2022 Buget Bill Also Enacts Fair Hiring In Banking Provisions for Credit Unions and Banks

In addition to the PUMP Act and Pregnant Worker Fairness Act, the budget bill signed by President Biden at the end of last year also amended the statutes which governing hiring by banks and credit unions.   The Fair Hiring In Banking provisions amended the provisions of the FDIA and Federal Credit Union Act which barred institutions from hiring “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense.”  The Act creates slight exceptions for financial institutions for when:

               ‘‘(i) it has been 7 years or more since the offense occurred;”

      ‘‘(ii) the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration,” or

        (iii)” it has been more than 30 months since the sentencing occurred”  . . “[f]or individuals who committed an offense when they were 21 years of age or younger.”  

The slight limitation on the new exceptions apply to certain federal offenses enumerated in the statute which require the passage of 10 years since the conviction.   In other words, these new exceptions do NOT apply to those specific federal statutes which require the passage of 10 years. 

The FDIC and NCUA Board are also tasked with creating rules (aka regulations) in 2023 creating “de minimis” exceptions for bad checks, fake ids, shoplifting, trespass and driving with expired tags, etc. and creating a system for “Consent Agreements” so that financial institutions can hire those with certain offenses after approval from the FDIC or Board.

The full slightly edited text of the new legislation is included below in case you’re bored and want to read it in full.

SEC. 5705. FAIR HIRING IN BANKING.

(a) FEDERAL DEPOSIT INSURANCE ACT.—Section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) is amended—

(1) by inserting after subsection (b) the following: ‘‘(c) EXCEPTIONS.

— ‘‘(1) CERTAIN OLDER OFFENSES.—

    ‘‘(A) IN GENERAL.—With respect to an individual, subsection (a) [which bars involvement in insured depository institutions of “any person who has been convicted of any criminal offense involving dishonesty or a breach of trust or money laundering, or has agreed to enter into a pretrial diversion or similar program in connection with a prosecution for such offense”] shall not apply to an offense if— ‘‘(i) it has been 7 years or more since the offense occurred; or ‘‘(ii) the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration.

    ‘‘(B) OFFENSES COMMITTED BY INDIVIDUALS 21 OR YOUNGER.—For individuals who committed an offense when they were 21 years of age or younger, subsection (a) shall not apply to the offense if it has been more than 30 months since the sentencing occurred.

    ‘‘(C) LIMITATION.—This paragraph shall not apply to an offense described under subsection (a)(2) [which applies to certain enumerated federal offenses for 10 years after conviction].

‘‘(2) EXPUNGEMENT AND SEALING.—

        With respect to an

‘‘(A) there is an order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense; and

‘‘(B) it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual’s State, Tribal, or Federal record, even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.

‘‘(3) DE MINIMIS EXEMPTION.—

‘‘(A) IN GENERAL.—Subsection (a) shall not apply to such de minimis offenses as the Corporation determines, by rule.

‘‘(B) CONFINEMENT CRITERIA.—In issuing rules under subparagraph (A), the Corporation shall include a requirement that the offense was punishable by a term of three years or less confined in a correctional facility, where such confinement—

‘‘(i) is calculated based on the time an individual spent incarcerated as a punishment or a sanction, not as pretrial detention; and

‘‘(ii) does not include probation or parole where an individual was restricted to a particular jurisdiction or was required to report occasionally to an individual or a specific location.

‘‘(C) BAD CHECK CRITERIA.—In setting the criteria for de minimis offenses under subparagraph (A), if the Corporation establishes criteria with respect to insufficient funds checks, the Corporation shall require that the aggregate total face value of all insufficient funds checks across all convictions or program entries related to insufficient funds checks is $2,000 or less.

‘‘(D) DESIGNATED LESSER OFFENSES.—Subsection (a) shall not apply to certain lesser offenses (including the use of a fake ID, shoplifting, trespass, fare evasion, driving with an expired license or tag, and such other low-risk offenses as the Corporation may designate) if 1 year or more has passed since the applicable conviction or program entry.’’; and (2) by adding at the end the following:

‘‘(f) CONSENT APPLICATIONS.—

‘‘(1) IN GENERAL.—The Corporation shall accept consent applications from an individual and from an insured depository institution or depository institution holding company on behalf of an individual that are filed separately or contemporaneously with a regional office of the Corporation.

‘‘(2) SPONSORED APPLICATIONS FILED WITH REGIONAL OFFICES.—Consent applications filed at a regional office of the Corporation by an insured depository institution or depository institution holding company on behalf of an individual—

‘‘(A) shall be reviewed by such office;

‘‘(B) may be approved or denied by such office, if such authority has been delegated to such office by the Corporation; and

‘‘(C) may only be denied by such office if the general counsel of the Corporation (or a designee) certifies that the denial is consistent with this section. 

‘‘(3) INDIVIDUAL APPLICATIONS FILED WITH REGIONAL OFFICES.—Consent applications filed at a regional office by an individual—

‘‘(A) shall be reviewed by such office; and

‘‘(B) may be approved or denied by such office, if such authority has been delegated to such office by the Corpora[1]tion, except with respect to—

‘‘(i) cases involving an offense described under sub[1]section (a)(2); and

‘‘(ii) such other high-level security cases as may be designated by the Corporation.

‘‘(4) NATIONAL OFFICE REVIEW.—The national office of the Corporation shall—

‘‘(A) review any consent application with respect to which a regional office is not authorized to approve or deny the application; and

‘‘(B) review any consent application that is denied by a regional office, if the individual requests a review by the national office.

‘‘(5) FORMS AND INSTRUCTIONS.—

‘‘(A) AVAILABILITY.—The Corporation shall make all forms and instructions related to consent applications available to the public, including on the website of the Corporation.

‘‘(B) CONTENTS.—The forms and instructions described under subparagraph (A) shall provide a sample cover letter and a comprehensive list of items that may accompany the application, including clear guidance on evidence that may support a finding of rehabilitation.

‘‘(6) CONSIDERATION OF CRIMINAL HISTORY.—

‘‘(A) REGIONAL OFFICE CONSIDERATION.—In reviewing a consent application, a regional office shall—

‘‘(i) primarily rely on the criminal history record of the Federal Bureau of Investigation; and

‘‘(ii) provide such record to the applicant to review for accuracy.

‘‘(B) CERTIFIED COPIES.—The Corporation may not require an applicant to provide certified copies of criminal history records unless the Corporation determines that there is a clear and compelling justification to require additional information to verify the accuracy of the criminal history record of the Federal Bureau of Investigation.

‘‘(7) CONSIDERATION OF REHABILITATION.—Consistent with title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.), the Corporation shall—

‘‘(A) conduct an individualized assessment when evaluating consent applications that takes into account evidence of rehabilitation, the applicant’s age at the time of the conviction or program entry, the time that has elapsed since conviction or program entry, and the relationship of individual’s offense to the responsibilities of the applicable position; ‘

‘(B) consider the individual’s employment history, let[1]ters of recommendation, certificates documenting participation in substance abuse programs, successful participating in job preparation and educational programs, and other relevant mitigating evidence; and

‘‘(C) consider any additional information the Corporation determines necessary for safety and soundness.

‘‘(8) SCOPE OF EMPLOYMENT.—With respect to an approved consent application filed by an insured depository institution or depository institution holding company on behalf of an individual, if the Corporation determines it appropriate, such approved consent application shall allow the individual to work for the same employer (without restrictions on the location) and across positions, except that the prior consent of the Corporation (which may require a new application) shall be required for any proposed significant changes in the individual’s security-related duties or responsibilities, such as promotion to an officer or other positions that the employer determines will require higher security screening credentials.

‘‘(9) COORDINATION WITH THE NCUA.—In carrying out this section, the Corporation shall consult and coordinate with the National Credit Union Administration as needed to promote consistent implementation where appropriate.

‘‘(g) DEFINITIONS.—In this section:

‘‘(1) CONSENT APPLICATION.—The term ‘consent application’ means an application filed with Corporation by an individual (or by an insured depository institution or depository institution holding company on behalf of an individual) seeking the written consent of the Corporation under subsection (a)(1).

‘‘(2) CRIMINAL OFFENSE INVOLVING DISHONESTY.—The term ‘criminal offense involving dishonesty’— ‘‘(A) means an offense under which an individual, directly or indirectly— ‘‘(i) cheats or defrauds; or ‘‘(ii) wrongfully takes property belonging to another in violation of a criminal statute; ‘‘(B) includes an offense that Federal, State, or local law defines as dishonest, or for which dishonesty is an element of the offense; and ‘‘(C) does not include— ‘‘(i) a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration; or ‘‘(ii) an offense involving the possession of controlled substances.

‘‘(3) PRETRIAL DIVERSION OR SIMILAR PROGRAM.—The term ‘pretrial diversion or similar program’ means a program characterized by a suspension or eventual dismissal or reversal of charges or criminal prosecution upon agreement by the accused to restitution, drug or alcohol rehabilitation, anger management, or community service.’’.

(b) FEDERAL CREDIT UNION ACT.—Section 205(d) of the Federal Credit Union Act (12 U.S.C. 1785(d)) is amended by adding at the end the following:

‘‘(4) EXCEPTIONS.—

‘‘(A) CERTAIN OLDER OFFENSES.—

‘‘(i) IN GENERAL.—With respect to an individual, paragraph (1) shall not apply to an offense if—

‘‘(I) it has been 7 years or more since the offense occurred; or

‘‘(II) the individual was incarcerated with respect to the offense and it has been 5 years or more since the individual was released from incarceration.

‘‘(ii) OFFENSES COMMITTED BY INDIVIDUALS 21 OR YOUNGER.—For individuals who committed an offense when they were 21 years of age or younger, paragraph (1) shall not apply to the offense if it has been more than 30 months since the sentencing occurred.

‘‘(iii) LIMITATION.—This subparagraph shall not apply to an offense described under paragraph (1)(B).

‘‘(B) EXPUNGEMENT AND SEALING.—With respect to an individual, paragraph (1) shall not apply to an offense if— ‘‘(i) there is an order of expungement, sealing, or dismissal that has been issued in regard to the conviction in connection with such offense; and ‘‘(ii) it is intended by the language in the order itself, or in the legislative provisions under which the order was issued, that the conviction shall be destroyed or sealed from the individual’s State, Tribal, or Federal record, even if exceptions allow the record to be considered for certain character and fitness evaluation purposes.

‘‘(C) DE MINIMIS EXEMPTION.— ‘

‘(i) IN GENERAL.—Paragraph (1) shall not apply to such de minimis offenses as the Board determines, by rule.

‘‘(ii) CONFINEMENT CRITERIA.—In issuing rules under clause (i), the Board shall include a requirement that the offense was punishable by a term of three years or less confined in a correctional facility, where such confinement— ‘‘(I) is calculated based on the time an individual spent incarcerated as a punishment or a sanction, not as pretrial detention; and ‘‘(II) does not include probation or parole where an individual was restricted to a particular jurisdiction or was required to report occasionally to an individual or a specific location.

‘‘(iii) BAD CHECK CRITERIA.—In setting the criteria for de minimis offenses under clause (i), if the Board establishes criteria with respect to insufficient funds checks, the Board shall require that the aggregate total face value of all insufficient funds checks across all convictions or program entries related to insufficient funds checks is $2,000 or less.

‘‘(iv) DESIGNATED LESSER OFFENSES.—Paragraph (1) shall not apply to certain lesser offenses (including the use of a fake ID, shoplifting, trespass, fare evasion, driving with an expired license or tag, and such other low-risk offenses as the Board may designate) if 1 year or more has passed since the applicable conviction or program entry.

‘‘(5) CONSENT APPLICATIONS.—

‘‘(A) IN GENERAL.—The Board shall accept consent applications from an individual and from an insured credit union on behalf of an individual that are filed separately or contemporaneously with a regional office of the Board.

‘‘(B) SPONSORED APPLICATIONS FILED WITH REGIONAL OFFICES.—Consent applications filed at a regional office of the Board by an insured credit union on behalf of an individual— ‘‘(i) shall be reviewed by such office; ‘‘(ii) may be approved or denied by such office, if such authority has been delegated to such office by the Board; and ‘‘(iii) may only be denied by such office if the general counsel of the Board (or a designee) certifies that the denial is consistent with this section.

‘‘(C) INDIVIDUAL APPLICATIONS FILED WITH REGIONAL OFFICES.—Consent applications filed at a regional office by an individual— ‘‘(i) shall be reviewed by such office; and ‘‘(ii) may be approved or denied by such office, if such authority has been delegated to such office by the Board, except with respect to— ‘‘(I) cases involving an offense described under paragraph (1)(B); and ‘‘(II) such other high-level security cases as may be designated by the Board.

‘‘(D) NATIONAL OFFICE REVIEW.—The national office of the Board shall— ‘‘(i) review any consent application with respect to which a regional office is not authorized to approve or deny the application; and ‘‘(ii) review any consent application that is denied by a regional office, if the individual requests a review by the national office.

‘‘(E) FORMS AND INSTRUCTIONS.— ‘‘(i) AVAILABILITY.—The Board shall make all forms and instructions related to consent applications avail[1]able to the public, including on the website of the Board. ‘‘(ii) CONTENTS.—The forms and instructions described under clause (i) shall provide a sample cover letter and a comprehensive list of items that may accompany the application, including clear guidance on evidence that may support a finding of rehabilita[1]tion.

‘‘(F) CONSIDERATION OF CRIMINAL HISTORY.— ‘‘(i) REGIONAL OFFICE CONSIDERATION.—In reviewing a consent application, a regional office shall— ‘‘(I) primarily rely on the criminal history record of the Federal Bureau of Investigation; and ‘‘(II) provide such record to the applicant to review for accuracy. ‘‘(ii) CERTIFIED COPIES.—The Board may not require an applicant to provide certified copies of criminal history records unless the Board determines that there is a clear and compelling justification to require additional information to verify the accuracy of the criminal history record of the Federal Bureau of Investigation.

‘‘(G) CONSIDERATION OF REHABILITATION.—Consistent with title VII of the Civil Rights Act of 1964 (42 U.S.C. 2000e et seq.), the Board shall— ‘‘(i) conduct an individualized assessment when evaluating consent applications that takes into account evidence of rehabilitation, the applicant’s age at the time of the conviction or program entry, the time that has elapsed since conviction or program entry, and the relationship of individual’s offense to the responsibilities of the applicable position; ‘‘(ii) consider the individual’s employment history, letters of recommendation, certificates documenting participation in substance abuse programs, successful participating in job preparation and educational pro[1]grams, and other relevant mitigating evidence; and ‘‘(iii) consider any additional information the Board determines necessary for safety and soundness.

‘‘(H) SCOPE OF EMPLOYMENT.—With respect to an approved consent application filed by an insured credit union on behalf of an individual, if the Board determines it appropriate, such approved consent application shall allow the individual to work for the same employer (without restrictions on the location) and across positions, except that the prior consent of the Board (which may require a new application) shall be required for any proposed significant changes in the individual’s security-related duties or responsibilities, such as promotion to an officer or other positions that the employer determines will require higher security screening credentials.

‘‘(I) COORDINATION WITH FDIC.—In carrying out this subsection, the Board shall consult and coordinate with the Federal Deposit Insurance Corporation as needed to promote consistent implementation where appropriate.

‘‘(6) DEFINITIONS.—In this subsection:

‘‘(A) CONSENT APPLICATION.—The term ‘consent application’ means an application filed with Board by an individual (or by an insured credit union on behalf of an individual) seeking the written consent of the Board under paragraph (1)(A).

‘‘(B) CRIMINAL OFFENSE INVOLVING DISHONESTY.—The term ‘criminal offense involving dishonesty’— ‘‘(i) means an offense under which an individual, directly or indirectly— ‘‘(I) cheats or defrauds; or ‘‘(II) wrongfully takes property belonging to another in violation of a criminal statute; ‘‘(ii) includes an offense that Federal, State, or local law defines as dishonest, or for which dishonesty is an element of the offense; and ‘‘(iii) does not include— ‘‘(I) a misdemeanor criminal offense committed more than one year before the date on which an individual files a consent application, excluding any period of incarceration; or ‘‘(II) an offense involving the possession of con[1]trolled substances.

‘‘(C) PRETRIAL DIVERSION OR SIMILAR PROGRAM.—The term ‘pretrial diversion or similar program’ means a pro[1]gram characterized by a suspension or eventual dismissal or reversal of charges or criminal prosecution upon agreement by the accused to restitution, drug or alcohol rehabilitation, anger management, or community service.’’.

(c) REVIEW AND REPORT TO CONGRESS.—Not later than the end of the 2-year period beginning on the date of enactment of this Act, the Federal Deposit Insurance Corporation and the National Credit Union Administration shall— (1) review the rules issued to carry out this Act and the amendments made by this Act on— (A) the application of section 19 of the Federal Deposit Insurance Act (12 U.S.C. 1829) and section 205(d) of the Federal Credit Union Act (12 U.S.C. 1785(d)); (B) the number of applications for consent applications under such sections; and (C) the rates of approval and denial for consent applications under such sections; (2) make the results of the review required under para[1]graph (1) available to the public; and (3) issue a report to Congress containing any legislative or regulatory recommendations for expanding employment opportunities for those with a previous minor criminal offense.

 

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.

FMLA Bars Retaliation Against Employee for Requesting FMLA Leave Even if Unqualified or Ineligible

On Wednesday, a unanimous Sixth Circuit reversed an employer’s 12(b)(6) judgment on an FMLA retaliation claim where the employee was terminated shortly after requesting an unpaid leave due to her infant son’s health even though she had not alleged that she was eligible for FMLA leave or that her son suffered from a serious health condition.  Millman v. Fieger and Fieger, PC¸ No. 21-2685 (6^th Cir. 1/25/23).  The Court ultimately determined that “the FMLA protects the right of an employee to inquire about and request leave even if it turns out that she is not entitled to such leave.”

According to the Court’s opinion, shortly after the commencement of the COVID pandemic on March 13, the employer law firm directed its staff to work from home one day each week.  The plaintiff lawyer’s two-year old son recently been hospitalized with RSV, a respiratory illness, was still using a nebulizer and his day care remained closed.  The plaintiff had five vacation and 3 PTO days left in her time off bank.  The firm owner denied her March 14 request to work from home on March 16 and 17, but HR approved her request to use her PTO.  When her direct supervisor asked if she planned to return on March 19, she indicated that she planned to return, but was concerned that her son’s day care was still closed and he had developed COVID symptoms.  On  Thursday, her son’s condition worsened and she contacted HR and offered to take unpaid leave to avoid returning to the office.  HR did not respond to her offer to take unpaid leave or send her an eligibility notice or request for a medical statement and instead authorized her to work from home for the remainder of the week.  She forwarded the email to her supervisor and worked with him from home for the rest of the day.  At the end of the day, HR sent her a letter signed by the firm’s owner terminating her employment after she reported that her son had a cold and she had not returned to work as promised.  A week later, she requested her personnel file and was sent another letter indicating that her actions showed that she had no intention of returning to work, that she refused to work because her son had a cold and they believed that she had quit.  When she filed suit in August, the court granted the employer’s motion to dismiss on the grounds that she had not alleged that she was eligible for FMLA leave or that her son suffered from a serious health condition.

The Court first concluded that FMLA retaliation claims may be brought both under the interfere, restrain and deny statutory section and the retaliation statutory section, but that the burden of proof for retaliation claims did not change depending on which statutory section was cited.  (The concurring opinion clarified that only the interfere, restrain and deny section should support this type of retaliation claim).   

The plaintiff’s “core claim is that she was fired for inquiring about and making a request to take FMLA leave, which she argues is protected activity under the FMLA.”  For purposes of ruling on a motion to dismiss (when all factual allegations are deemed to be valid), the Court presumed that she had alleged sufficient causation and an adverse action.  The only question was whether she had engaged in a protected activity and that her employer knew she had engaged in a protected activity when there were no factual allegations indicating that she was entitled to or qualified for FMLA leave.

It makes sense that entitlement is a prerequisite to an FMLA retaliation claim in certain circumstances. In the more common circumstance, if an employee actually takes leave without being entitled to the leave, her action is beyond the scope of FMLA protection. Simply put, the FMLA protects leave that is taken only if it falls within the scope of entitlement; taking leave to which the employee was not entitled unambiguously falls outside the FMLA’s protections. . . .

This case presents an entirely different circumstance. [Plaintiff] never actually took leave; she only made a request for leave. . . . the question is whether the FMLA protects the right of an employee to inquire about and request leave even if it turns out that she is not entitled to such leave. . . .

 . . . the steps of the process created by the FMLA—including the first step, i.e., the employee’s initial request for leave—must be protected activity under the Act. FMLA rights and the statute’s purpose would be significantly diminished if employers could fire an employee who simply took the required initial steps to access FMLA leave.

                . . .

Suppose that an employee, intending to exercise her FMLA rights, meets with her employer and asks questions concerning her FMLA rights, then is fired for doing so. Concluding that no FMLA violation could occur if it turns out that the employee is not entitled to leave would render the employee unprotected during the step required to initiate the FMLA’s process. Without protection, employees would be discouraged from taking authorized initial steps—including preparing or formulating a request—to access FMLA benefits. We are not to impose nonsensical readings of a statute “if alternative interpretations consistent with the legislative purpose are available.”

                . . .

                . . . Starting with the regulation implementing § 2615(a), “[t]he FMLA prohibits interference with an employee’s rights under the law, and with . . . inquiries relating to an employee’s rights.”

                . . . .

Thus, the scope of protected activity under the FMLA starts with the first step contemplated under the Act’s procedures: a request made to the employer. That request, moreover, need not lead to entitlement in order to be protected. In this case, when her son began exhibiting symptoms associated with COVID-19, [Plaintiff] made a request to her employer for unpaid leave—following the first step of the FMLA’s process. The Firm, through Human Resources, then offered, and [she] accepted, a work-from-home arrangement for those two days and never responded to her request. [Her] action was grounded in a legitimate exercise of the FMLA’s procedural framework and was therefore protected under the FMLA.

Although the employer argued that the plaintiff had failed to provide notice that she was exercising her rights under the FMLA, the Court pointed out that the FMLA regulations make clear that employees do not need to use the words, FMLA, to request leave under the FMLA.   Rather, “the employee must provide enough information for the employer to know that the leave she has requested reasonably might fall under the FMLA. In addition, where leave is needed to care for a family member, the employee must so indicate.”

“In any circumstance where the employer does not have sufficient information about the reason for an employee’s use of leave, the employer should inquire further of the employee or the spokesperson to ascertain whether leave is potentially FMLA-qualifying.” 29 C.F.R. § 825.301(a). Once an employer is put on notice that an employee seeks to use her FMLA leave, moreover, “the employer bears the obligation to collect any additional information necessary to make the leave comply with the requirements of the FMLA.”

In addition, the employer was clearly on notice because it initially permitted her to work from home and its subsequent documentation cited her request to not return to the office.

The Firm indicated that it was aware of  [her] request based on its response: it offered an alternative accommodation to work from home for two days. The Firm had notice that [she] sought leave to care for her son who had recently been hospitalized with RSV, suffered continuing symptoms from that condition and, potentially, had contracted COVID-19. This knowledge gave rise to a duty for the Firm to, at minimum, engage in the communication required by the statute. The Firm neither sought to clarify [her] request nor did it attempt to obtain “a certification issued by a healthcare provider of . . . [her] son” to determine whether her request fell outside the scope of the Act. 29 U.S.C. § 2612(a). Instead, the Firm offered a work-from-home arrangement—which [she] accepted—and then terminated her after the first day for failing to “come into work,” indicating that her “child had a minor cold.” The Firm, thus, failed to exhaust any of its obligations in responding to [her] request. On these allegations, [she] provided proper notice to her employer that she sought FMLA leave and was acting pursuant to the FMLA’s prescribed procedures. The Firm was on notice of her protected activity.

Therefore, the dismissal was reversed and the case was remanded to the trial court to proceed with discovery.

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.

Sixth Circuit Reverses Employer's Summary Judgment on Willful FLSA Violations

Last month, the Sixth Circuit reversed an employer’s summary judgment on allegedly willful FLSA violations asserted by the Department of Labor involving recordkeeping, and overtime wages.    Walsh v. KDE Equine, LLC, Nos. 21-5054/5133  (6^th Cir. 12/22/22). “To show that an employer acted willfully, the DOL must prove that the employer “knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.”  In this case, the Court found that the employer’s failure to maintain accurate records of working hours and to pay overtime compensation was willful because, in part, it “(1) had previously been investigated and found in violation of the FLSA, (2) was enjoined by a district court from continuing to violate the statute and ordered to pay unpaid overtime compensation, and (3) made assurances that it would comply in the future.”  The DOL showed that payroll was processed before the mostly inaccurate time sheets even arrived.   The Court rejected the employer’s defenses concerning its pay practices as not complying with the DOL regulations governing lump sum payments, fluctuating work week and § 778.309 (fixed fee for regular overtime).   The trial court had already ordered the payment of more than $211K in back pay before the Court's ruling. 

According to the Court’s opinion, the employer allegedly failed to pay mandatory minimum and overtime wages to, and to maintain accurate records of working hours involving, hot walkers and grooms at its stables when they generally worked between 44 and 52 hours each week.   Instead, the employer paid them on a salary basis with extra pay for extra work.  “Most of the employees did not submit timesheets for the additional hours worked, while others submitted inaccurate time sheets.”  The DOL “requested that the court find that KDE acted willfully which would warrant liquidated damages and a three-year statute of limitations period.”  On competing summary judgment motions, the trial court ruled against the DOL on willful violations and instead granted the employer summary judgment on that issue.  At the bench trial, the trial court ruled in favor of the DOL and ordered the employer to pay $211,541.76 in back wages. On appeal, the Court affirmed the judgment on the substantive claims, but reversed the employer’s summary judgment on whether its conduct was willful under the FLSA, entitling the DOL to a trial on that issue and possible liquidated damages and an extra year for the limitations period on the remaining claims.

There is a two-year statute of limitations for an ordinary violation under the FLSA. McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135 (1988). When the violation is willful, however, the statute of limitations is three years. Id. An employer who violates § 6 or § 7 of the FLSA is liable to the affected employees in the amount of their unpaid minimum wages or overtime compensation plus an equal amount as liquidated damages. 29 U.S.C. § 216(b).

To show that an employer acted willfully, the DOL must prove that the employer “knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute.” See McLaughlin, 486 U.S. at 133. This court has found an employer to have known or acted with reckless disregard where the employer “had actual notice of the requirements of the FLSA by virtue of earlier violations, his agreement to pay unpaid overtime wages, and his assurance of future compliance with the FLSA.” . . .

                . . .

            Whether a defendant willfully violated the FLSA is a factual question. . . . An employer having notice of the FLSA requirements by virtue of prior violations and assurances of future compliance is a material fact that we have found to be highly indicative of willfulness. . . . . Accordingly, the factual disputes as to whether an employer's prior violations and assurances of future compliance gave the employer actual notice of its obligations under the FLSA raise enough of a genuine issue of material fact to preclude summary judgment.

The Court rejected the employer’s argument that its retention of a payroll expert following its prior injunction and consent judgment, requiring employees to complete their own time sheets and posting of labor law signs in its barns and workplaces required judgment in its favor on the willfulness issue in light of the DOL’s contrary evidence that the employer attempted to conceal its violations by changing payroll records to reflect that the employees were paid on an hourly and not salary basis and that paychecks had been issued and payroll processed before the time sheets even arrived.

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.

Unanimous Sixth Circuit Affirms and Narrows Enforcement of Federal Contractor COVID Mandate

Yesterday, a unanimous Sixth Circuit both affirmed and narrowed a preliminary injunction entered against President Biden’s order that “all federal agencies  . . . include in their new contracts a provision obligating contract recipients to require their employees to wear face masks at work and be vaccinated against COVID-19.”   Kentucky v. Biden, No. 21-6147 (6^th Cir. 1-12-23).   The Court agreed that Biden had exceeded his authority under the Federal Property and Administrative Services Act of 1949.  The Court found that the Act’s statement of purpose did not authorize, and has never empowered, the government to take any particular action.   Further, the prefatory statement focuses on government efficiency, not contractor efficiency.  However, the Court narrowed the injunction to enforcement of the order against the plaintiffs – i.e., States of Ohio, Kentucky and Tennessee and two Ohio sheriffs’ offices --  and found that the district court had exceeded its authority in enjoining enforcement of the order against all federal contractors and subcontractors in all three states (who presumably will need to file their own preliminary injunctions if the government does not voluntarily withdraw the order, which has been on hold since it was earlier enjoined in Georgia).   

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.

While You Were Celebrating, the NLRB Has Been Busy

As has become common, the NLRB issued a number of notable decisions following election season (and the Georgia special election).  Last month, it issued three notable decisions (following a few notable actions last Fall) and Congress increased its funding by $25M at the end of the month.   Among other things, it will for the first time permit successful charging parties to recover more than back pay for harm incurred from NLRA violations (i.e., compensatory damages).  It will also presume that off duty employees of contractors cannot be excluded from private property if they are engaged in protected concerted activities.  And, it will permit unions to form units based on who wants to join, which could result in a proliferation of bargaining units.

On December 13, 2022, the NLRB sua sponte expanded the type of financial relief that a successful employee may recover after filing an unfair labor practice (but without ever using the term, compensatory damages).  Thryv, Inc., Nos. 20–CA–250250 and 20–CA–251105.   The employer was found to have unlawfully and unilaterally laid off six employees without first bargaining in good faith to impasse with the union.  As “make whole relief,” and without such a request from the union or any of the affected the employees, the NLRB ordered more than just reinstatement with back pay, which has been the traditional remedy for decades.  Rather, the Board ordered the employer “to compensate affected employees for all direct or foreseeable pecuniary harms that these employees suffer as a result of the respondent’s un[1]fair labor practice.”  In the civil litigation context, this is called compensatory damages:

We conclude that in all cases in which our standard remedy would include an order for make-whole relief, the Board will expressly order that the respondent compensate affected employees for all direct or foreseeable pecuniary harms suffered as a result of the respondent’s unfair labor practice.  As we explain below, any relief must be specifically calculated and requires the General Counsel to present evidence in compliance demonstrating the amount of pecuniary harm, the direct or foreseeable nature of that harm, and why that harm is due to the respondent’s unfair labor practice. The respondent, in turn, will have the opportunity to present evidence challenging the amount of money claimed, argue that the harm was not direct or foreseeable, or that it would have occurred regardless of the unfair labor practice.

The Board then discussed the reason for its radical change in more than five long pages. 

Three days later, the NLRB decided to return to the Obama-era standard for excluding individuals from private property.    In Bexar County Performing Arts Center Foundation, No. 16–CA–193636, the Board “abandoned” the current legal standard and returned to the old: 

Under the New York New York test, a property owner may lawfully exclude from its property off-duty employees who regularly work on the property for an onsite contractor and who seek to engage in Section 7 activity on the property only where the property owner is able to demonstrate that the contractor employees’ Section 7 activity significantly interferes with the use of the property or where exclusion is justified by another legitimate business reason, including, but not limited to, the need to maintain production and discipline.

In this case, union musicians wanted to enter a theatre which the ballet company (and the San Antonio Symphony and Opera San Antonio) leased in order to publicize their dispute with leaflets with the ballet company, which had opted to use recorded music instead of the union musicians for its performance of Sleeping Beauty.  The theatre (and city police) prohibited the musicians from leafletting at the theatre or the sidewalk and pushed them across the street.

The Board saw

no reason why contractor employees—just because their employer does not own the property where they regularly work—should not enjoy a similar opportunity to exercise their statutory rights at the place where they regularly work.

Accordingly, the Board found that the theatre violated the musicians’ rights under the NLRA:

by preventing the Symphony employees from distributing flyers on the sidewalk in front of the Tobin Center on the Respondent’s property about Ballet San Antonio’s use of recorded music, which deprived the Symphony employees of the work of performing that music live. The Symphony employees work regularly at the Tobin Center, and the Respondent has not demonstrated that the leafleting would have significantly interfered with the use of its property or that it had another legitimate business reason for denying them access.

On December 14, the Board relaxed the standard for determining the scope of a bargaining unit and returned to the Obama-era standard from Specialty Healthcare: “where a labor union seeks to represent a unit that contains some, but not all, of the job classifications at a particular workplace.”  In other words, the union can decide to “organize” only those employees who want to join and exclude the rest (who, presumably, would vote against the union and prevent it from obtaining majority support necessary to form a new unit).  American Steel Construction, Inc., No. 07–RC– 269162.    These are sometimes referred to as microunits. 

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.