Today, the Department of Labor issued an Administrator Opinion Letter (FLSA2008-8) from September addressing the FLSA’s enterprise coverage of non-profit organizations. In short, the DOL reminded non-profit employers that the DOL does not consider charitable donations to be “sales made or business done” for purposes of reaching the $500,000 threshold for enterprise coverage. (The threshold under Ohio law is $150,000 under Ohio Revised Code § 4111.03). However, revenue from services provided for a fee to customers/clients which compete with businesses would be counted towards the threshold, as would interest and dividends on investments. The Opinion Letter does not address how grants would be characterized. The DOL also reminded employers that even if the organization is not covered by the FLSA as an enterprise, individual employees may still be covered if – on a non-isolated basis -- they engage in interstate commerce (such as making/receiving interstate telephone calls, shipping materials to another state and/or transporting persons or property to another state). Moreover, organizations covered by Ohio’s minimum wage and overtime statutes are still de facto subject to the white collar exempt status tests under the FLSA because the Ohio statute incorporates them by reference.
As explained in Opinion Letter 2008-8, the FLSA applies to employees of covered enterprises (i.e., enterprise coverage) and to individual employees engaged in interstate commerce (i.e., individual coverage). Enterprise coverage applies to government agencies, hospitals, residential care facilities, schools and colleges, and “enterprises with a business purpose with an annual dollar volume of sales made or business done of $500,000 or more and at least two employees engaged in commerce or the production of goods for commerce.” (In contrast, Ohio Revised Code § 4111.03 provides that “Employer” means the state, political subdivisions, “any individual, partnership, association, corporation, business trust, or any person or group of persons, acting in the interest of an employer in relation to an employee, but does not include an employer whose annual gross volume of sales made for business done is less than one hundred fifty thousand dollars . . . “).
The FLSA and its implementing regulations “are silent” regarding whether charitable donations, service fees, membership dues and dividends and interest earned by a non-profit “should be included as “sales made or business done” in calculating FLSA enterprise coverage. Nonetheless, the DOL explained that enterprise coverage typically does not extend to the charitable, religious, educational or similar activities of non-profit organizations when those activities are not in substantial competition with other businesses. However, “where such organizations engage in ordinary commercial activities, . . . the business activities will be treated under the [FLSA] the same as when they are performed by the ordinary business enterprise.” 20 C.F.R. §779.214. Thus, “[i]ncome from contributions, membership fees, or dues (except any part which represents the value of a benefit, other than of token value, received by the payor), or donations (cash or non-cash) used in the furtherance of eleemosynary activities, does not come within the phrase “sales or business done” in the FLSA. “Services provided for a fee to customers, such as for spaying/neutering or for pet adoption, are provided for a business purpose to the general public in competition with other businesses (pet stores, kennels, etc.) and thus do not qualify as eleemosynary activities.”
Insomniacs can read the full Opinion Letter at http://www.dol.gov/esa/whd/opinion/FLSA/2008/2008_09_29_08_FLSA.htm.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
Friday, November 14, 2008
Wednesday, November 12, 2008
EEOC Obtains Unanimous $600K Federal Court Jury Verdict in Cleveland Against West-Side Private School.
On Monday, the EEOC announced that a unanimous jury rendered a $600,000 verdict against Lake Ridge Academy in favor of a male employee who claimed that he had been fired in retaliation for objecting to unequal pay for women. The Academy also agreed to pay another $350,000 in settlement before the jury rendered a verdict on punitive damages. According to the EEOC, the plaintiff “had been employed at the North Ridgeville, Ohio-based preparatory school as chair of an accreditation study and was fired after requesting information from Lake Ridge’s Head of Schools and the Chief Financial Officer regarding possible pay inequity when he noted that males were being paid more than females for similar education and work history.” After a full evidentiary trial, the “jury awarded back pay of $50,000, front pay of $50,000, and compensatory damages of $500,000.” There was nothing in the press release about the validity of the underlying pay discrimination concerns.
Insomniacs can read the full press release at http://www.eeoc.gov/press/11-10-08a.html.
EEOC Obtains $1.875M Consent Decree Against University of Phoenix for Favoring Mormon Employees.
On Monday, the EEOC announced that it obtained a consent decree from an Arizona federal court for $1,875,000 for 52 individuals on the grounds that managers at the University of Phoenix showed preferential treatment to Mormon employees. In its class action lawsuit, the EEOC alleged that the “University of Phoenix engaged in a widespread practice of discriminating against non-Mormon employees who worked as enrollment counselors in the University’s Online Division.” In particular, witnesses testified that “that managers in the Online Enrollment Department at the University of Phoenix discriminated against non-Mormon employees, and favored Mormon employees, in several ways, including: (1) providing the Mormon employees better leads on potential students; (2) disciplining non-Mormon employees for conduct for which Mormon employees were not disciplined; (3) promoting lesser-qualified or unqualified Mormon enrollment counselors to management positions while repeatedly denying such promotions to non-Mormon enrollment counselors; and (4) denying tuition waivers to non-Mormon employees for failing to meet registration goals, while granting the waivers to Mormon employees.”
In addition to the monetary relief, the consent decree required the employer to engage in other activities in the future, including: (i) Dissemination of a Zero Tolerance Policy to all employees in the University of Phoenix Online Enrollment Department, stating that the company has zero tolerance for religious discrimination and that any violation of the policy will result in termination; (ii) Training for managers and non-managers on the issue of religious discrimination; (iii) Creating a system to include in managers’ evaluations an assessment of their compliance with equal employment opportunity laws; and (iv) Hiring a Diversity Officer, and the staff necessary, at the University of Phoenix to monitor compliance with the terms of the consent decree.
Insomniacs can read the full EEOC press release at http://www.eeoc.gov/press/11-10-08.html.
Tuesday, November 11, 2008
Sixth Circuit: Employer’s Forgiveness of Wildcat Strike Must Be Unequivocal Before Firing Striking Employees Violates NLRA.
On Friday, the Sixth Circuit affirmed a decision by the NLRB upholding the termination of wildcat strikers who claimed that their termination violated the NLRA because the employer had condoned – or forgiven – their unlawful strike before they were terminated. Exum v. NLRB, No. 07-2070. An ALJ had previously agreed with the employees, but the NLRB and the Sixth Circuit found that the statements relied upon by the employees were too equivocal – or ambiguous – to constitute ratification of their illegal strike. It is also clear from the opinion that the Court found the employees’ version of events to be too incredible to believe over the contradictory testimony of the employer’s president. Otherwise, when an employer condones – or forgives – unprotected misconduct by an employee, it can violate the NLRA to later terminate the employee for protesting terms and conditions of employment.
Most of the facts in the case were undisputed. The employer operated a slaughter house and had a bargaining agreement with the union for the last forty years. The CBA guaranteed the employees a 35-hour workweek and prohibited any strikes or work stoppages prior to attempts to resolve any dispute. However, during the 2001 economic slowdown, the employer asked the union to agree to shorten the workweek to 15 hours/week instead of layoffs because at least 21 employees were needed to properly process the meat. Although the union agreed to the reduction in work hours, it apparently failed to so inform the employees, who then walked out – with freshly slaughtered cows on the factory floor -- without first trying to resolve the problem as required by the CBA.
When the striking employees demanded to speak with the president, he agreed to meet with them individually, but not as a mob. He instructed them to return to work within fifteen minutes or to leave the premises. He also explained that if they chose to leave the premises at that point, he would consider them to have voluntarily resigned their employment. When many of them refused to return to work, he asked them to leave – which they did. When they asked if they were being fired, they claimed that he said no and pleaded with them to return to work. As one employee put away his work clothes, he had a brief conversation with the president where he indicated that the employee should take his pen with him because he would need it to fill out job applications. The union representative again arrived at the plan, met briefly with the president, but did not explain anything to the employees – other than to instruct the departing employees to meet with him at the union hall the next afternoon. The union representative denied that any of the employees told him that they intended to return to work the next day. Some employees claim the president told them to put their things away and return the next day.
When some of the striking employees returned to the plant the following morning, they did not attempt to enter the plant, speak with the guard or return to work. Rather, they remained in their cars outside the plant gates and claimed that they were somehow prevented from entering the plant. When the striking employees picked up their final paycheck a few days later, they were told to clean out their lockers and return any company property in their possession. They also received letters from the employer confirming their resignations, and none of them protested or filed a grievance under the CBA.
When strike misconduct has been “clearly shown, condonation may not be lightly presumed from mere silence or equivocal statements, but must clearly appear from some positive act by an employer indicating forgiveness and an intention of treating the guilty employees as if their misconduct had not occurred. . . . The case law in this circuit makes it clear that the employer’s action expressing forgiveness cannot be vague or equivocal.”
In this case, the NLRB “first noted that there were two separate work stoppages in this case. The first was when the employees en masse walked away from their jobs and stood outside the plant. The second was when the employees were given an opportunity to return to work with no repercussions. While neither was a protected strike, the first was clearly forgiven by Employer if the employees returned to their stations, and all employees who did so remained employed. Petitioner and the other employees who continued the strike and chose not to return to their stations initiated a second work stoppage that was not condoned, and for which they were terminated.”
“There is substantial evidence in the record to support the Board’s finding that Employer did not condone the employees’ strike. The employees’ behavior does not support a claim of condonation. Not only did the employees not tell Canada on the day of the strike that they intended to return to work the next day, but they also did not discuss with Freudenberg the determination on their separation notices that they had voluntarily quit and abandoned their jobs. Furthermore, if Freudenberg told the employees to return to work the next day, such a comment when taken in the context of his other statements was entirely ambiguous. Because the employer’s actions in forgiving an unprotected strike must be unequivocal, and a petitioner must demonstrate by clear and convincing evidence that such forgiveness occurred, the court finds that Petitioner has failed to satisfy his burden.”
Insomniacs can read the decision in full at http://www.ca6.uscourts.gov/opinions.pdf/08a0395p-06.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
Most of the facts in the case were undisputed. The employer operated a slaughter house and had a bargaining agreement with the union for the last forty years. The CBA guaranteed the employees a 35-hour workweek and prohibited any strikes or work stoppages prior to attempts to resolve any dispute. However, during the 2001 economic slowdown, the employer asked the union to agree to shorten the workweek to 15 hours/week instead of layoffs because at least 21 employees were needed to properly process the meat. Although the union agreed to the reduction in work hours, it apparently failed to so inform the employees, who then walked out – with freshly slaughtered cows on the factory floor -- without first trying to resolve the problem as required by the CBA.
When the striking employees demanded to speak with the president, he agreed to meet with them individually, but not as a mob. He instructed them to return to work within fifteen minutes or to leave the premises. He also explained that if they chose to leave the premises at that point, he would consider them to have voluntarily resigned their employment. When many of them refused to return to work, he asked them to leave – which they did. When they asked if they were being fired, they claimed that he said no and pleaded with them to return to work. As one employee put away his work clothes, he had a brief conversation with the president where he indicated that the employee should take his pen with him because he would need it to fill out job applications. The union representative again arrived at the plan, met briefly with the president, but did not explain anything to the employees – other than to instruct the departing employees to meet with him at the union hall the next afternoon. The union representative denied that any of the employees told him that they intended to return to work the next day. Some employees claim the president told them to put their things away and return the next day.
When some of the striking employees returned to the plant the following morning, they did not attempt to enter the plant, speak with the guard or return to work. Rather, they remained in their cars outside the plant gates and claimed that they were somehow prevented from entering the plant. When the striking employees picked up their final paycheck a few days later, they were told to clean out their lockers and return any company property in their possession. They also received letters from the employer confirming their resignations, and none of them protested or filed a grievance under the CBA.
When strike misconduct has been “clearly shown, condonation may not be lightly presumed from mere silence or equivocal statements, but must clearly appear from some positive act by an employer indicating forgiveness and an intention of treating the guilty employees as if their misconduct had not occurred. . . . The case law in this circuit makes it clear that the employer’s action expressing forgiveness cannot be vague or equivocal.”
In this case, the NLRB “first noted that there were two separate work stoppages in this case. The first was when the employees en masse walked away from their jobs and stood outside the plant. The second was when the employees were given an opportunity to return to work with no repercussions. While neither was a protected strike, the first was clearly forgiven by Employer if the employees returned to their stations, and all employees who did so remained employed. Petitioner and the other employees who continued the strike and chose not to return to their stations initiated a second work stoppage that was not condoned, and for which they were terminated.”
“There is substantial evidence in the record to support the Board’s finding that Employer did not condone the employees’ strike. The employees’ behavior does not support a claim of condonation. Not only did the employees not tell Canada on the day of the strike that they intended to return to work the next day, but they also did not discuss with Freudenberg the determination on their separation notices that they had voluntarily quit and abandoned their jobs. Furthermore, if Freudenberg told the employees to return to work the next day, such a comment when taken in the context of his other statements was entirely ambiguous. Because the employer’s actions in forgiving an unprotected strike must be unequivocal, and a petitioner must demonstrate by clear and convincing evidence that such forgiveness occurred, the court finds that Petitioner has failed to satisfy his burden.”
Insomniacs can read the decision in full at http://www.ca6.uscourts.gov/opinions.pdf/08a0395p-06.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
Monday, November 3, 2008
Ohio Appeals Court Reduces Non-Compete Period for Long-Time Tax Preparer Employee.
Last month, the Lucas County Court of Appeals reversed in part a summary judgment entered by the trial court in favor of a former employee and cut in half the non-compete period in the non-compete agreement. Murray v. Accounting Ctr. & Tax Servs., Inc., 2008-Ohio-5289 (10/10/08).
The plaintiff was forced by her employer to sign a non-compete agreement in 1999 in order to receive her paycheck that day. The agreement provided that she would not accept fees from any client of the employer for two years from the date her employment was terminated. In addition, the agreement provided that the agreement could be transferred to any successor employer upon merger or sale of the firm. In 2004, the firm was sold to the defendant employer, the non-compete agreement was assigned to the new company and the plaintiff continued working for the new company. In November 2006, the defendant employer presented her with a new Confidentiality and Non-Compete Agreement and asked her to sign it along with an agreement changing her compensation structure from hourly wages to commissions. When she refused to work on a commission basis, she was fired in January 2007. She continued to provide services to clients of the defendant employer and filed a declaratory judgment action testing the validity of the non-compete agreement which she signed in 1999. The trial court ruled that the agreement was unenforceable and ruled in favor of the plaintiff.
On appeal, the appeals court found that the 1999 non-compete agreement was properly assigned to the defendant employer over objections that no notice of the assignment was provided to the plaintiff employee.
The court did not address whether the 1999 agreement was supported by sufficient consideration – in that the undisputed evidence showed that the plaintiff was required to sign it in order to receive her current paycheck – which was to compensate her for services already rendered. The employer could not have legally withheld her wages if she had refused to sign the 1999 non-compete agreement without violating the FLSA or Ohio’s wage payment and collection law. On the other hand, the court may have considered her future employment to constitute valid consideration – but it does not address that obvious point at all.
Instead, the court focused on the reasonableness of the terms of the 1999 non-compete. "A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public." The court then decided that the agreement was onerous in restricting the livelihood of a 16-year employee who supported herself by preparing tax returns for her employer and for herself. However, in balancing the interests of the employer in protecting its client base, the court narrowed the non-compete from two years to one year. The court also delayed the running of the one-year period to 60 days from the date of the court’s order. The court did not address the issue of liquidated damages presented in the 1999 agreement even though the plaintiff had admitted that she had provided services to clients of the defendant-employer.
Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/6/2008/2008-ohio-5289.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
The plaintiff was forced by her employer to sign a non-compete agreement in 1999 in order to receive her paycheck that day. The agreement provided that she would not accept fees from any client of the employer for two years from the date her employment was terminated. In addition, the agreement provided that the agreement could be transferred to any successor employer upon merger or sale of the firm. In 2004, the firm was sold to the defendant employer, the non-compete agreement was assigned to the new company and the plaintiff continued working for the new company. In November 2006, the defendant employer presented her with a new Confidentiality and Non-Compete Agreement and asked her to sign it along with an agreement changing her compensation structure from hourly wages to commissions. When she refused to work on a commission basis, she was fired in January 2007. She continued to provide services to clients of the defendant employer and filed a declaratory judgment action testing the validity of the non-compete agreement which she signed in 1999. The trial court ruled that the agreement was unenforceable and ruled in favor of the plaintiff.
On appeal, the appeals court found that the 1999 non-compete agreement was properly assigned to the defendant employer over objections that no notice of the assignment was provided to the plaintiff employee.
The court did not address whether the 1999 agreement was supported by sufficient consideration – in that the undisputed evidence showed that the plaintiff was required to sign it in order to receive her current paycheck – which was to compensate her for services already rendered. The employer could not have legally withheld her wages if she had refused to sign the 1999 non-compete agreement without violating the FLSA or Ohio’s wage payment and collection law. On the other hand, the court may have considered her future employment to constitute valid consideration – but it does not address that obvious point at all.
Instead, the court focused on the reasonableness of the terms of the 1999 non-compete. "A covenant restraining an employee from competing with his former employer upon termination of employment is reasonable if the restraint is no greater than is required for the protection of the employer, does not impose undue hardship on the employee, and is not injurious to the public." The court then decided that the agreement was onerous in restricting the livelihood of a 16-year employee who supported herself by preparing tax returns for her employer and for herself. However, in balancing the interests of the employer in protecting its client base, the court narrowed the non-compete from two years to one year. The court also delayed the running of the one-year period to 60 days from the date of the court’s order. The court did not address the issue of liquidated damages presented in the 1999 agreement even though the plaintiff had admitted that she had provided services to clients of the defendant-employer.
Insomniacs can read the full decision at http://www.sconet.state.oh.us/rod/docs/pdf/6/2008/2008-ohio-5289.pdf.
NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.
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