of the following…. b. Maximum Required period i. 602(2)(A)(i) Terminations – 18 months ii. 602(2)(A)(ii)special rule for multiple qualifying events (“QE”): 1. if 2nd event happens w/in 18 months of first QE, then the new ending date is 36 months from the first QE iii. 602(2)(A)(iv) – if a QE is not listed, then beneficiary gets 36 months of coverage 1. Daughter in Dakotacare would have gotten 36 months of coverage, if she had stayed enrolled iv. Summary: Of the qualifying event is termination of employment or reduction in hours, the COBRA period is normally 18 months. If however, the qualified beneficiary is determined, under Title II or XVI of the Social Security Act, to have been disabled at any time during the first 60 days of COBRA coverage resulting from the loss of employment or reduction of hours, the COBRA period for all qualified beneficiaries is extended to 29 months. If another qualifying event, like a divorce or separation, occurs during the original 18 or 29 month period, that period is extended to 36 months but only for individuals who were qualified beneficiaries when the first qualifying event took place and who remained covered at the time of the second event. If the “QE” is the death of the EE, divorce or separation, loss of dependent status, or eligibility of Medicare, the COBRA period is 36 months. If an employee becomes eligible for Medicare, REGARDLESS if there is a QE, COBRA coverage must be provided for the spouse and dependent children for at least 36 months following the date of eligibility. c. End of Plan i. COBRA coverage can end before the expiration of any of these periods if the employer ceases to provide any group health plan to any employee, if the beneficiary fails to pay the premium, or if the beneficiary becomes entitled to Medicare benefits. ii. 602(2)(B): if the E ends all group health plans for every employee, then that’s when the coverage stops d. Failure to Pay Premium i. 602(2)(C ): get a thirty day grace period, but you lose coverage if you don’t pay e. Group Health plan coverage OR Medicare entitlement i. 602(2)(D)(i): coverage ends when beneficiary is covered by someone else, as long as the new insurance doesn’t



6. 7.


bar coverage to preexisting conditions 1. Group health plan coverage/Medicare entitlement; designed to move people to a new plan when they get a new job; cancer husband argued, successfully, that this didn’t apply to him because he was already covered by his wife’s plan, before his COBRA election. ii. 602(2)(D)(ii): coverage ends when beneficiary becomes entitled to draw Medicare Notice Requirements a. 606(a)(2): E must notify the plan administrator of the QE w/in 30 days b. 606(a)(3): beneficiary is responsible for notifying the administrator of the occurrence of divorce of loss of dependency w/in 60 days (or 60 days from getting notice) c. 606(a)(4)(A) – administrator shall notify to any qualified beneficiary of a death, termination, Medicare entitlement, or Title 11 case d. 606(a)(4)(B): administrator shall notify when a divorce/loss of dependency of the beneficiary’s rights to COBRA e. 606( c) – administrator has 14 days to make these notifications 605(1)(A),(B),( C) 60 Premium Requirements a. 602(3)(A) –– employee must pay 100% of premium + 2% for administrative costs and have 45 days to make first premium payment upon election b. also, can’t require premium until 45 days after the beneficiary made the initial election for continuation coverage c. Note: sometime employers will chip in for premiums for current employees; if under COBRA, E doesn’t have to pay any of it, and is make 2% in administrative fees! d. 602(3)(B) 45 day grace period for paying premium i. possible to be 149 days from QE before EE has to pay ii. 2nd QE would allow another 30 days, 179 total What is a “Qualifying Event?” § 603 a. 603(1): death of the covered employee b. 603(2) termination, other than for gross misconduct), or reduction of hours i. Conery v. Bath Assoc. (N.DF. Ind. 1992) (embezzlement is gross misconduct) ii. Karby v. Standard Pros. Co., (D.S.C 1992) (standard is substantial deviation from the high standards and obligations) c. 603(3) divorce/legal separation of covered employee d. 603(4) beneficiary becomes entitled to Medicare e. 603(5) dependent child ceases to be a dependent f. 603(6) case under Title 11 (?)



Qualified Medical Child Support Orders (QMCSO)/Other Health Care Mandates Under ERISA 9. OBRA; ERISA § 609 10. designed to protect children against fathers w/ health care coverage using that to leverage their demand for custody 11. legislated in 1993, because state court orders were preempted by ERISA, e.g. unenforceable 12. requires ERISA to recognize QMCSO that require a divorced spouse to provide health care coverage iii. Summary and Example: Parents get divorced, it’s messy and they fight over custody of
kids. The parent who doesn’t have custody decides to drop them off of his healthcare plan. The state court can’t enter orders against the beneficiaries b/c preempted by ERISA. Qualified Medical Child Support Orders were created to solve the problem. The state court enters a ? order, which must follow the reqs in ERISA 609 (make sure everything is included – some states have std forms). Provides for child support or health benefit coverage for the child of a participant under a group health plan. 609: expenses reimbursement must be made to the parent who paid it, regardless of whose name is on the plan.


Health Coverage of Adopted kids
Adopted kids w/ special needs – group health plan may not restrict coverage of a child adopted solely on the basis of a preexisting condition that the child has at the time. Minimum Maternity Lengths of Hospital Stay

i. i.


The Mothers and Newborns’ Health Protection Act of 1996 amended ERISA to add section: §711 Mothers and Newborns Health Protection act of 1996. This act prohibits health plans from limiting maternity stays to less than 48 hours after vaginal deliver and 96 after cesarean unless the physician decides earlier discharge is appropriate

a. HIPPA [ERISA §§701-702] i. HIPPA: The Health Insurance Portability and Accountability Act of 1996
(HIPPA) continued the substantive regulation of both insured and self-insured health care plans that began with COBRA. ii. Generally. Limits scope of preexisting condition exclusions. 1. requires plan sponsors to credit previous health coverage 2. expands plan enrollment requirements 3. limits the exclusion of individuals because of their health status iii. In SUMMARY: HIPAA’s major reforms:

1. 2. 3. 4.

Limits the scope of preexisting condition exclusions Requires plan sponsors to credit previous health coverage (portability part) Expands plan enrollment requirements Limits the exclusion of individuals b/c of their health status

iv. Limitation on excluding preexisting conditions. 1. Only for condition for which medical advice, diagnosis, care or treatment
was recommended or received within the 6 months before enrollment date. §701(a)(1) a. Genetic information may not be treated as a condition unless it has led to an actual diagnosis of the condition related to the information. 2. May exclude for 12 months after enrollment date (or 18 if late enrolled); §701(a)(2)


3. The exclusion period must be reduced by total period of “creditable
coverage” the person has (most qualifies—military, COBRA, HC), so if a person has 12 months of credible coverage, no exclusion. §701(a)(3) a. Reduce on the back end (?): You do all of the calculations to see if they can do an exclusion, and if so, how long can they do that. b. Break in coverage. No credible coverage if there are 63 days separating enrollment from that coverage §701(c)(2)(A) (*waiting period doesn’t count as part of the break). i. Example: An EE has at least 12 months of creditable coverage under a former E’s plan. That coverage expires on July 1. The EE is hired by a new E on September 1, and the E’s health care plan has a 30 day waiting period for enrollment. The 30 day waiting period can NOT be included in determining whether a break in coverage sufficient to cause the loss of the EE’s credible coverage has occurred. c. See also § 602(2)(D)(i): COBRA can continue into new coverage when a preexisting exclusionary clause would limit available coverage Enrollment date. Earlier of date of enrollment or 1st day of waiting period for enrollment §701(b)(2) (p. 215) Exclusion not applicable to: a. Certain newborns, adoption of certain children, pregnancy. §701(d)(1) i. A group health care plan or insurer may not apply any preexisting condition exclusion to a newborn child if that child is covered under credible coverage as of the 30 day after his or her birth, unless there was a 63 period during which the child was not coverage under any creditable coverage. b. §701(d)(3): pregnancy is not a pre-existing condition Special Enrollment Dates a. HIPPA also changes under certain cirumstances the common practice of health plans and insurers of limiting periods when employees may enroll themselves or their dependents if they could have enrolled earlier but did not. If one of the special enrollment periods applies to an EE or his or her dependents, the plan must use the 12 month period for preexisting conditions (subject to the creditable coverage rules) rather than the 18 month period otherwise permitted for late enrollees. b. §701(f)(2)(A)-(C ): for dependent beneficiaries c. coverage will relate back to their births New Mothers a. Any plan offered under ERISA may not restrict a hospital stay for vaginal deliveries to less than 48 hours

4. 5.




b. §711(a)(1)(A)(ii) or 96 hour for a C-section
c. §711(a)(B) can’t require the doctor to get the insurance’s permission for the hospital stay i. addressed preemption problem for state laws that were designed to prevent insurance from kicking new mothers out of the hospital too soon) v. Retaliation Provision. 1. Can’t fire or discriminate against someone for making a claim under the plan. §510 (p. 199) a. E is not prevented from changing or canceling benefits in its plans. McGann v. H&H Music (p. 213) ii. Denial of Benefits – Tort Claims Preempted, Sue under §502(a)(1)(B) 1. Kuhl v. Lincoln Nat’l Health a. Plan denied heart transplant in a hospital where the doctors actually knew how to do the operation b. Patient died, so family member tried to bring a tort claim, preempted c. If still alive, should have sued under §502(a)(1)(B): Civil Enforcement: private c/o/a/ to recover benefits due under the terms of his plan (can bring in state or federal court) d. If he won, he would have gotten reimbursed for the surgery, but not for the financing necessary to get the surgery (no collateral damages) i. Facts of the case: he didn’t pay for the surgery, so there was no out-of-pocket expenses to recover; he just died
ii. I took from that case that ERISA preempts all state laws/claims that relate (in any way) to an ee benefit plan. ERISA preempted the three state law claims and the wife's claim for IIED. Since these claims were preempted and money damages are not available under ERISA 502, the wife was not entitled to "other equitable relief" or money damages.

iii. Health Coverage of Adopted Children iv. Pediatric Vaccine Coverage v. Judicial Review of Fiduciary Decisions i. Rittenhouse v. UnitedHealth Group Long Disability Ins. Plan ii. E makes total disability claim for hearing loss, plan administrator disagrees and denies his claim, the E sues under §502(a)(1)(B) 1. Claims Procedure a. §503(1): every ERISA plan must provide written notice to any beneficiary whose claim has been denied, setting forth the specific reasons for the denial (must be understandable to the reader) b. §503(2):must all afford a reasonable opportunity to any participant whose claims has been denied for a full and fair review by the appropriate fiduciary i. appeal can be made by same entity as the entity denying benefit; no need for review to be made by an


§ 502(a)(1)(B) – civil enforcement of ERISA action brought by participant or beneficiary to recover benefits due to him under the terms of his plan, to enforce his rights under terms of plan, or to clarify rights to future benefits under terms of plan (can be brought in state or federal court though all other claims must be brought in federal court)

independent decision-maker ii. employer gets to wear two hats: employer & fiduciary c.  Can’t sue in federal court until the claimant has exhausted all options for review i. plaintiff does all the appeals process with the company and then sues under ERISA § 502(g) (which awards attorney’s fees and costs for enforcing “delinquent contributions) 2. Standard of Review: Depends whether the Plan calls for “discretion” a. If administrator denies claim, judge will review de novo i. De Novo review means that the reviewing court is free to make its own decision, without regard to the decision of the administrator. b. If Summary Plan Description said that the administrator has “discretion” to deny plans, then the judge will look to see if the administrator made a clear error in the law, or refused to apply the law, i.e. abused his discretion i. Advice: if lawyer represents the plan administrator, make sure you put “discretion” in the plan! ii. (double check with someone re: this) Under a discretionary standard of review, a decision denying benefits will be upheld if it based on a reasonable interpretation of the plan’s terms and the evidence before the fiduciary at the time of decision. Procedural violations, such as failure to file required documents with the DOL, failure to provide summary plan descriptions to participants and beneficiaries, or failure to comply with requests for information, normally do not affect the application of the deferential standard of review. 3. Summary:

a. b. c.

§503 p.201 – if they deny the claim they must give written notice setting forth the specific reasons for denial; and they must afford a reasonable opportunity for a full and fair review. Absent unusual circumstances, the person must exhaust their remedies w/in the plan before suing (even though the person who decided your claim will probably be the one deciding the appeal) Rittenhouse had presented more documents on appeal, w/o giving good reason for not presenting them to AIG earlier. Court found the court below erred by considering these documents b/c they were not before AIG when the final decision was made §502(a)(1)(B) basically a federal breach of K claim. 1989 case Firestone Tire & Rubber Co v. Bruch: denial of benefits challenged under §502 is to be reviewed under a de novo std unless the benefit plan gives the administrator or fiduciary discretionary authority to determine eligibility for benefits or to construe the terms of the plan. Default is de novo, but plans can trump the de novo std w/ lang giving their administrator discretionary authority. Then it will be reviewed only

d. e.



for abuse of discretion. (SEE ABOVE RE: ABUSE OF DISCRETION)


ERISA---Civil Enforcement of Benefit Rights

w. ERISA covers any employee benefit plan established or maintained by an E, a
union, or both. EXEMPTED are governmental plans; tax-exempt church plans, unemployment etc. i. Under ERISA the universe of benefit plans is divided into two types (1) Pension Benefit Plans and (2) Welfare Benefit Plans. x. ERISA Civil Causes of Action i. The civil enforcement provisions of §502 of ERISA authorizes a number of COAs. 1. Day-to-Day enforcement would be under §502(a)(1)(B) which authorizes participants or beneficiaries to bring an action to recover benefits due them under the plan, to enforce their rights under the plan, or to clarify their rights under the plan, or to clarify their rights to future benefits under the plan. This is the only purely personal cause of action authorized by ERISA. 2. Second Action is under §502(a)(3) which permits participants, beneficiaries or fiduciaries to sue to enjoin any act that violate ERISA or the terms of the plan or to obtain other equitable relief to redress statutory or plan violations or to enforce provisions of the statute or the plan. This is a broader COA than 502(a)(1)(B). A §502(a)(3) claim may be brought for instance by a plan participant against an employer for violation of §510, ERISA antidiscrimination provision by a fiduciary to recover money paid to a physician in violation of the terms of a health care plan or by a fiduciary to enforce an employer statutory obligation to make contributions. 3. COA under 502(a)(2) permits a participant, beneficiary, fiduciary, or the Sec. of Labor to seek relief under §409…this is the reverse of 502(a)(1) (B) and vindicates statutory rights, not individual rights under the plan. 4. COA under 502(a)(1)(A) authorizes a plan participant or beneficiary to sue the plan administrator for failure to comply with a request for information that ERISA requires the administrator to furnish. The remedy for this violation is a civil penalty of up to $100 per day, as authorized by §502(c). Retaliation and Plan Modifications – ERISA §510 ii. ERISA contains antiretaliation provision that safeguards workers’ statutory rights by protecting the underlying employment relationship on which those rights are based. iii. Section 510 contains three separate protections: 1. Prohibits any adverse employment action in retaliation for the exercise of a right to seek benefits. 2. Unique to ERISA. Congress sought to deter stories of employees who were fired after many years of faithful service, just before they were to become eligible for a pension or other employment benefits. Congress prohibited employers from discriminating against



Summary Plan Description (SPD – every plan must have) Must accurately describe details of plan • If beneficiary can show actual reliance on SPD to their detriment, then SPD controls as opposed to plan

employees in order to prevent EE from attaining rights under ERISA plans. An E that fires an EE in order to block that EE’s vesting in the E’s pension plan violates §510. 3. For individuals who have given information or testified in any proceeding under the Act, has not generated much litigation. Thus, you are protected in testifying in a proceeding. iv. Policy 1. combat employers who would fire EE’s right before their pension rights vested 2. ERISA shortens the vesting period and makes it illegal to fire to avoid vesting 3. BUT --- Health Care benefits still DO NOT VEST v. Exercise Clause: unlawful to discriminate or fire a participant for exercising any right to which he is entitled under his EE benefit plan vi. Interference Clause: can’t fire or discriminate for the purpose of interfering with the attainment of any right to which such participant may become entitled under the plan a. no requirement for health benefits to become non-forfeitable 2. Can’t Buy a Business and Cover all Employees Except Sick Ones a. Lessard v. Applied Risk Management b. ERISA claim under §510, bought and sold business with a shady asset purchase agreement – business buyer obligated to cover health benefits for all current employees…except for the ones that were on leaves of absences (i.e., the ones with real health care concerns) c. The purchase agreement facially discriminated against person on disability and medical leave 3. Okay to change health plan for AIDS patient, as long as it affects all EEs a. McGann v. H&H Music Co. (handout) b. Employee has AIDS, c. Thought about firing him, but didn’t i. he could have had a claim under §510, for their interference d. instead, employer modifies plan to cover about everything but AIDS (AIDS only had a $5,000 limit; otherwise, there was a million dollar lifetime cap) e. because health benefits do not vest, unless the E had obligated itself by contract, EE had no right to the million dollar i. Plaintiff has to show specific intent that the modifications were targeted at him …. ii. Even though he was the only one with AIDS, the policy applied to everyone iii. E’s intent was to not pay for AIDS-related claims, their intent (the court stupidly held) that it wasn’t to purposely avoid paying McGaan’s medical claims f. Folz v. Marriot Corp, E fired EE w/ brain cancer: employer had


See GREY ERISA Handout

specific intent to interfere with EE’s benefits vii. ERISA Preemption. [ERISA §514] 1. ERISA contains a preemption of “unparalleld breadth.” It bars state regulation of benefit plans even as to matters on which ERISA is silent. Remember ERISA’s preemption provision applies only to employee benefit plans covered by the statute. State may apply their own laws to plans that are exempt from ERISA coverage, such as government plans and church plans. 2. Important→ Federal Premption has displaced a vast body of state law dealing with fridge benefits and left a void it its place. Thus, as seen in many cases, state P’s loose their ability to assert common law torts because ERISA has no provisions pertaining to them. 3. Express Preemption. ERISA preempts state laws which “relate to” an ERISA plan. §514(a). a. The Supreme Court has said that these words should be construed expansively, and that a law “relates to” an employee benefit plan “if it has a connection with or reference to such plan. Both direct and indirect state actions that relate to covered plans are preempted. 4. Relates to: a law relates to when it has a connection with or reference to such a plan. (Kuhl v. Lincoln Nat’l Health Plan) a. Tort suits which are for failure to distribute benefits under an ERISA plan are preempted. b. state laws that are in harmony, complement, or gap-fill ERISA are included in the definition c. does not apply to criminal law d. variety of tests exist



§514(a) – “relate to” – also works for alleged improper processing of a claim for benefits under an ERISA-regulated plan. (Pilot Life from Kuhl) ERISA will always trump state claims if they relate to employee benefit programs (preempts all state laws) State law includes all laws, decisions, rules, regs or any action having the effect of law. (statutes, regs, common law) Kuhl is an example of how ERISA preempts action for wrongful death replacing it w/ nothing. Although it may replace it w/ its own action.

viii. Exception. Nothing is construed to preempt state regulation of insurance.
ix. §514(b)(2)(A): a law “regulates insurance” and thus isn’t preempted by ERISA if 2. the state law is specifically directed toward entities engaged in insurance 3. the state law substantially affects the risk pooling arrangement between the insurer and the insured (Kentucky Assoc. of Healths Plans v. Miller (2003) a. also, ERISA doesn’t preempt state insurance laws that mandate the substantive terms of insurance contracts  state health care mandates vi. BUT….“deemer clause” ;§514(b)(2)(B) 1. The Deemer Clause qualifies the saving clause by providing that no employee benefit plan shall be deemed to be an insurance company


for purposes of any law of any state purporting to regulate insurance companies. a. The combination of these clauses [514(b)(2)(A and B)] means that any entity engaged in the business of insurance, except an ERISA plan, is subject to state insurance regulation. 2. Direct state insurance regulation cannot reach self-funded ERISA plans, however, because self-funded plans do not purchase insurance policies, and the deemer clause prohibits its states from deeming ERISA plans to be insurance companies under state laws purporting to regulate insurance. 3. Any attempt by a state directly to regulate self-funded plans “relates” to those plans and is not saved by the saving clause because it does not regulate insurance. 4. Distinction b/w plans that buy insurance policies and those that are selfinsured 5. FMC Corp. v. Holliday (US 1990) 6. state can’t impose health care mandates on self-funded ERISA plans because they can’t be deemed under state control 7.  strong incentive to avoid Massachusetts-style universal health care; “sorry, we’re self-funded and but your state laws are preempted by ERISA!” a. Most employees do not know whether their employer has selffunded insurance or not vii. Hawaii Exception 1. §514(b)(5)(A) – Hawaii Prepaid Health Care Act isn’t preempted, because they got their own exception 2. only state to get its own exemption 3. an amendment done because Standard Oil Co. v. Agsalud (1981), which struck down the Hawaii Prepaid Health Care Act on ERISA preemption grounds VII. Termination of Employment 1. Discharge a. Employees challenge unfair discharges with a variety of legal theories, there exists three major exceptions to the at-will doctrine. Most states recognize at one of the following: i. Breach of an express or implied promise, including representations made in employee handbooks. ii. Discharge in violation of public policy iii. Breach of the implied covenant of good faith and fair dealing. b. Breach of K i. Express Ks 1. Generally. In the absence of a contract, EEs are “at will” and can be fired for a good reason, no reason, or bad reason 2. all states but Montana & Arizona are still at-will 3. At CL if an EE has a contract, can not fire unless with in the bounds of


the contract or contract is breached. 4. P has burden of persuasion to show a contract exists. ii. Reliance 1. A person may reasonably rely on an offer of at-will employment, even though there is not a contract. Grouse v. Group Health Plan a. EE has the right to assume he would have a good faith opportunity to perform his duties to the satisfaction of the E. i. No answer as to how far a good faith opportunity extends. b. Grouse v. Group Health Plan Inc. i. Facts: young pharmacist hired by a hospital, drops another offer and quits current job; prospective employee repudiates because he couldn’t provide enough references who knew who he was ii. Issue: can plaintiff bring a claim for breach of contract? iii. Holding: Yes. iv. Rationale: Clear case of promissory estoppel; doesn’t matter that he was going to be an employee at-will – he was entitled to a good faith opportunity to perform his job v. Damages 1. Old job: Richter $280/week 2. New job: PT job $130/week 3. Target job: Group Heal $400/week 4. 400(expectation) – 130 (mitigation)= $270 a. BUT, not a breach of contract claim, so don’t get expectation damages, he gets RELIANCE damages, e.g. quitting his old job = $280 - $130 = $150 Most states with employment at vi. Grouse applied to EE fired after 1 full day of work. will allow for exceptions Except for Georgia – no Court found no distinction b/w 1 day and Grouse. exceptions to employment at will Gorham v. Benson Optical rule
Kansas recognizes 2 of 3 exceptions

vii. SUMMARY: What if they’d let him come to work for a day then fire him? Does he have the right to a claim or does he have the right to assume he’d be given and good faith opportunity? Gorham v. Benson Optical: 539 N.W.2d 798 (Minn. App. 1995). Gorham gets hired by Benson, quits previous job. They fly him to regional convention on his first day where he meets a lot of the executives of the co. Apparently he didn’t go over very well, b/c afterward they called him in and fired him, offering pay for the day. He was an EE at will. He sued relying on Grouse, and the Ct of Appeals said there was no real difference. They let him sue in promissory estoppel. ix. So now the Q is: how long is a reasonable opportunity?



Ford v. TrendWest Resorts a. Facts: Ford has a drinking problem; he comes to work smelling like alcohol for the second time, and they fire him. His wife calls up, asking them to rehire him. They agree, on the condition that he goes to rehab, and he must sign a last-chance agreement (if he makes one more decision, he’s out and he can’t file a grievance). When he’s done w/



rehab, they’ll rehire him as an at-will employee in a position equal to that which he had. He finishes the program, and they offer him a telemarketing position – far less lucrative than his previous job. He doesn’t return to work and sues for breach of K. Holding/Rationale: i. General rule is – at-will employee can be discharged at any time w/ or w/o cause. The employer doesn’t have to have a reason, or if it does have a reason, it doesn’t have to be a good one. And the ER isn’t required to give notice. ii. Always have the right to quit b/c indentured servitude is illegal iii. Can’t fire someone if: 1. protected by statute – fed and state (Title VII, ADEA, ADA) 2. it violates important public policy as determined by case law in the state – tort 3. contract – it’s not employment at will anymore b/c modified by a form of contract iv. So what are his damages? Does he get to recover for lost future earnings? Did Grouse get to recover them from Group Health? No. Those covered under statutes get to recover lost future earnings b/c the statute sets forth what the damages are. Under the public policy exception, their lost earnings are an element of damages in tort. Here this is a contract breach, so we have to see what are the contract damages from this breach? There are none b/c he was going to be an employee at will. So he couldn’t have argued future economic damages, b/c who knows how long he would’ve worked there – he was an EE at will.

3. Exceptions to “At-will” Employment a. Statutes. ADEA, ADA, Title VII etc b. Public Policy. Termination frustrates a clear public policy. c. Contract, express or implied. i. Damages. An at-will EE has no expected future earnings
b/c all he has contracted for is at-will status. iii. Employment Manuals 1. The so-called “handbook exception” to the employment at will rule has been articulated in two basic ways: a. Unilateral Contract Analysis: The offeror (E) makes a promise limiting its prerogatives, such as the right to fire at will, by communicating the promise to employees in a handbook, and the offeree-employee accepts the offer by commencing or continuing to work. Under unilateral contract anaysis, an E policy cannot be considered an offer unless it is communicated to employees. b. Promises in the EE manuel are seen as binding the E because of the benefit the E obtains by issuing the handbook in the


first place. 2. Usually handbook is being argued to restrict at-will status of employer 3. Implied K. Woolley v. Hoffman (p. 248) a. Offer (the handbook) b. Acceptance (EE begins work) c. Consideration (coming/continuing to work when EE has no obligation to continue) 4. Wooley v. Hoffman-LaRoch – 1985 case, very influential a. Facts: at-will employee fired w/o warning, brings a claim for breach of contract, saying the handbook was the contract that said he could only be fired for cause and only after following certain procedures b. Rationale: Didn’t matter that he didn’t read the handbook, they just need to have received it or been in a position to receive it – not good to hold different employees to different standards (policy reason)
c. Unilateral K analysis – offer, acceptance, consideration. Offer: When you employee a large # of employees, we presume the provisions in such a widely-distributed manual mean something. The handing out of the manual = offer. The language must be clear enough for people to understand what the offer is What about the workers who don’t read the manual? They just put it in their desk/car. Reading it isn’t necessary to have the offer, b/c then you’d have an odd result – they’d all have the same handbook w/ same protections, but only some would get them depending on how careful or compulsive some of them were. Acceptance: any employer who continues to work there after receiving the handbook is presumed to have accepted the offer therein. Consideration: The EE’s labor is really all they have For an offer of lifetime employment, the EE must give add’l consideration (for instance, selling your business to the co in return for permanent employment as a consultant; or moving across the country to take the job; or giving up a job w/ job security to take the job) Here, under a unilateral K, the continued coming to work is both acceptance and consideration. It would be unfair to allow the ER to distribute a handbook w/ lots of promises yet not hold them to those promises later on. All that they need do is put in a disclaimer.


5. Do not have to prove that employee looked at handbook in order to rely
on handbook a. Do have to prove that employee did receive handbook or be distributed in such a way that they could have received it 6. E can put in a prominent and unmistakable waiver saying the handbook is nonbinding. a. Include in a prominent position a statement that there is no promise of any kind made. b. Waiver in a general welcome section and waiver under the heading “general instructions” on pg. 2 found not adequate. c. Sears’ disclaimer has not lost a case

Morris v. Coleman – Kansas S. Ct. case recognizing handbook exception in 1987


7 states have rejected handbook exception Delaware, Fl., Ga., Ind., La., Mo., N.C. 7 states have not taken clear position Ken., Mass., Pa., R.I., Tenn., Tx., Va. 36 states and DC have recognized handbook exception

d. Wyoming: hasn’t seen a waiver that is good enough, yet e. Kansas. Disclaimer is not determinative as a matter of law, just
considered as another fact i. Other provisions in the manual or statements by supervisors may be factors. Kansas looks at the totality of the circumstances. ii. Wilkinson 7. No Waiver Disclaimer for Existing EE’s a. E can not add waiver affecting incumbent workforce who has handbook without waiver, without giving some consideration for the change. Doyle v. Holy Cross Hospital i. Not at-will EEs b/c have the old handbook EEs, so continuing to work cannot be consideration for the change. b. Varies state by state. i. States that have explicitly rejected the theory 1. DE, FL, GA, Ind., LA, MO, NC ii. States that haven’t taken a clear position 1. KY, Mass, Penn, RI, Tenn., TX, VA 8. Re notice of handbook & its terms: Kinoshita v. Canadian Pacific Airlines. Allowing 2 EEs to sue for breach of rules in a generally distributed set of EE policies, even though to Plaintiffs may not in fact have received all of the communications. ER could not avoid liability just b/c a particular EE was not personally aware of the particular rule. 9. Anderson v. Douglas & Lomason (255) a. Facts: 53 handbook which included policies for termination, b. Discussion c. Wyoming, interesting laws: in WY, conspicuousness of disclaimer is a question of law for the court to decide. WY Supreme Court has yet to find a disclaimer that they thought was conspicuous enough. d. Sanchez v. Life Care Centers of Am: (This is yet another case to come before us in which an e’er has tried to satisfy the court’s secret concept of an adequate disclaimer in an ee handbook) Found on second page of 30 page handbook, under heading, general instructions, and sub-heading contents. e. McDonalds: court was not in large print, not capitalized, not set off in boarder, in welcome, failed to give untutored persons in contract law notice f. IA, no special requirements, judged by other language requirements. Disclaimer was on page 53 (last page of handbook): Disclaimer must be clear in its terms and coverage of the disclaimer must be unambiguous. 10. Wilkinson v. Shoney’s, Inc. (KS) a. Facts: breach of implied K and malicious defense. Shoney’s hired a co to deal w/ their workers comp claims w/ instructions


to dispute each one – he filed, and got his benefits. Wilkinson had worked at Shoney’s, but quit after being verbally abused by a supervisor. He is later rehired to work at a different one. He gets pulled into a convo w/ an EE, in which he told her he would no go out w/ her either if he were single. She files a sexual harassment for this convo and other comments. Unemployment benefits are for ppl who lost their job thru no fault of their own. (can’t get if quit voluntarily or if fired for misconduct as defined by the state) Wilkinson’s malicious defense claim is based on the company’s claims in trying to deny his benefits. He also has his handbook claim, based on the fair treatment stmt on the poster, and their progressive discipline and rehire policies, and the handbook. b. Holding: c. Rationale: i. Choice of law – he’s working in MO, but filed in KS. Makes a difference b/c MO has rejected the handbook exception. He wants them to use KS law. Court determined the K was made in KS. ii. All of his evidence goes toward fair treatment; they didn’t go thru progressive discipline – just fired him. iii. Shoney’s argues it had a disclaimer on the poster – pretty confusing wording (could’ve been written more clearly) – Wilkinson said he read it but didn’t understand it. iv. Back-up argument: progressive discipline doesn’t apply to allegations of sexual harassment. IF there’s been an internal investigation and the violator has been found guilty (enough), we can just fire him. Good, except that that wasn’t really the reason he was fired – the real reason was b/c a boss found out he was rehired w/o checking w/ him first – it was a failure to get reference check from a higher up manager. v. Notes: vi. Disclaimer in Brown v. United Methodist Homes: “employment w/ UMH is ‘at will’ and may be terminated by the Homes w/o cause. No commitment for employment for any specified duration, including ‘lifetime’ ermployment, shall be valid or binding on the Homes unless it is expressly set forth in a written doc and signed by the EE and the exec director of the Homes.” They also sent a memo to all EEs to clarify the statement. vii. *In KS, if you have evidence of statements saying that an ER will be fair to the EE (try to have a good reason to fire), the disclaimer is not dispositive – it’s just another piece of evidence. What does that mean? Does an ER have to randomly exercise its right; or treat its EEs


unfairly? In most other states, a properly worded, conspicuous disclaimer is dispositive as a matter of law despite fair treatment. viii. ERs will want to change their handbooks to make it clear that it’s not a contractual promise iv. Changes to the Handbook: need consideration for adding adverse terms 1. example: “all EE’s will get paid leave for their birthdays” 2. offer, acceptance, consideration? Sure. Good news is binding… but changes adverse to the EE may not be… a. Doyle v. Holy Cross Hospital (Ill. 1999) i. Issue: whether the terms of a handbook may be altered unilaterally by the employer to an employee’s disadvantage, and in the absence of a reservation of the right by the employer to make unilateral changes. ii. Holding: No! iii. Facts: nurse, hired in 1960, was fired in 1991; first handbook issued in 1971, new one (with unfavorable term to nurses) issued in 1983 iv. RULES: employer must give consideration when he adds an unfavorable term to a contract b. But see … Asmus v. Pacific Bell (Cal. 2000) i. Issue: Once an employer’s policy, which requires employees to be retained unless a certain condition occurs, has become a part of the employment contract, Additional Consideration or consent may the employer unilaterally terminated the policy, required: 5 states (Conn., Ill., Wy., Az., even though that certain condition hasn’t happened? Al.) Reasonable notice required: 5 states ii. Holding: Yes, BUT only if the employer effects the (Cal., Mich., Wash., S.C., W. Va.) change after a reasonable time, on reasonable notice, and w/o interfering with the employee’s vested benefits…in other words, the Court held that an E may unilaterally modify a policy that contains a specified condition of indefinite duration, if the E makes the change after reasonable notice and without interfering with EE’s vested benefits. iii. More Asmus Case Facts:
iv. Facts: certified from circuit CoA to CA sup court – can ER unilaterally change the policy? v. Holding: CA view is yes, if the changes made after the policy has been in effect for a reasonable time, w/ reasonable notice to EEs and as long as it doesn’t effect a vested benefit (vacation/pension already earned). 1. only 10 states have decided the issue: 2. ER must give consideration or get EE consent

b. c.

Conn, Ill, Wyo, AZ, AL Alabama Reasonable notice


CA, Mich, Wash, S.C. . (actual notice to each effective EE required), W.VA.



Re notice of negative modifications: Gaglidari v. Denny’s Restaurants: reasonable notice of changes requires more than conjecture or fortuity. T/f plaintiff was not bound by later editions of handbooks that were given only to new EEs, not to incumbent workers. Denny’s said there were copies in the break room, so maybe she saw one – not good enough. By operation of CL in most states, a written K for employment for a term can’t be terminated w/o cause unless the K provides otherwise. Almost all of them do say otherwise, either identifying ways it could be terminated or defining cause. Written Ks, whether for a term or for an indef period, may contain explicit just cause protection. Oral agreements, EE handbooks, or courses of conduct may be found to have created cause protection (KS). Always the Q: is the reason the ER gave good enough to satisfy the cause std? Is what the EE did enough? Also: does, in making the decision to fire EE for what they did, the ER have to be right – does the EE have to have actually done the thing they claim he did? Or is good faith decision by ER enough?

vi. “Cause”


v. Just Cause, Defined. 1. by operation of law, a written employment contract for a definite term
may not be ended w/o cause before the expiration of the term, unless the contract provides otherwise … and they almost always allow unilateral action 2. Written contracts, a. whether for a term or for an indefinite period, may contain explicit just cause protection. b. Examples: collective bargaining agreement 3. Oral agreements, employee handbooks or course of conduct may be found to have created cause protection 4. Proof of Cause. Whether E acted with fair and honest cause or reason regulated by good faith. a. Follow an appropriate investigation and have reasonable grounds for believing the EE had done so. b. not pretextual or arbitrary c. Good cause: reasoned conclusion supported by substantial evidence gathered through adequate investigation including notice of claimed misconduct and a chance for employee to respond. d. Question is not whether EE did the thing, but what E knew at the time of firing. i. Contran v. Rollins Hudig (Cal.) ii. Issue/Holding: Is firing someone for alleged (but not proved) sexual harassment just cause for firing? Yes. iii. Facts: plaintiff wrongfully accused of sexual harassment, and fired. Jury awards a ton of money because the employer fired him w/o being able to prove it. Appeal:




vi. vii.

shouldn’t the jury have been asked whether it was reasonable for the employer to believe the harassment was true? When it is an implied cause requirement—did he actually do the thing they fired him for; did the employer do a proper investigation and reach their conclusion for reasons that are not arbitrary. Employers are required to give notice and to do a full investigation, the employer does not have to be correct. Rationale: Employer did a good investigation and came about its results honestly; gave notice. Following the Cotran view of proof of cause, (more or less) 1. Wash., Cal., Alas., Nev., NM, N.D., Ore., Wy. 2. but see Toussaint v. Blue Cross etc. of Mich. (1980): first Mich. Handbook case… a. “A promise to terminate employment for cause only would be illusory if the employer were permitted to be the sole judge and final arbiter of the propriety of the discharge. There must be some review of the employer’s decision if the cause contract is to be distinguished from the satisfaction contract” b. Just an FYI that---Michigan is in a little category by itself. 3. Additional Case Notes/Summary
a. The correct Q for the jury is: was the factual basis on which the ER concluded reached honestly after an appropriate investigation and based on reasons that were not pretextual? Ca SC says, when it’s not an individual written K, but a handbook or implied cause requirement, the std for the jury is not whether he actually did the thing for which they fired him, but did the ER reach their conclusion honestly? “Good Cause” is defined as fair and honest reasons, regulated by good faith on the part of the ER, that are not trivial, arbitrary or capricious, unrelated to business needs or goals, or pretextual. Kind of common law due process in private sector: must give them notice, a chance to respond, do investigation.




c. Violation of Public Policy. (Tort c/o/a/) i. Public Policy Defined. Public Policy tort must be fundamental, substantial, &
well-established at the time of the firing and it must involve a matter that affects society at large rather than a purely personal or proprietary interest of the E or EE. ii. Categories. 1. Refusing to violate the law or complying with the law.


a. Act must in fact be illegal, e.g. criminal (at least in TX) b. Some states require EE be personally exposed to criminal sanctions; other states say civil penalties are enough. c. Must the employees have “clean hands?” 2. Exercising a statutory right a. Workplace related right from status as an EE. 7 states do not recognize any form (Al., b. Held: firing of H for W’s filing states a claim. Fl., Ga., La., Maine, NY, RI) i. Rebrachek v. Farmers Cooperative Elevator Tx. and DC only recognize #1; Kansas has so far ii. Issue/Holding: whether there was a connection between recognized #2 and #4 the plaintiff’s filing a claim and why he got fired? Arizona and Montana have statutes regulating employment termination iii. Facts: plaintiff filed a worker’s comp claim, had little bits of circumstantial evidence that the two actions were related (see pp. 284), but five months had passed.. iv. Rationale: different circuits have different limits for how long to too long when granting summary judgment against the plaintiff; 1.5 months is long enough, 3 months too long… 5 months approaches the limit, but this plaintiff still gets to go to trial 3. Performing a public duty a. Voting, jury service, testifying at legal proceeding, serving in military, reporting abuse. b. 4. Reporting violation of the law (whistleblowing) a. Some states require EE to be correct about E’s violation. i. Any violation of the law? ii. State v. federal iii. Criminal v. civil sanction iv. Restrictions as to areas of the law v. Internal v. external reporting vi. Must the EE be right about the violation, or is a reasonable good faith belief enough? vii. How well must the EE articulate his concern? b. Whistle blower: Goodman v. Wesley Medical Center, L.L.C. (Kan. 2003) i. Issue/Holding: ii. Facts: pissy nurse agreed to testify against the hospital in a negligence claim, which alleged understaffing; fired for breaching the hospital’s policies concerning patient confidentiality. Note: this nurse had no dealing with the particular incident about the claim; argued that public policy was articulated in the KS Nurse Practice Act iii. Elements: plaintiff must show that 1. a RPP would have concluded that the employer was engaged in activities in violation of rules, What if you have a statutory remedy for the regulations, or the law pertaining to public violation the plaintiff alleged, can the plaintiff avoid the statute and sue in tort health, safety, or the general welfare; instead? E.g. OSHA 2. the employer had knowledge of the employee’s Why would they want to do
this? $$$ (compensatory and punitive, longer statutes of limitations, Can sue in a state claim to vindicate a policy articulated in a federal statute (at least for ones that embody the same principles as an identical state law)


reporting of such violation prior to discharge of the employee; a. report must have been done out of good faith concern, not malice or spite. 3. and the employee was discharged in retaliation for making the report iv. Foley v. Interactive Data Corp. (Cal. 1988): the public policy must be … 1. “fundamental,” substantial” and well established at the time of the firing, 2. and it must involve a matter that affects society at large rather than a purely personal or proprietary interest of the employee of the employer x. Constructive Discharge 1. Ordinarily, an employee who quits his or her job does not have a claim for discharge in breach of contract or retaliatory discharge. If however, the conditions that cause the employee to quit constitute a “constructive discharge” courts will treat the EE as if he or she had been fired. 2. Most constructive discharge cases fall into two fact patterns: a. The E can cause a constructive discharge by materially breaching the EE contract of employment in some manner short of termination. b. The E can make working conditions so intolerable that the EE feels compelled to quit. 3. occurs when workings conditions must be so terrible that a reasonable person would have felt compelled to resign a. day-in/day-out abuse or harassment; onetime actions, like demotions, are not enough b. it’s harder to prove 4. Intent: only to make working condition horrific, not to cause them to quit Balmer v. Hawkeye Steel, 294 (2000) 5. Firing alone is not actionable – must be something more to be wrongful xi. show all this = firing, 1. BUT still need the underlying reason to give the claim; getting fired isn’t enough (breach of contract, whistleblowing, etc.) xii. relationship b/w common law claims and statutory regulation (SEE BELOW for Further Explanation) 1. Hysten v. Burlington Northern Santa Fe Railway Co., 297 (2004) 2. Questions certified to 10th Cir. to Kansas S. Ct. 3. If statutory remedy available, can only pursue common law remedy if the statutory remedy is not an adequate alternative 4. Factors a. lack of control b. Lack of judicial review


c. Unavailability of punitive damages y. Relationship b/w common law claims and statutory regulation i. Hysten v. Burlington Northern Santa Fe Railway ii. Facts: this is a case on public policy. The best source of public policy is a state statute, or fed statute (here) that has its own remedy in it. We know that Congress thought it was an important pub policy b/c they created a remedy. Can the P elect not to use the statutory remedy – avoid the statute and sue in tort instead, b/c he can get more $ (gets all compensatory damages, not just back-pay, and punitives). His suit is under KS tort law – “I was fired in violation of pub policy of state of KS as evidenced by the fed statute, Fed ERs Liability Act” – do the Kansas courts recognize a public policy from an FELA claim? iii. Holding: Yes iv. Rationale: 1. FELA is a fed workers comp statute, for ppl who work on railroads/interstate commerce 2. We know KS recognizes the public policy tort for those fired b/c they filed a WC claim (retaliation). Court talked a lot about the two: they both have the same public policy (providing remedies for those injured on the job). So, yes, KS recognizes this as a KS tort. 3. Q2: what about the fact that he had a remedy under his collective bargaining agreement (union member)? He’s protected by the railway labor act. He filed a grievance under the agreement, arbitrator split the diff – reinstated and got benefits, but no back-pay. He wants more. 4. Can he sue in tort or were his rights adequately protected under the RLA? v. Alternative remedies doctrine: we won’t let ppl sue in tort if the statute (state or fed) provides for an adequate alternative remedy. But the court hasn’t found many statutory remedies it thinks are adequate. 1. Flenker: OSHA remedy doesn’t give you relief in court; only get 30 days to file claim w/ dept of labor; must file w/ dept and it has sole discretion whether to pursue the claim. Not good that there are no factors set forth in statute that Sec of labor can look at in deciding whether to pursue an investigation. Not good that EE doesn’t get his own atty. Remedy is reinstatement and back pay. Plaintiff is not in charge of the case. 2. Coleman: he was an EE in union, the collective bargaining ag had an arbitration clause. Court doesn’t like arbitration: no discovery, subpoena power, ppl don’t testify under oath, etc. Rare to see bad things about arbitration. 3. Carrie says: “Kansas does not allow the P to sue in Tort, if the statute provides an adequate remedy.”

vi. Quitting & Covenants Not to Compete 1. Idbeis v. Wichita Surgical Specialists, PA, 301 (Kan. 2005) a. Non-competes must protect legitimate business interest of employer b. Weber v. Tillman – leading Kansas case on non-competes i. only dermatologist in Hayes, booming practice, brings


in Dr. Tillman from FL, Tillman signed 2 yr noncompete for 50 miles, ii. Dealing with the importance of whether the contract the public, not allowing the physicians to practice would represent an injury to the public, if they cant get a surgery on their heart. Cant put the publics lives at risk. 2. Enforceable? Factors to consider: a. Protect a legitimate business interest of the employer? b. Undue burden on the EE? c. Injurious to the public welfare? d. Time/territorial scope reasonable? i. Decide on the facts and circumstances of each case ii. Probably will be upheld, freedom of contract 3. Additional Notes regarding Idbeis Case: a. Facts: 4 physicians part of the group were part of the mgt structure and negotiations of restrictive covenants w/ themselves and new surgeons. Violated the no practice of medicine for 2 yr period w/in 75 mi of Wichita (Idbeis) or Sedgwick county (the other 3). Dueling battles for injunction to stop them started. Trial ct granted it in favor of the 3 who didn’t have liquidated dmgs provisions in their non-competes, prohibiting WSS from enforcing those non-competes, but requiring Idbeis to either stop practicing or paying liquidated damages under his K. Someone decides to rewrite the other guys’ K to include liquidated damages. Appeal. b. Holding: c. Rationale: d. 285 Kan. 485 (2007) the bond is to ensure that ? gets reimbursed for its injuries. KSA 60-905(b). e. In Idbeis 2, WSS is saying the injunction the other 3 docs got against us turned out to be wrong, we want our atty’s fees from those guys. f. In I, WSS filed counterclaim seeking the court to declare the validity of the non-competes, which it won on. So in II, the court awarded atty fees in $361,851.38; against each physician: $120,612.12. It goes back to the supreme court, which said it was entitled under KSA only to the fees incurred in seeking the dissolution of the temp injunction, NOT any fees necessarily incurred in pursuing your counterclaim declaring ag valid and your remedy of permanent injunction, even if the issues are all intertwined. Reversed, remanded again. How dist court will figure it out when issues are all the same. Presumably WSS will get a lot less in atty fees.


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