Over the last several years virtually every drug company has been hit with a lawsuit about whether its drug representatives or “drug reps” are exempt from overtime.  In case you have missed them on TV or in the doctor’s offices, drug reps are the folks who visit your doctor hawking drugs from all of the drug companies to get physicians to prescribe them.  Coincidentally, that is where those samples your physician may have given you at one time come from.   These drug reps don’t actually sell directly to the doctors because the doctors are actually the folks who “sell” the product to their customers.  Rather, drug reps just try their best to get doctors to choose to prescribe the medications.

The argument in all of the lawsuits goes something like this:  Everyone is entitled to receive overtime if they work more than 40 hours a week, unless they are “exempt” from the overtime requirement under one of several permitted exemptions (see my previous posts on Overtime and Exemptions from Overtime).  “Outside sales” are one of the groups that may be exempt from overtime.  For many years drug reps have been considered by drug companies as outside sales people, and in virtually every respect they meet the requirements of the exemption that were originally laid out by the Department of Labor.

Recently, however, the Department of Labor decided to take the position that drug reps do not meet the requirements of the exemption because they don’t actually “sell” anything.  As noted above, they just push physicians to choose to use their products and “sell” the drugs.  The Department of Labor then encouraged drug reps to bring suit against drug companies by publishing this narrow view as an interpretation of its own original regulations that should be followed by businesses.

Some of the courts where suit was filed accepted the Department of Labor’s interpretation of its original requirements, giving deference to the agency that originally wrote the rules.  Other courts found that the new interpretation was a self-serving attempt to narrow the outside sales exemption to produce more overtime earning employees.  In an effort to deal with the differing opinions among the courts of appeal, the issue was put to the US Supreme Court to decide.  Last week the Supreme Court handed down its final pronouncement on the subject.  In a 5-4 decision, the Court found that drug reps are properly “outside sales” and exempt from overtime.

The Supreme Court felt that the Department of Labor was being overly technical about what constitutes a sale and found that the Department’s interpretation did not deserve deference even though it originally wrote the requirements for the exemption.

I think this is the right result.  The drug industry is a unique environment that requires special consideration.  Drug companies would be happy to sell their products directly to patients, but they can’t.  Physicians have to be the one to decide when a drug is needed and should do so based on patient need and not to line drug companies pockets.  In this system, drug reps are the closest thing to a salesman that the drug companies could have to get their product to market.  Without them, physicians might not know about or choose to prescribe a particular medicine.  The Department of Labor overstepped its bounds and even tried to cheat by redefining its own rules and the Supreme Court was looking.

Besides, drug reps are exceptionally well paid.  Many make over $100,000 per year without any special additional compensation for working overtime.  They don’t need the extra compensation.

So, what does this mean for your business?  If you are a drug company, you should be very happy.  If, more likely, you have a different business, you should know that the outside sales exemption is alive and well and if you have similarly situated sales representatives, they should be well protected.  Otherwise, it probably has limited application for you because the drug rep environment is so unique.

Guest author and Looper Reed tax attorney Jennifer Gurevitz offers some thoughts on the recent Supreme Court decision upholding Obamacare.

Now that the Supreme Court has confirmed that the Patient Protection and Affordable Care Act is constitutional and has upheld the individual mandate providing that all Americans have minimum essential health insurance coverage or pay a penalty, it is important to understand the implications this law has on businesses and their employees. Some key implications are as follows:

For Employers:

Employer Responsibility – Providing Health Insurance or Paying a Fine.

  • Employers with Less than 50 Full-Time or Full-Time Equivalent Employees. Employers with less than 50 full-time employees (those who work 30+ hours per week) or full-time equivalent employees (determined by dividing the total number of hours worked in a month by part-time employees by 120) are not responsible for providing health care coverage for their employees and are not liable for a fine for failing to do so.
  • Small Business Tax Credit. Small businesses (defined as businesses with 25 or fewer employees and average annual wages of $50,000 or less) are eligible for a tax credit of up to 50% of nonelective contributions the business makes on behalf of their employees for insurance premiums.
  • Employers with 50 or more Full-Time or Full-Time Equivalent Employees. Beginning in 2014, employers with 50 or more full-time or full-time equivalent employees will have the option of providing health insurance for all of their employees or paying a fine.
  • Fine for Employers who Offer Health Insurance. Employers must pay a non-deductible penalty of $3,000 per year for each full-time employee who obtains health insurance through a health care exchange and receives the premium tax credit if the employer does not offer minimum essential coverage to its full-time employees and their dependents. An employer does not offer minimum essential coverage if the employer medical plan contributions equal less than 60% of allowed costs, or if an employee pays more than 9.5% of his or her household income for health coverage. This penalty is limited to an amount equal to $2,000 multiplied by the number of full-time employees of the employer (less the first 30 employees).
  • Fine for Employers who do not Offer Health Insurance. Employers who don’t offer health coverage will be required to pay a non-deductible penalty of $2,000 per employee. An employer’s first 30 employees who would otherwise qualify will not be included in the assessment.
  • Employers with Over 200 Employees. In addition to the rules provided above for employers with 50 or more full-time or full-time equivalent employees, beginning sometime in 2014 after the IRS issues regulations, employers with over 200 employees that offer health coverage must automatically enroll new full-time employees in a coverage option and must also automatically continue existing elections for current full-time employees from year to year.

Health Insurance Exchanges. Beginning in 2014, health insurance exchanges will be established in each state or through the federal government for states that have opted not to create their own exchanges or are unable to operate an exchange by January 2014. Individuals and employers with less than 100 employees (some states may limit to 50 employees through 2016) will be able to shop for insurance through the exchanges. The exchanges have the option of including employers with more than 100 employees beginning in 2017. The use of the exchanges will allow employers to choose the level of coverage they will provide and to offer their employees choices among qualified health plans within that level of coverage. This will let employers offer plans from multiple insurers but receive a single bill and write a single check. Employers purchasing coverage through an exchange may be eligible for a tax credit of up to 50 percent of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full-time employees coverage and pay at least 50 percent of the premium.

Reporting Requirements. Beginning in 2013 (for 2012 Forms W-2), employers that provide health insurance to their employees, whether the employer or the employee pays the premiums, must disclose the value of health benefits on each employee’s W-2 . Employers filing fewer than 250 Forms W-2 for the previous calendar year are currently exempt from this new reporting requirement until the IRS issues regulations stating otherwise.

For Employees:

Increased Tax for Some Employees and Investors. Beginning in 2013, individual taxpayers with incomes in excess of $200,000 ($250,000 for couples filing married filing jointly) will pay an additional 0.9 percent Medicare tax on the excess. In addition, they’ll pay a new, 3.8 percent Medicare tax on unearned income, such as interest, dividends, rents, royalties, and certain tax gains.

Health Insurance Premium Tax Credit. Refundable tax credits are available to eligible taxpayers to help cover the cost of health insurance premiums for individuals and families who purchase health insurance through a health benefit exchange. Credits are available for people with incomes above Medicaid eligibility and below 400 percent of the poverty level ($92,200 for a family of four in 2012) who are not eligible for or offered minimum essential coverage. The credits apply to both premiums and cost-sharing.

Cap on Flexible Spending Accounts. Beginning in 2013, Flexible Spending Account Contributions will be capped at $2,500 and future caps will be tied to increases in the Consumer Price Index.

HSA Withdrawal Penalty. The tax penalty for an unqualified withdrawal from an HSA account has been increased effective January 1, 2011, from the current level of 10% to 20%.

Who, What, Why . . .

Who does it apply to: Virtually all business owners hiring individuals under the age of 18.

What is the minimum age to hire: There is a lot of variation about the minimum age to hire and there are different restrictions placed on various age groups:

• Any age: Farm work on a parent’s owned or operated farm; perform on television, radio, movies, or other theater productions (with a permit); work for a parent’s business in a “non-hazardous” position; and, believe it or not, gathering and making evergreen wreaths.

• Age 11: Delivering (not selling) newspapers.

• Ages 12 and 13: Farm work on someone else’s farm with a parent’s consent performed outside of school hours. The work may not be “hazardous.”

• Ages 14 and 15: Farm work in “non-hazardous” positions with the following restraints: (a) outside of school hours; (b) no more than 8 hours in a day or 48 hours in a week; and (c) no work between 10 p.m. and 5 a.m. on a day followed by a school day, or midnight and 5 a.m. on a day that is not. Non-farm work (except sales, solicitation, or work in a sexually oriented business) which is not “hazardous” with the following restraints: (a) no more than 18 hours in a school week or 40 hours in a non-school week; (b) no more than 3 hours on a school day, or 8 hours on any other day; (c) no work before 7 a.m. or after 7 p.m., except between June 1 and Labor Day when work hours are extended to 9 p.m.

• Ages 16 and 17: Any “non-hazardous” work for unlimited hours.

• Age 18 and older: Any job, whether “hazardous” or not, for unlimited hours.

What exceptions are available for hardship of the child: A 14 or 15 year old child may get a waiver of the restrictions by applying with the Texas Workforce Commission. The application must provide required information, including written statements: (a) explaining the need of the child to work to support himself or his immediate family; (b) the precise type of work to be done by the child for the employer; and (c) from the child’s school regarding the advisability of letting the child work.

What is considered “hazardous” work: Again, there are different rules for different ages:

• Ages 14 and 15 (Plus the section below): Work that involves manufacturing, mining, or processing occupations (including occupations requiring the performance of any duties in work rooms or work places where goods are manufactured, mined, or otherwise processed); cooking; baking; public messenger service; occupations connected with transportation (by rail, highway, air, water, pipe, or other means), warehousing, window washing, storage, communications, public utilities, preparing meat for sale, boiler and engine rooms, maintenance and repair of a business or its equipment, and construction except for office work associated with these business types; operating or assisting in the operation of powered machinery or vehicles other than office equipment; setting up, adjusting, cleaning, oiling, or repairing power-driven food slicers and grinders, food choppers, cutters, and bakery-type mixers; working in freezers or meat coolers, and loading or unloading goods to and from trucks, railroad cars, or conveyors. And, anything the Department of Labor or Texas Workforce Commission determine hazardous in the future.

• Ages 14 through 17: Work that involves, driving under certain conditions; manufacturing or storing explosives; mining; roofing; excavation operations; logging or saw mills; manufacturing brick, tile or similar products; wrecking, demolition, and ship-breaking; firefighting; exposure to radioactive substances; operating or assisting in the operation of hoisting equipment, balers, compactors, or powered woodworking, metal forming, punching, or shearing, meat processing, baking, paper-product, saws, shearing, or abrasive cutting machines. And, anything the Department of Labor or Texas Workforce Commission determine hazardous in the future.

How much do I have to pay: All employees of all ages are entitled to at least minimum wage, however, employees under the age of 20 may be paid $4.25 per hour (plus appropriate overtime, if any) for the first 90 calendar days or until they turn 20 – whichever comes first.

Do child workers require a work permit: Though a work permit is not required, Texas does have a certificate of age document that is available to children to prove their age to an employer. Child actors or performers under the age of 14 must obtain a permit.

Are there any other special rules for child actors: For child actors under 14, there are many additional restrictions. The restrictions include prohibitions against missing school, considerations about the conditions of the wardrobe and set environment and the proximity of the child’s guardian. This is a very particularized area and should be carefully navigated with the assistance of someone who understands the laws in this area.

What if I hire someone underage without knowing it: Under Texas law, you may be subject to civil penalties up to $10,000 per violation, and criminal penalties for a Class A or B misdemeanor. Under Federal law, you may be subject to separate penalties of up to $11,000 for each violation.

Common Situations:

But it’s not part of his job: Sal’s Supermarket hires Bobby, a 15 year old, to work as a sack boy and day stocker outside of school hours. The company is careful not to work Bobby more than the hours he is permitted under the law and to keep his hours during the permitted time of day. One day, however, an 18 year old senior stocker asks Bobby to put some empty cardboard boxes in the paper compactor. This innocent mistake happened for real to Chuck E. Cheese® who let employees under 18 operate its garbage compactor. This is probably the most common under age violation. In fact, as a 16 year old working at the local theater I operated an industrial sized garbage compact on a nightly basis.

Mowing the yard: Michael’s dad wants him to learn to be responsible and what it is to start working and managing money. He gets the maintenance man from their church to hire Michael to mow the church lawn on a riding mower every week. The job doesn’t really pay, but Michael’s father secretly provides $20.00 a week for the Church to pay his son. Based on what you’ve read, this is clearly a violation of the “hazardous” job requirement and probably a violation of the minimum wage requirement depending on how many hours Michael spends each week. (Yes, this was me, too. My father and I have recently settled out of court for an undisclosed amount.)

What should I do:

Good: Post required legal notice for child employment and, as a precaution, get written consent from parents or an age certificate for employees under the age of 16. Be sure no child under 18 is placed in a position that would be hazardous under the list above.

Better: The above, and in environments where “hazardous” work is done, educate supervisors to be sure not to allow children to act in hazardous capacities – even if it is not part of their regular job.

Best: All of the above, and evaluate all of your job descriptions for positions that involve “hazardous” work and set minimum age requirements at 18 in those job descriptions to avoid any risk.

“Mia” Macy applied for a job with the Bureau of Alcohol Tobacco and Firearms and interviewed as a male candidate.  A former police detective from Phoenix relocating to San Francisco, Macy was repeatedly told by persons she interviewed with that she would be given the job she applied for.  Some time after interviewing, but before being hired, Macy reported to the organization that she was beginning the process of changing from a man to a woman.  Shortly thereafter Macy received notice that she would not receive the position because it was allegedly closed due to lack of funds.  Later, however, Macy learned that the position was not closed and had been filled by another candidate.

Following the public sector EEO procedures which are different than those in the private sector, Macy alleged sex discrimination and discrimination regarding gender assignment.  The allegation under gender assignment was rejected and Macy filed an internal appeal with the EEOC.  On April 20, 2011, the EEOC ruled that gender assignment is a “sex” discrimination claim.

What does this mean for Texas businesses?  Maybe a lot.  Maybe not much.  The decision is not binding on Texas or federal courts, but it will be used to suggest that these courts should adopt the position that gender assignment can result in a sex discrimination claim.  If a Texas state or federal court adopts the view that it is a claim, it may become the law.  I wouldn’t count on it happening any time soon, though.   The appeals courts that govern Texas both at a state and federal level have a reputation for being very conservative.  If a decision is made at a local level that gender assignment supports a claim for sex discrimination, it will most certainly be appealed and I cannot see any of the Texas appellate courts finding in favor of it.

Regardless of your views on the issue, however, it may be worthwhile to take the decision into consideration in future employment decisions.  Gender assignment is not likely to become a viable claim in Texas any time soon, but you would probably prefer to avoid the publicity and legal expense that comes along with being the guinea pig chosen to find out!

Everything is bigger in Texas.  Darn right.  Well, maybe this is one distinction Texas businesses could have done without.   In recently released EEOC complaint results for 2011, Texas ranked first. One in ten complaints across the US were filed in Texas.  Of those claims filed in Texas, race charges came in first, followed by sex, age, and national origin.

Folks, we are beating California where the employment laws and employee protections run rampant!  Let’s try to take some proactive steps to avoid this distinction in the future.

Desperately trying to retain its relevance in a world where unions are going by the wayside, the National Labor Relations Board (NLRB) has taken up the issue of what employers can do about employee posts on the internet.

Under the National Labor Relations Act employees are permitted to engage in “concerted activity” which is to say they can complain about the terms and conditions of their work without risk of losing their jobs.  Of course, the difference between now and 20 years ago is that employee used to go to the bar on Friday night and complain about their supervisor over a game of pool or darts.  Now, they go home and post on Facebook where the whole world can see it.

For the last several years the NLRB has taken it upon itself to protect employee rights to post on Facebook, and I have no problem with the general idea of protecting employee rights to post.  What has been driving me and my clients up the wall is the NLRB’s attack on what employers can say in a social media policy without getting in trouble.

The Board has been draconian in terms of what is acceptable.  Specifically, the NLRB uses concern that an social media policy might have a “chilling effect” on an employee’s willingness to post on the internet as a basis to strip employers rights to restrict employees from activity that would not otherwise not be protectable.

In a 24 page report published last week, the NLRB offered tidbits from recent decisions.  These are some highlights:

“Don’t release confidential guest, team member or company information” is illegal because an employee might reasonably interpret that as prohibiting them from discussing their own situations on the internet.  Hence, it is apparently inappropriate for a business to tell employees to keep the company’s secrets.

You cannot tell employees to be sure what the post on the internet about the company is “completely accurate and not misleading”.  The limitation to the truth is apparently overly broad because it might interfere with an employee’s ability to say something so long as it is not “maliciously false.”  I recognize the NLRB wants to give latitude to employees before they get in trouble, but affirmatively advocating for their ability to lie so long as it is not “maliciously false” goes overboard for me.

“Report any unusual or inappropriate internal social media activity.” is a violation because it encourages employees to report the union activities of other employees to management.  Maybe that is true, but at the same time it prevents an employer from even knowing if an employee has posted the company’s secret formula for its product online!

“Get permission before reusing others’ content or images” is unlawful, because it interferes with employees’  right to take and post photos of, for instance, employees on a picket.  This is simply untrue.  It only asks that employees get permission before posting someone else’s private content or images.

“Resolve concerns about work by speaking with co-workers, supervisors, or managers” is also unlawful because the employees are not expressly told that they can skip the internal procedure all together and go straight to ranting on the internet.  I do not disagree that employees may take grievances to the internet, but the idea that an employer is somehow chilling an employee’s NLRA rights simply because they don’t explain how employees can use the internet to blast their grievances is ridiculous.

And you cannot protect yourself by putting in a disclaimer either.  “This Policy will not be construed or applied in a manner that improperly interferes with employees’ rights under the National Labor Relations Act,” might not make expressly clear to the employee just what they can do under the act.

For the full report, have a look here.  You will be amazed.

Who, What, Why . . .

Who does it apply to: Every employer, but especially those subject to discrimination laws (over 15 employees).

What pre-search considerations are there: There are a lot of things to consider before you even announce a job. You should determine if you will search internally, outside the company, through the newspaper, or use the internet. Whatever you select, make sure that your posting reaches all demographics. For example, considering only local residents in an almost all Black neighborhood would be discriminatory toward Hispanics. Prepare your job description in advance and base it on the actual needs of the position and not your personal views. Just because a job is physically demanding is not a reason to exclude people over 40. Make sure you use an application form that does not suggest discrimination or ask for information on protected characteristics such as age and religion.

What should I know about checking references: Most employers are afraid to give up any information on past employees for fear of being sued for defamation. Some of this concern can be allayed by requiring applicants to sign a consent permitting former employers to share. Additionally, you can inform the former employer of the protection under Tex. Lab. Code §§ 103.001 – 103.005 that makes employers immune from liability unless they lie.

Can I consider criminal history: You may, but businesses providing in-home services or residential deliveries are required to do so by law. Note that background check companies are only allowed to give history for the past 7 years unless the job pays more than $75,000.00 or involves selling insurance.

Should I “google” applicants: It seems that everyone has an “internet persona” these days and many employers have taken to searching Google® for information about potential applicants. While the search is potentially harmless, it may yield information that an employer should not consider such as a person’s participation in a particular church.  As a note, there are companies that offer the service of collecting an applicant’s internet persona and sanitizing the information gathered so that employers do not see that information.

Are credit checks allowed: Many employers like to run credit checks on applicants. It is allowed, but there are some things to be aware of. First, it is not legal to allow a prior bankruptcy to influence your decision to hire. Next, you absolutely must make the applicant aware that you are running a check and may use the results in your hiring decision. Additionally, you need written consent which should be on a separate dedicated form. Finally, if you use the report as a basis not to hire, you have to give the applicant the report and an explanation of their rights.

What considerations are there for the actual interview: Be careful to avoid questions that could be interpreted as giving you a discriminatory bias. You can’t avoid noticing the person’s race and sex, but avoid other protected characteristics such as pregnancy, military status, religion, national origin, and age. Focus on objectively determining the person’s ability for the job and getting to know their personality. If you do your job descriptions right (see last month’s EH piece), they can be a tool for avoiding discrimination. Use it as a checklist to gauge applicants and hold on to the results.

Is there anything I should do for applicants I do not hire: You are best off not to communicate with them. If you have to, keep it brief and say the candidate hired was a “better fit.” Internally, document your reasons for not hiring each candidate you passed on. The EEOC requires that you retain the records for at least a year and I would advise keeping them three to get past any statutes of limitations.

Can I test an applicant’s physical ability to perform the job: The government came up with an effective way to isolate employment decisions based on disability. Businesses cannot ask disability-related questions or give pre-employment physicals until after a prospective employee is given an offer of employment, conditional only on the physical screening. All other background checks and other impediments to hire must be passed before testing may begin. If an employer decides not to hire the applicant based on the results of the exam or because of a disability, they must give the applicant the reason within ten days.

When can I start drug testing: You can drug test potential new hires. You need to be sure to use a licensed testing company that confirms its results with a gas chromatograph and be sure to get written consent from the applicant.

Are pre-employment polygraphs legal: See the EH piece on the Employee Polygraph Protection Act. Simply put, you cannot give a polygraph but there may be other pen and paper psychological tests that give comparable results.

Common Situations:

The Pepsi® challenge: Can you refuse to hire any person for any position because they have been arrested or convicted of a criminal offense? Pepsi® found out: No. The EEOC considers it potentially discriminatory to use arrest and criminal conviction histories as a blanked basis not to hire someone. The EEOC’s logic? Blacks are arrested and convicted of crimes more often than any other race. Unless the business can demonstrate some sort of business necessity for considering them as a factor, they should not be used.

User ID and password, please: Calvin Cautious requires job applicants to hand over their Facebook® password so he can review their account for indiscretions before hiring them. Is Calvin out of bounds? It depends on your point of view. Facebook has a policy that its members cannot share their password with anyone. Of course, the applicant is the only one who would suffer for violating the policy. Even so, it just does not feel right to ask an applicant to violate policies to get a job working for you. What message does that send? Of course, that doesn’t mean you cannot require the applicant to “friend” you so that you can see their profile. If you do though, be wary because you may be exposed to information about protected characteristics you do not want to know about.

No openings at this time: Saul’s Supermarket gets applications non-stop even when it is not hiring because the front office clerk keeps giving them out. Saul goes through the applications about once a month and tosses out the ones he does not like and holds on to those he does. Has Saul done anything wrong? Of course you know I would not have floated this point unless there was a problem. Employers who “cherry pick” applications to hold may be perceived as discriminating because they are not giving equal consideration to all applicants. In the hands of an angry prospective employee, that might be enough for a claim that becomes a lawsuit. Either toss them all or keep them all.

What should I do:

Good: Make sure your application form is neutral in its questions. Obtain consent for all background checks with clear notification that it may be the basis of an employment decision. For applicants under 18, get parental consent.

Better: In addition to the items above, prepare a formal job description before beginning the hiring process. Have applicants answer on paper about their ability to meet the requisites of the job description and sign off on it. If they lie about their qualifications or overstate them, you will have great evidence to use to defeat their unemployment benefits claim.

Best: All of the above, plus have your counsel review your application forms, consents, and pre-hire testing procedures. Also, consider hiring a third party to do internet checks to get information sanitized for protected class information.

With unemployment for people 20 – 24 hovering around 13.2%, college students are flocking to unpaid internships to gain some experience, stay busy, and better position themselves for jobs afterward.  As recently reported by Josh Sanburn at Time MoneyLand and Steven Greenhouse in the NYT, however, these unpaid internships have serious legal problems.

Businesses are taking advantage, offering “internships” that are supposed to put the grads on the path to a super career.  Instead, interns are working 12 hour days in some cases cleaning out closets, getting coffee, and running errands.  They are no more learning the business than the man in the moon, unless they are studying for a runner job they could have gotten – with pay – before college.

A few of these interns have gotten smart though, and are filing lawsuits for minimum wage and overtime and employers should be concerned.  In addition to collecting these back wages, the interns can collect liquidated damages of an equal amount, and attorney fees.

So, how do the employers that are using internship programs for the right reasons know they won’t get in trouble?  Well, to properly be an unpaid internship, the intern must not be an employee within the meaning of the Fair Labor Standards Act (FLSA).  Of course, as you might imagine, the congress painted with a pretty broad brush when they defined “employ” under the FLSA because the wanted to prevent just this type of conduct.

Though not having the force of law, the Department of Labor came up with a six factor test that it will use to decide if an internship must be paid.  And, since the Department of Labor is the organization who enforces the FLSA, employers should sit up and listen.  To properly be an unpaid internship:

1.  The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

2.  The internship experience is for the benefit of the intern;

3.  The intern does not displace regular employees, but works under close supervision of existing staff;

4.  The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

5.  The intern is not necessarily entitled to a job at the conclusion of the internship; and

6.  The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Of course, after reading the criteria, employers with anything less than the purest motives will want to drop the idea of an internship program all together.  C’est la vie!

 

It turns out the story of the Florida law firm employees fired for wearing orange is NOT over.  (For those not up to speed, see my post from March 20, 2012.)  At a recent legal seminar on the National Labor Relations Act (NLRA), I learned that the orange clad crew has filed a complaint with the National Labor Relations Board alleging that their employer fired them in interference with their rights to engage in “concerted activity.”

According to ABC News, eight of the fired workers have joined in the complaint.  Say what?  Weren’t the workers wearing orange to stand out in a bar they planned to go to the afternoon they were fired.  Yep.

How is that “concerted activity” worthy of legal protection?  Let’s start from the beginning: what is “concerted activity?”  According to the NLRA, it is when two or more employees take action for their mutual aid or protection regarding terms and conditions of employment.  This could be almost anything, right?  Right.  That is what is so scary about the NLRA.  Everyone thinks it is just about unions.  Internet and news publicity are making employees more aware of this otherwise almost extinct area of law.

Now the NLRA is being used for all kinds of claims when a union is not even involved because it protects what is considered pre-union activity.  If an employee complains about their pay, working conditions, or their supervisor to another employee, that is protected under the NLRA.  Employers need to be on the look out for these issues.

In a statement to the American Bar Association Journal by the law firm in the orange shirt case, the employees were fired for using the shirts as a small part of a concerted plan to “harass, bully and intimidate the new office manager into quitting.”  Ooops.  This sounds an awful lot like concerted activity.  Good luck to the law firm.  It should have followed my advice and just kept it’s mouth shut about why it let the employees go.

Bonus Points:  For those of you paying attention closely, you might have noticed that the employees said they were dressed in orange to stand out in a bar and that it was actually the law firm that said the employees were engaged in something that sounds like concerted activity.  How could their be a claim if the employee’s stated reason is not concerted activity?  According to the NLRB, if the employer believes the employees were engaged in a concerted activity and uses that as a basis for termination, it can be a violation regardless of what the employees intentions were.  Scary

.

Who, What, Why . . .

Who does it apply to: Every employer without exception. Under the Texas Payday Act and the federal Fair Labor Standards Act, there are requirements and limitations about what can be deducted from an employee’s pay.

What types of allowable deductions are there: Charges in the following categories may be deducted under the right circumstances:

• Meals and Lodging: The “reasonable cost” of food and shelter provided by employers may be deducted from pay if it is primarily for the employee’s benefit. If the employer provides the food or lodging for its business purposes (think apartment complex manager), the value cannot be deducted from the employee’s wages. Essentially the “reasonable cost” of these items is the cost to the employer – with no profit. There are many rules and regulations regarding the deductibility of these items. Check with your lawyer before making deductions of this type.

• Voluntary Wage Assignments: Employers are authorized to deduct from an employee’s wages and take them below minimum wage for payments made to programs such as the employer’s health, dental, disability, and life insurance plans.

• Loans: Employers can make deductions to an employee’s pay taking the employee’s wages below minimum wage for loans made to the employee. Employers should be careful, however, because any administrative fees or interest on the loan may not be charged against the minimum wage portion of the employee’s wages. Employers should document any loan just like a private promissory note to protect against employees who quit, default, or try to avoid the debt so that they can seek recovery through the courts.

• Pay Advances: If an employee is allowed to take vacation before that vacation time has technically accrued, and that employee quits, the employer may deduct the paid but unaccrued vacation money from the employee’s final pay. In doing so, the employer must have written authorization from the employee. In another circumstance, employers may advance an employee insurance premiums for unpaid leave periods where the employee would otherwise be responsible for the premiums. Employers must be careful making this type of advance, however. Offering it to only certain employees might generate a discrimination claim.

• Uniform Costs and Cleaning: The cost of and cleaning charges for certain clothing required for work may be deducted from an employee’s wages and reduce them below minimum wage so long as the deduction is approved in writing by the employee. Clothes meeting this requirement must be provided solely as a convenience to the employee and suitable for off-duty use. If the clothes have a company logo, are of a distinctive style such as a tuxedo, a specific type of jacket, or a security uniform, the cost may still be deducted (with written consent), but may not cut into the employee’s minimum wage.

• Payroll Taxes: FICA (Social Security and Medicare) and income tax withholding are permissible deductions which may bring an employee’s wages below minimum wage.

• Union Dues: Union dues may be deducted from an employee’s pay even if the deduction reduces the employee’s pay below minimum wage. Employers must have a written authorization for deduction of union dues.

• Garnishments and Wage Attachments: Employers are required to follow appropriate garnishments and statutory wage deductions for bankruptcy garnishments (no limit on deduction amount), court-ordered child support or spousal maintenance (employer may add $10 administrative fee per month for child support and $5 for spousal), IRS tax levies (subject to IRS deduction limitations), and guaranteed student loans (employer may add up to $10 administrative fee per month).

• Theft: Employers may deduct losses from employee theft or misappropriation of company resources and take the employee’s pay below minimum wage in doing so.

What about tips: Most employers don’t think of the difference between paying minimum wage and the allowed $2.13 for tipped employees as a “deduction” from pay but the federal government sees it as a deduction from minimum or overtime wages – even though it is referred to as a “tip credit.” Tips are a topic all their own, and will be discussed in a future EH piece.

Common Situations:

My register came up short: Bob’s Bowling Balls has a policy that all employees are responsible for shortages on their register at the end of each shift. Bob believes that employees who come up short must have stolen the money and this is the best way to keep them honest. Bob’s view may be logical, but it isn’t totally legal. If Bob has solid evidence that an employee stole money, he can take those losses from the employee in the form of wage deductions – even reducing the employee’s pay below minimum wage, but the deduction must still be authorized by the employee to be valid under the Texas Payday Act. Bob may follow his policy for register shortages without evidence so long as it is authorized in advance by the employee and does not take them below minimum wage.

Guilt by garnishment: Suzy Straightlace’s employee Tim has had a run of bad luck. Despite working two jobs he still cannot cover all the costs of his financial obligations and the medical treatment for his special needs child. Tim has defaulted on his student loans and is behind on his taxes so he recently suffered an IRS levy. Suzy decides that Tim must be let go because her customers would freak out if they realized Tim, an accountant, was handling their money but could not handle his own. Has Suzy strayed off the straight and narrow? Yes. Employers are not permitted to consider the fact that an employee’s wages are being garnished in termination or disciplinary decisions.

Payday loan deduction: Tom simply cannot live within his means. This month he takes out a payday loan and makes a “voluntary wage deduction” agreement with a local payday loan company. Tom provides the form to his employer and requests that a portion of his pay be diverted to the payday loan company. Is the employer obligated to fulfill this request? No. Employers may choose whether to accept a voluntary wage deduction agreement from an employee. The payday company will just have to sue Tom to get their money. That said, employers are prohibited under other laws from using this as an excuse to prevent an employee from participating in a benefits program, such as health insurance, offered to employees of the business.

What should I do:

Good: Always get consent, be careful deducting below minimum wage as noted above, and check that the deductions made for multiple garnishments do not exceed the legal limit.

Better: In addition to the above, document any loan to an employee as a separate document to protect your ability to sue if the employee leaves. Consider creating a single consent form signed at the time of hiring (or as soon as you read this) with all the different types of deductions in it.

Best: All of the above plus create special policies in your employee handbooks regarding deductions and utilize a specific policy for any advances for premiums on health policies to ensure no discriminatory practices.