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Wednesday, August 28, 2013

Dunkin Donuts, Strippers and Anheuser-Busch in FLSA Cases

By: Tommy Eden



Dunkin Donuts: Franchisee with 55 locations in New Jersey and New York has agreed to pay $198,000 in back wages after a Department of Labor investigation revealed violations of the Fair Labor Standards Act (FLSA) by failing to pay 56 store managers overtime. The underpaid managers were exempt, salaried employees, but saw their pay reduced when they logged less than 60 hours per week.
The FLSA's overtime exemption for management employees who handle certain executive supervisory responsibilities only applies if those workers earn a guaranteed weekly salary of at least $455. While the job duties of managers fell within the parameters of the executive exemption they did not receive a regular guaranteed weekly salary. These managers were owed overtime once they worked 40 hours for the week because taking improper salary deductions invalided their exempt status.




Strippers: Georgia federal judge recently granted certification to a class of exotic dancers in a suit accusing The Great American Dream Inc., which operates under the name Pin Ups Nightclub, of improperly categorized its strippers as independent contractors in order to avoid paying them minimum wage. The dancers also alleged in their complaint that the strip club unlawfully deducted nightly "house fees" from their tips and required them to share their gratuities with however many other entertainers were dancing on stage simultaneously. The case is Stevenson v. The Great American Dream Inc. 

Free Beer: Earlier this month a class of California brewery workers hit Anheuser-Busch with a suit accusing it of denying them proper overtime wages. The suit alleges that the value of free and discounted beer (called “incentive payments”) was unfairly excluded in pay-rate calculations, lowering their overtime payment. When non-exempt employees work more than 40 hours in a week, they are entitled to one-and-one-half times their “regular rate” of pay. The regular rate is to be adjusted when an employee receives a bonus or other incentive compensation. The case is Anthony Controulis v. Anheuser-Busch.

Common Sense Counsel: I don’t make up this stuff. All of these cases were actually reported in the last 30 days and represent a small fraction of the FLSA cases I have reviewed for this article. FLSA violations are the most common and costly employment lawsuit being brought and employers are paying out millions in settlements and attorney fees. With the FLSA self help to determine if you are in compliance is simply not a legal option and an ounce of prevention with a wage and hour audit is the only risk reduction strategy.

Tommy Eden is a partner working out of the Constangy, Brooks & Smith, LLP offices in Opelika, AL and West Point, GA and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com

Wednesday, August 21, 2013

Logo Work Clothes May not be Taxable













Alabama@Work
By: Tommy Eden, Attorney

On February 5, 2010 - The Internal Revenue Service (IRS) released a private letter ruling that the value of small items such as shirts, gloves, and hats provided by employers can be excluded from workers' taxable income. The exemption for the clothing items falls under an IRS rule allowing an income exclusion for benefits of minimal value where determining that value is "unreasonable or administratively impracticable," the de minimus fringe benefit rule in Code Section 132(a)(4)states: “The term “de minimis fringe” means any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees) so small as to make accounting for it unreasonable or administratively impracticable. Section 1.132-6(b)(1) of the Treasury Regulations states:

Generally, the frequency with which similar fringes are provided by the employer to the employer's employees is determined by reference to the frequency with which the employer provides the fringes to each individual.“

According to the letter, the employer provides items such as tee shirts, polo shirts, sweaters, jackets, swimsuits, socks, sweatshirts, coats, pants, jeans, shorts, gloves, hats, fanny packs, belts, clip-on ties, and equipment bags bearing the employer's logo. The employer said it provided the items twice annually at the most.

In the Analysis portion of the letter the IRS stated: “The Code and Regulations require Taxpayer to establish that the value of the items it seeks to exclude as de minimis fringes is so low as to make accounting for them administratively impracticable. Neither the Code nor the Regulations specify a particular value above which an item can no longer be considered a de minimis fringe.” On the issue of the difficulty of accounting for the gifts, generally an "objective guidepost" would be if the cost of determining an item's value would be greater than the cost of the benefit.”

The IRS ultimately agreed that the employer's provision of logo work clothing items would qualify for the income tax exemption. The IRS cited the lack of precise cost information from vendors, the difficulty of establishing fair market value, and the costs that would have to be incurred to track the value received by each employee given the employer's large and decentralized structure.

Ruling is available at http://www.irs.gov/pub/irs-wd/1005014.pdf

However, on May 20, 2011, the IRS revoked that Private Letter Ruling: http://www.irs.gov/pub/irs-wd/1135022.pdf
Common Sense Counsel: if you give any of the logo items to your employee listed above, you need to read this IRS letter (and revocation letter) and give your accountant a copy. Otherwise your employees may have a taxing problem when they wear your stuff.


Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com


Call to Police Reporting Harassment Protected

Alabama@Work
By Tommy Eden, Attorney
In Scarbrough v. Board of Trustees Fla. A&M Univ., (11th Cir. Oct. 22, 2007) the Court determined that an employee who called campus police when his supervisor allegedly threatened him after he rejected the female supervisor’s advances may have been engaged in protected activity under Title VII of the 1964 Civil Rights Act and were issue for a jury to decide.
Dushun Scarbrough was hired on Aug. 10, 2004 to work for Florida A&M University as an academic advisor for student affairs in the School of Nursing. Shortly after he was hired, he claimed that his female supervisor made inappropriate and unwanted advances toward him. He also claims that he consistently rebuffed those advances. During September 2004 she allegedly made an overt sexual advance toward him during a “mandatory meeting” where she required him to attend at her home. He then immediately left her home. The alleged retribution for his hasty departure consisted of his boss overloading Scarbrough with work responsibilities and verbally accosting him in the workplace.
Scarbrough discussed the incident at his bosses home and the ensuing maltreatment with the dean of the nursing school. He met with the dean on numerous occasions and during the fall semester of 2004, when she represented to Scarbrough that she had spoken with his boss and that her attitude should improve. Scarbrough then interviewed with the Dean for an available student coordinator position in the nursing school and the dean recommended that he be hired for the position.
A short time later, Scarbrough claims that his boss verbally attacked him with abusive and profane language, spat in his face and knocked papers out of his hand. Scarbrough reported this incident to university administration, at which time he was granted permission to take the remainder of the year off (approximately two weeks). Scarbrough believed that his bosses outrageous behavior stemmed from his rejection of her earlier advances. He filed a formal discrimination complaint against his boss and the university with the Florida EEO Agency.
Shortly after filing the complaint, Scarbrough’s tire was slashed. Scarbrough’s neighbor provided a description of the car that drove away from Scarbrough’s home at the time of the incident and that description resembled his boss’ car. Then his boss allegedly confronted Scarbrough in a vulgar manner a second time and threatened him with violence over an office telephone bill.
In response to this alleged behavior, Scarbrough called the university campus police and sought a court injunction against his boss. The next day, the dean withdrew her recommendation that Scarbrough transfer to the student affairs coordinator position and discharged him for “unprofessionalism.” The dean incidentally received a copy of Scarbrough’s formal discrimination complaint the day before she discharged him from the university’s employ. The university maintained that Scarbrough’s involvement of the campus police was “unnecessarily disruptive.” It therefore determined that Scarbrough’s termination was warranted.
The 11th Circuit held that where, as here, involving the police allegedly derived from an effort to protect against actions that are intertwined and interrelated with alleged sexual harassment; it cannot be deemed “unprofessional” conduct for which an employee can be terminated. An employee has a right to police protection irrespective of whether it may cause some disruption in the workplace. Furthermore, Scarbrough’s call to the police may be deemed protected activity under Title VII of the 1964 Civil Rights Act if he was threatened and physically accosted for rejecting his bosses’ sexual advances. If involving the police is protected activity, then Scarbrough’s discharge was retaliatory and therefore unlawful. The 11th Circuit Panel vacated the District Court’s summary judgment and found that all of the issues were left for a jury to decide.
Common Sense Counsel: The broad range of behavior that may be deemed “protected activity” under the anti-retaliation provision of Title VII of the 1964 Civil Rights Act has widened considerably over the past few years. To the degree conduct (even disruptive conduct) could reasonably be perceived as intertwined and interrelated with alleged harassment, an employer should not use that conduct as the basis for an employee discharge. See the EEOC Website for detailed guidance on the subject of unlawful retaliation http://www.eeoc.gov/laws/types/facts-retal.cfm

Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com

Thursday, August 15, 2013

Paula Wins Bitter Sweet Victory




As you may recall, Paula Deen and her brother Earl "Bubba" Hiers were sued for racial and sexual discrimination in the work place in U.S. District Court in Savannah, Ga. In her May 17 video-taped deposition, the 66-year-old Food Network star and Savannah restaurant owner testified that she has used racial slurs, specifically the “N” word, in the past but insisted she and her family does not tolerate prejudice. Paula later cried like a baby on The Today Show begging forgiveness as the Food Network pulled her cooking show.

As I predicted in my column on June 30, U.S. District Judge William Moore Jr. ruled earlier this week that Lisa Jackson, an ex-manager of Uncle Bubba's Seafood and Oyster House, could not bring a race discrimination claim based on how her employer's alleged racism damaged her relationships with her black subordinates.

The former manager alleged that the restaurant owners used racial slurs, barred black employees from using the customer restroom even though white employees could, and refused to hire black employee as hostesses. This all caused Jackson to have significant personnel management challenges as black employees turned to her and she was powerless to rectify their problems, she claimed.

In his Dismissal Order Judge Moore found that Title VII does "impose a code of civility in the workplace and while Ms. Jackson may have faced significant challenges in managing a workplace allegedly permeated with racial discrimination, her difficulties do not fall within the zone of interests sought to be protected by Title VII and cannot support a claim for racial discrimination under that statute." His decision is in line with 11th Circuit Court of Appeals authority holding that a white employee’s interests fell outside the scope of the rights and individuals Congress had been attempting to safeguard through the Civil Rights Act. Common Sense Counsel: In a dog-eat-dog world – it pays to hire the right dog. Keep in mind that for the defense attorney defending a client’s deposition, the day can be a nerve-wracking, sweaty armpit experience where a weak performance or just one poor answer can sink a case or for Paula a multimillion dollar business enterprise.  First, an attorney should try to dispose of questionable claims in the lawsuit before the client’s deposition. Second, the attorney should seek to limit a client’s answers to offensive and not legally relevant questions, or at the very least file a motion for a protective order to keep the deposition testimony from being made public in a court filing. Third, don’t get bit by your own dog by ignoring racial slurs, jokes, or discriminatory misconduct just because act committed by senior management.


Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com

Friday, August 9, 2013

VictoryLand a WARN Loser





Early this week the 11th Circuit Court of Appeals ruled that VictoryLand (Macon County Greyhound Park Inc.) did not satisfy a federal law that required the business to give statutory notice to its employees before two rounds of mass layoffs. The layoffs occurred after former Alabama Governor Bob Riley's crackdown on electronic bingo, back-and-forth legal proceedings over the legality of the game and the seizure by state regulators of bingo machines. The case is Myra Sides et al. v. Macon County Greyhound Park Inc.

VictoryLand asserted that because it took out billboard ads and made Internet postings that criticized the government's raids and suggested they were illegal put its employees on notice and fulfilled the spirit of the Worker Adjustment and Retraining Notification Act (WARN). The 11th Circuit was unconvinced finding VictoryLand liable for violating WARN because it failed to give proper notice to its employees of layoffs in February and August 2010, when the casino closed its doors in anticipation of a looming raid by state regulators. VictoryLand did not provide any formal notice under the WARN Act to employees.

VictoryLand employees filed a WARN class action complaint in Oct. 2010 and won class certification in March 2012. The United States District Court then granted summary judgment to the employees on liability for the WARN Act violations. VictoryLand’s potential liability according to the WARN class action attorney is roughly $3 to $5 million to 1000-1200 employees.
                                                                                                           
Common Sense Counsel: The WARN Act was created in part so that employers with at least 100 employees taking action that will adversely affect 50 or more employees would be statutorily required to provide adequate notice of future layoffs to all employees before ordering a mass layoff or plant closing. Under WARN “[a]n employer shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order.” 29 U.S.C. § 2102(a).

The regulations implementing WARN require that notice should be “specific” and include: (1) a statement regarding the temporary or permanent nature of the layoff; (2) the expected date of the mass layoff or plant closing; (3) information on “bumping rights”; and (4) the “name and telephone number of a company official to contact for further information. WARN does contain an “unforeseeable business circumstances” defense where closure is not reasonably foreseeable as of the time that notice would have been required. The 11th Circuit is giving notice to employers that they are going to be held to the clear statutory language of the WARN Act. Employers not heeding the message will also find their company the biggest looser.

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Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com

 

Click below to complete an intake questionaire to receive a proposal to update or develop your Alabama Employee Handbook: https://docs.google.com/forms/d/1BAirnmNg6V9tAyIJFifkrbicJK8-PxncVBR94cZ6jy4/viewform

Private FLSA Settlement a Train Wreck




Candace Nall worked for Mal-Motels, which is owned by Mohammad Malik as a front desk clerk and night auditor. For the first four months Nall used a time clock to keep track of the hours but later Malik told her to stop using the time clock and said that he would pay her a “salary” of $8.75 per hour. Nall then started verbally reporting her hours to Malik. There were no accurate written records of the hours that Nall actually worked.

Nall claimed to Malik that she “periodically” worked more than forty hours per week but was not paid one and one-half times her regular hourly wage for that overtime work, which was in violation of the Fair Labor Standards Act. She figured that she was owed at least $3,780 in unpaid overtime.  Any employer who violates the FLSA is liable to the employee or employees affected in the amount of their unpaid overtime compensation and in an additional equal amount as liquidated damages. Nall pointed to the guest registry to support her overtime claim.

Nall then quit her job because she was not being paid for her overtime, hired an attorney, who filed a lawsuit on her behalf against Malik individually and Mal-Motels, claiming a violation of the FLSA. Malik, without the assistance of an attorney, filed an answer for himself and for Mal-Motels.

In May 2010, still acting without an attorney, Malik called Nall about settling her lawsuit. The two of them agreed to meet at the motel. Malik told Nall not to bring her attorney, and she didn’t. When the two of them met and talked, Malik told Nall that she was “ruining his business” and that it would be better for him if she would settle the case. He presented her with two documents to sign and offered her a check for one thousand dollars and another one or two thousand dollars in cash if she agreed to sign them and dismiss her lawsuit. Nall felt that Malik was pressuring her, but she agreed to sign the two documents because she trusted him and she “was homeless at the time and needed money.”

What Nall had signed was a voluntary dismissal with prejudice of her complaint and a letter to her attorney informing him that the case had been settled. There was no written settlement agreement.  The 11th Circuit Court of Appeals in Hall v. Mal-Motels on July 29 invalided all that Malik had tried to do to end his FLSA nightmare. The Court reaffirmed that FLSA settlements must be supervised by a court or the Department of Labor even in cases where the employee no longer works for the employer. 

Common Sense Counsel: This case is like doing your own plumbing, when thing go wrong it can ruin your entire home or business.   Wage and Hour law is the same. Innovative pay plans, poor record keeping, working off the clock, misclassification can all be costly and are completely avoidable. With the FLSA, self help to resolve a claim is simply not a legal option.

-----------------------Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at teden@constangy.com or 334-246-2901. Blog www.alabamaatwork.com

Click below to complete an intake questionaire to receive a proposal to update or develop your Alabama Employee Handbook: https://docs.google.com/forms/d/1BAirnmNg6V9tAyIJFifkrbicJK8-PxncVBR94cZ6jy4/viewform