Employment Law Monitor : Employment Lawyer & Attorney : Cole Schotz Meisel Forman & Leonard Law Firm : NJ, Mid-Atlantic Wage & Hour, Wrongful Termination

In the recent case of Knepper v. Rite Aid Corp., --- F.3d --- (3d Cir. 2012), the Third Circuit Court of Appeals joined the Second, Seventh, Ninth and D.C. Circuits in holding that Fair Labor Standards Act (“FLSA”) collective actions and state law class actions are not inherently incompatible.  While at first glance the decision may seem significant, in actuality, it is not a change in controlling law, but rather, reaffirms and clarifies existing and well established case law.

The FLSA provides, among things, that employers must pay minimum wages and overtime to non-exempt employees.  In many respects the FLSA overlaps with state wage and hour laws.  As a result, in actions alleging violations of the FLSA, plaintiffs’ counsel also often assert claims for alleged violations of comparable state laws.  These actions can be filed on behalf of the named plaintiffs individually and as representatives for similarly situated individuals – i.e., a class action for the state law claims and a collective action for FLSA claims.  Such combined actions are called “dual” or “hybrid” actions. 

Because of the original jurisdiction vested with the federal courts over FLSA claims, these dual-actions are filed in the federal district courts.  In so doing, plaintiffs ask the district court to exercise supplemental jurisdiction over the state law claims, which allows the courts to hear cases over which they do not have original jurisdiction.  Federal district courts can exercise supplemental jurisdiction where the state law claims are part of the same case or controversy as the claims of original federal question jurisdiction.   28 U.S.C. §1367.  As explained by the Third Circuit, in determining the propriety of supplemental jurisdiction, “[t]he issue is whether there is a ‘common nucleus of operative fact’ and whether the claims are part of the ‘same case or controversy under Article III.’”  DeAsencio v. Tyson Foods, Inc., 342 F.3d 301, 308 (3d Cir. 2003)(quoting In re Prudential, 148 F.2d at 303 (3d Cir. 1998)).

There are, however, inherent differences in how a federal or state law class action works compared to the FLSA equivalent, which is termed a collective action.  In a class action, similarly situated individuals are automatically members of the class, unless they opt-out of the class.  By contrast, in a FLSA collective action, individuals must affirmatively opt-in to be members of the collective.  Depending on the circumstances, this can create a disproportionate number of members between a FLSA collective and a state law class.  As a result, defense counsel will sometimes ask a district court to refuse to exercise supplemental jurisdiction over state law claims in a dual action, relying upon 28 U.S.C. §1367(c).

Under 28 U.S.C. §1367(c)(2), a district court may decline to exercise supplemental jurisdiction when, among other reasons, “the claim substantially predominates over the claim or claims over which the district court has original jurisdiction[.]”  In DeAsencio, the Third Circuit recognized that due to the differences between a FLSA opt-in collective and a state law opt-out class that “the disparity in numbers of similarly situated plaintiffs may be so great that it becomes dispositive [of predomination] by transforming the action to a substantial degree, by causing the federal tail represented by a comparatively small number of plaintiffs to wag what is in substance a state dog.”  DeAsencio, 342 F.3d at 311.  Thus, the  DeAscencio court directed district courts “faced with the prospect of dual certification of a FLSA class and a state-law based class to determine, on a case-by-case basis, whether to exercise supplemental jurisdiction over such state law claims.”  White v. Rick Bus Co., 743 F.Supp.2d 380, 385 (D.N.J. 2010)(citing DeAsencio, 342 F.3d at 312).

Some district courts have misinterpreted DeAsencio to stand for the proposition that dual actions are always “inherently incompatible” and automatically barred.  That was the issue in Knepper, where the district court held that the state law class action was inherently incompatible with the FLSA collective.  On appeal, however, the Third Circuit rejected that notion, stating that “we disagree with the conclusion that jurisdiction over an opt-out class action based on state-law claims that parallel the FLSA is inherently incompatible with the FLSA’s opt-in procedure.”  Knepper at *8.

Although Knepper is the first time that the Third Circuit joined other Circuit Courts in expressly rejecting an inherent incompatibility argument, Knepper does not change the law. Rather, Knepper clarifies what the Third Circuit already held in De Asencio, namely that the propriety of dual certification must be determined “on a case by case basis” to determine whether dual certification is consistent with Article III jurisdiction of the district courts.  Knepper at * 8 DeAsencio, 342 F.3d at 312.

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In a case of first impression, the United States Court of Appeals for the Third Circuit has confirmed that supervisors of both private and public sector employers can be held individually liable under the Family and Medical Leave Act (“FMLA”) 29 U.S.C. § 2601 et seq.   Haybarger v. Lawrence Cty. Adult Probation and Parole, 667 F.3d 408 (3d Cir. 2012).  Although this was the first occasion for the Third Circuit to decide the issue of supervisor liability, other Circuit Courts of Appeals have consistently held that, based upon the FMLA’s plain language, supervisors may be held individually liable in the private sector.  There is, however, a split amongst the Circuit Courts of Appeals as to whether the FMLA permits individual liability against supervisors at public agencies.  The Fifth and Eighth Circuits have permitted such liability, while the Sixth and Eleventh Circuits have not.  In Haybarger, the Third Circuit joined the Fifth and Eighth Circuits in holding that the FMLA imposes individual liability against supervisor at public agencies. 

In order to be subject to individual liability, the supervisor must exercise supervisory authority over the plaintiff and be responsible in whole or part for the alleged FMLA violation.  Id. at 417.  The Haybarger Court further noted that supervisors, and others, can also be subject to personal liability under the FMLA if they qualify as “employers” under the “economic reality test” (“ERT”).  Id. at 417-418.  The ERT is the same test applied in Fair Labor Standards Act (“FLSA”) cases, where courts will consider whether the individual against whom personal liability is sought: (1) had the power to hire and fire the subject employee; (2) supervised and controlled the conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records.  Id. at 418 (internal citations omitted). 

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As readers of this blog may recall, in 2011 New York implemented the New York Wage Theft Prevent Act (the “Act”), which amended the New York Labor Law to impose new recordkeeping and notice obligations on the majority of employers operating within New York State, as well as expanding the civil and criminal remedies available when employers fail to comply with these provisions.  Specifically, the Act requires that by February 1st of each year, employers provide notice to employees of their rate(s) of pay, designated pay day, the employer's intent to claim allowances as part of minimum wage, all identifying, affiliate and contact information for the employer, which includes the name of the employer and any "doing business as" names used by the employer and additional information that may be specified by the Commissioner of Labor.  

The notice must be provided in the employee's primary language, as identified by the employee, through translated notices provided by the Department of Labor.  These notices are required at the time of hire, as well as yearly between January 1 and February 1, and when there are changes in the information on the pay notices.  With respect to changes in the terms of an employee’s notice, the employer must provide notice of changes to the affected employees either in a separate written notice seven days in advance of the change or in the detailed wage statement accompanying payment of wages.  The employer is required to retain copies of these notices and a signed, dated acknowledgement of receipt from each employee for six years.  The notices must be made available to the Department of Labor upon request.

Employers should also be aware of changes in the Act that expand the Department of Labor's authority to enforce the Labor Law.  For example, the Act increases the mandatory liquidated damages for wage violations to 100% of unpaid wages.  In addition, the Act provides for interest from the date of any underpayment and additional civil penalties for failure to comply with final judgments within 90 days.  The Act also provides for individual recovery of civil damages for each workweek in which the employer fails to comply with its new notice requirements.  Finally, the Act expands an employee's ability to bring complaints and private actions for such violations, while also strengthening an employee's protections against any prohibited retaliation by an employer.  Prohibited retaliation includes, among other things, any action that negatively affects workers such as discharge, suspension, transfer to another shift or reduction in wages or hours, which is done because a worker has engaged in a protected activity.  A protected activity includes any of the following: an employee’s right to complain to their employer, the Department of Labor or the Attorney General about possible violations of the Labor Law and regulations issued under it; an employee’s right to file a complaint about these possible violations and give information about their conditions of employment to the Department of Labor or Attorney General; and an employee’s right to testify at hearings or other proceedings.  The penalties for retaliation can include fines up to $10,000, as well as an additional $10,000 in liquidated damages.  The Department of Labor can also request reinstatement of the worker and/or compensation for lost wages.

With February 1, 2012, the deadline for compliance quickly approaching, New York employers should take steps to ensure compliance with these necessary obligations.

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In a significant religious freedom decision, on January 11, 2012, the United States Supreme Court unanimously recognized a “ministerial exception” to employment discrimination laws.  The “ministerial exception” had been recognized by the lower Courts of Appeals, but, until now, had not been affirmed by the Supreme Court.  In its decision, the Court found that the Establishment and Free Exercise Clauses of the First Amendment preclude “ministers” from asserting employment discrimination claims against their churches. 

In Hosanna-Tabor Evangelical Lutheran Church & School v. Equal Opportunity Employment Commission – No. 10-553, the Court addressed the claims of Cheryl Perich (“Perich”), a teacher at the Hosanna-Tabor Evangelical Lutheran Church and School (the “Church”), which is a member of the Lutheran Church – Missouri Synod in Redford, Michigan.  Perich claimed that the Church terminated her because of her disability, narcolepsy, as well as her threat to pursue a disability discrimination claim.  The Church claimed that it terminated Perich because she violated its religious doctrine by failing to resolve her conflict internally rather than initiate litigation.

Following Perich’s termination, the Equal Opportunity Employment Commission sued the Church on behalf of Perich alleging that her termination was unlawful and in retaliation of her threats to file an Americans with Disabilities Act (“ADA”) lawsuit.  The lower courts acknowledged the “ministerial exception” to anti-discrimination laws, and thus, recognized the First Amendment’s guarantee of freedom of religion to churches and their operations with regard to their treatment of employees.  The Supreme Court upheld the exception.  Issuing the Court’s opinion, Chief Justice John G. Roberts, Jr. wrote that “the interest of society and the enforcement of employment discrimination statutes is undoubtedly important … but so, too, is the interest of religious groups in choosing who will preach their beliefs, teach their faith and carry out their mission.”  The Court expressed concern that requiring churches to follow anti-discrimination laws could hinder their selection and retention of religious leaders. 

In precluding Perich from pursuing her employment discrimination claim, the Court considered whether Perich was a religious employee, or “minister,” covered by the ministerial exception.  Although she taught secular subjects, a small portion of her day involved religious duties.  Moreover, the Court recognized that Perich was a “called” (to God) teacher who had received religious training.  Thus, the Court found her to be covered by the ministerial exception and prohibited from invoking anti-discrimination laws.  Although concluding that Perich was a “minister,” the Court neglected to establish a bright line rule distinguishing religious from secular employees, leaving such determinations to the facts of each case.
 

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Overall, 2011 was a record breaking year for the EEOC.  During the 2011 fiscal year, the Equal Employment Opportunity Commission (“EEOC”) won a record-breaking $365 million for discrimination victims.  In addition, the EEOC’s private sector mediation program obtained more than $170 million in monetary benefits for employees. 

It was also a productive year for the EEOC in terms of reducing its backlog.  For example, in fiscal year 2011, 99,947 charges of discrimination were filed with the EEOC.  However, as of September 20, 2011 there were only 78,136 pending charges – a decrease in ten percent over the last year.  This reduction was due to the EEOC following through on its pronouncement to make the reduction of its backlog a priority. 

EEOC enforcement was also up.  In 2011 the EEOC reported that at the end of the fiscal year, there were 580 systematic investigations under way, which was up from 485 investigations the previous year.  In addition, EEOC field legal units filed 261 lawsuits – 23 of which involved systematic allegations affecting large numbers of people; 61 involved between two and 19 alleged victims; and 177 were individual lawsuits.  

Based on the increased activity by the EEOC, employers need to review and revise, if necessary, their discrimination and harassment policies to ensure they are up-to-date.  With the EEOC being aggressive in its pursuits to dispose of cases as well as the increased success in obtaining awards for discrimination victims, employers must protect themselves against these types of claims.

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On November 4, 2011, the New Jersey Department of Labor and Workforce Development (“NJDOL”) issued a new notice/poster entitled “Employer Obligation to Maintain and Report Records.”  A copy of the poster can be found here.

Employers are required to immediately post the notice and provide it to all new employees hired on or after November 7, 2011.  Additionally, by December 7, 2011, employers must distribute the poster to all current employees who were hired before November 7, 2011.

Employers should immediately take steps to ensure compliance with the posting and distributions requirements of the new poster and should seek legal counsel if they have any questions concerning their obligations.

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On October 19, 2011, the Appellate Division affirmed a trial court’s decision that abrasive, abusive, and condescending conduct toward employees does not, on its own, equate to a hostile work environment claim if the workplace conditions were the same for men and women. In other words, while the law protects against harassment motivated by a protected category such as race, gender, or religion, it does not guarantee a civil or courteous environment.

In Miceli v. Lakeland Automotive Corp., A-302-10T2, the Appellate Division considered the trial court’s grant of summary judgment in favor of Lakeland Automotive Corporation (“Lakeland”). Miceli, the only female car salesperson at Lakeland, brought a gender discrimination claim under New Jersey’s Law Against Discrimination (“LAD”), N.J.S.A. 10:5-1 to 49, against her former employer, Lakeland. She alleged that on three occasions a male co-worker abused, belittled, and harassed her. The scope of the alleged abusive language included the co-worker yelling at her saying she was “going to get hers” and that her “day is coming.” Miceli also complained that her supervisor permitted this conduct and directed his own abrasive behavior toward her by speaking to her (and other employees) in an angry, belittling, and condescending manner, and making statements in front of her and everyone else about his frustrations with the employees’ work.

The trial judge initially denied Lakeland’s pre-discovery motion for summary judgment, noting that the conduct complained of, “while it is impolite, while it is boorish, while it is probably reflective of a lack of human kindness, does not seem to be predicated upon . . . sexist conduct.” Nevertheless, the trial court denied the motion so that plaintiff could pursue discovery. Following discovery, Lakeland renewed its motion for summary judgment, and the Court granted it, finding that Miceli did not allege sufficient additional proofs “that the conflicts and altercations between herself and both the sales manager and the co-worker were motivated by her gender,” other than Miceli’s “blanket assertions.”

On appeal, Miceli argued, among other things, that Lakeland had a duty to eliminate the abusive behavior that constituted a “hostile work environment” in violation of LAD. The Appellate Division affirmed the trial court’s decision, recognizing that “there is no LAD violation if the same conduct would have occurred regardless of [Miceli’s] sex.”

The Appellate Division reasoned that the sales manager did not permit the conduct to continue as he addressed each incident about which Miceli complained and warned the co-worker that he would be terminated if problems continued. Moreover, plaintiff admitted that her supervisor’s abrasiveness was not limited to plaintiff, but that “[e]veryone complained about [the sales manager].” Miceli even admitted that the sales manager treated two other male co-workers abusively. She explained that the sales manager was “[j]ust an angry person all together.”

The Appellate Division concluded that, although rude and obnoxious, “there is no evidence to suggest that the co-worker’s conduct . . . was motivated by gender.” “Personality conflicts, albeit severe, do not equate to hostile work environment claims simply because the conflict is between a male and a female employee.” citing Herman v. Coastal Corp., 348 N.J. Super. 1, 20-21 (App. Div. 2002).

Even though “boorish” behavior may not be unlawful, employers should implement and enforce appropriate workplace guidelines. Also, if issues arise, employers should consult legal counsel regarding the remediation of and potential exposure for acts of their employees and obtain guidance on the best course of action to pursue to avoid and/or minimize liability for such acts.

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Last month, new overtime exemption rules of the New Jersey Department of Labor and Workforce Development (“NJDOL”) became effective.  These new rules are intended to bring overtime exemptions under the New Jersey Wage and Hour Law (“NJWHL”) in line with the 2004 revisions to the federal Fair Labor Standards Act rules, by repealing the existing state overtime exemption rules and replacing them with the analogous federal exemptions.  NJDOL accomplished this by revising N.J.A.C. 12:56-7.2 to remove the definitions of the various overtime exemptions and adopted by reference the counterpart in the Code of Federal Regulations (“CFR”), specifically 29 CFR 541.

However, in an apparent omission, by adopting 29 CFR 541, the NJDOL removed the state exemption for inside salespersons.  The NJWHL inside salesperson exemption had provided that salespeople who received at least 50% of their total compensation from commissions and earned more than $400 per week, fell under the administrative exemption to overtime.  Federal regulations provide a similar exemption, but that exemption is found in a different section of the regulations, not 29 CFR 541.

NJDOL has indicated that the removal of the inside salesperson exemption was not intended and that it is working on rectifying the situation.  In the meantime, however, certain employees who were previously exempt from overtime are, at least for the time being, apparently entitled to receive it.

New Jersey employers who have inside salespersons who were previously exempt from overtime should consult legal counsel to determine how best to handle overtime for such employees, until the state rules are revised.

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The final installment of this three part series describes what employers should expect after an OSHA inspection as well as the employers’ rights.

1.  What happens after OSHA completes its inspection?

Unless your establishment is in full compliance with OSHA’s standards, you will receive a “Citation and Notification of Penalty” from OSHA.  Generally, OSHA has up to six months after it initiates the inspection to issue a Citation.  A Citation includes: the type of violation (classification); the standard, regulation or section of the Occupational Safety and Health Act that was violated; a description of the violation; the abatement date; and the penalty. 

A. The alleged violation could fall into one of the following categories:

Willful - A willful violation is a violation in which the employer knew that a hazardous condition, which violated a standard, regulation or a section of the Occupational Safety and Health Act, existed but made no reasonable effort to eliminate it.  If the willful violation results in a death, OSHA can seek criminal sanctions against an employer.

Serious - A serious violation exists:

if there is a substantial probability that death or serious physical harm could result from a condition which exists, or from one or more practices, means, methods, operations, or processes which have been adopted or are in use, in such place of employment unless the employer did not, and could not with the exercise of reasonable diligence, know of the presence of the violation.

Repeat - OSHA may cite an employer for a repeated violation if:

(A) the employer has been cited previously for a substantially similarviolation;

(B) the previous citation containing the substantially similar violation has become final order of the Occupational Safety and Health Review Commission; and

(C) the current violation occurred within 5 years from the date that the earlier citation became final order or from the final abatement date, whichever is later.

Other-Than-Serious - An other than serious violation exists where an accident or illness that could occur from a violation “would probably not cause death or serious physical harm but would have a direct and immediate relationship on the safety and health of employees.”

De Minimis – A de minimis violation is a “violation of a standard that has no direct or immediate relationship to safety and health.”

In addition, an employer can also be cited for failure to correct a previously cited condition.  The Occupational Safety and Health Act allows OSHA to assess penalties for each day a violation continues past the final abatement date.

B. Section of OSHA Standard Violated and Description of the Violation

The citation must also describe the violation and section of OSHA’s standard that was violated.

C. Abatement Date

The abatement date is the date by which the violation must be corrected.  The abatement period is “the shortest interval within which the employer can reasonably be expected to correct the violation.”  Abatement dates are usually discussed at the closing conference.  In determining the abatement date the inspector generally considers the following factors:

(a) The seriousness of the alleged violation;

(b) the equipment, material and/or personnel needed to correct the alleged violation and their availability;

(c) the time period to obtain the necessary material for correcting the violation;

(d) the time period to construct or install the abatement equipment; and

(e) the time period to train personnel.

If an employer is unable to meet an abatement date because of some uncontrollable circumstance, the employer can petition the OSHA Area Director to modify the abatement date contained in the Citation.

D. Penalty

The Citation also sets forth the penalty assessed by OSHA.  OSHA is authorized to assess the following civil penalties: $70,000 for each willful or repeated violation; $7,000 for each serious or other than serious violation; $7,000 for each violation of the posting requirement; and $7,000 per day beyond a stated abatement date for failure to correct a violation.

Penalties are calculated once a violation is classified.  In calculating penalties OSHA takes into account the following factors:  the seriousness of the violation; the number of employees employed by the employer; the employer’s good faith as demonstrated by the employer’s efforts to comply with the Occupational Safety and Health Act and OSHA’s standards and regulations; and the employer’s past history of compliance.  OSHA can, at its discretion, reduce the maximum penalty that it will impose after considering these factors.

2. If OSHA issues citations to my company, what should I do?

Once you receive a Citation, you must post the Citation at or near the place where each violation occurred so that it will be conspicuous to employees.  The purpose of this is to make employees aware of the hazards to which they may be exposed.  The Citation must remain posted for three (3) working days or until the violation is corrected, whichever is longer.  You are required to comply with these posting requirements even if you subsequently decide to contest the Citation.

You have two choices once you receive a Citation.  The first option is you can comply with the Citation.  That is, you can correct the alleged violations by the date specified in the Citation and pay any penalty that may have been assessed.  If you do not contest the Citation, the Citation will become a final order in fifteen (15) working days after receiving the Citation.  Once the Citation is a final order, it will be binding and not subject to review by any court or agency.

The second option available to you is to contest the Citation.  You have fifteen (15) working days from the date of receipt of the Citation to contest the Citation.

However, before you decide which course to take, you should take advantage of an OSHA process known as the Informal Conference.  You must request and schedule the Informal Conference with the OSHA Area Office that issued the Citation within the fifteen (15) working day contest period.

If you cannot reach a settlement agreement with OSHA at the informal conference, you may wish to contest the Citation.  Generally, a notice of intent to contest all or any portion of the Citation must be submitted in writing to the OSHA Area Office that issued the Citation within fifteen (15) working days after the receipt of the Citation.

3. Should I challenge the OSHA citations?

There is no universal formula to assess whether you should challenge the OSHA Citation.  The decision must be made in good faith and based on the facts, which include consideration of alleged violation, its impact on employee health and safety, the classification of the violation, the method of abatement and the cost involved in abating the alleged violation.

4. If I do challenge an OSHA citation, what should I expect?

Once you file a notice of contest, jurisdiction over the matter vests with the Occupational Safety and Health Review Commission (the “Commission”).  The Commission, sometimes called “OSHRC,” is an independent agency not connected in any way with OSHA.  Its primary purpose is to decide contested cases arising from Citations issued by OSHA.  It does not perform investigations or promulgate standards.

Once the Notice of Contest is filed with the OSHA Area Office that issued the Citation, the OSHA Area Director will forward a copy of the Notice of Contest to the Commission.  The Commission will appoint an Administrative Law Judge who will preside over the hearing and render a decision, which can be appealed by the employer or OSHA.

5. How can I clear my company’s record from any citations issued by OSHA?

There is no method to clear your company’s record of past Citations issued by OSHA.  However, the longer your company operates without OSHA Citations the better.  OSHA can use past Citations as a basis to issue Citations that have a more severe classification with increased penalties.  For instance, if OSHA re inspects your company in the future, it can issue repeated violations for conditions that were violated during the original inspection.

6. Can OSHA re-inspect my facility?  If so, is there any action that I can take to prevent OSHA from inspecting my facility in the future?

Yes, OSHA can re-inspect your facility.  You cannot prevent OSHA from re inspecting your facility in the future, but you can minimize the chances of that occurring by being proactive.  By establishing safety and health programs that incorporate coordination and communication of safety and health issues among personnel; means for planning and implementing needed training and job orientation for employees; and means for identifying and controlling workplace hazardous and monitoring the effectiveness of such program, you can minimize workplace hazards and thus, reduce the chances of OSHA re-inspecting your facility.  In certain situations you may want to utilize the services of a safety and health consultant to assess your workplace and make recommendations to better comply with OSHA’s standards.  Your lawyer can assist you with deciding whether to retain a consultant to evaluate your workplace.

7. If OSHA re-inspects my facility, should I expect the same result as the initial inspection?

The answer to this question is dependent on your company’s response to the initial inspection and your company’s commitment to health and safety.  Only by being proactive and implementing programs that protect employees can you reduce the possibility of future OSHA enforcement actions.

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