Articles Posted in Employment Agreements

Lev Craig

On May 2, 2017, the Republican-majority U.S. House of Representatives passed H.R. 1180, or the “Working Families Flexibility Act.” The bill, which will now move to the U.S. Senate for consideration, would amend the Fair Labor Standards Act (FLSA) to enable employers to offer employees accrued paid time off for overtime hours worked, in place of cash wages.

The act would amend § 207 of the FLSA to add a provision stating that “[a]n employee may receive, […] in lieu of monetary overtime compensation, compensatory time off at a rate not less than one and one-half hours for each hour of employment for which overtime compensation is required.” In other words, the law would allow employees to choose between receiving overtime premium pay and accruing compensatory time off, or “comp time,” for any hours worked over 40 in a work week. According to the terms of the bill, employers cannot force employees to accrue comp time rather than receive overtime pay, and the employer and employee must enter into a written agreement in order for the employee to use the comp time option. Employees’ accrued comp time would be capped at 160 hours, which the employee would be allowed to cash out for its monetary value at any time, and employers would be required to pay employees the cash value of any unused time at the end of the year.

Edgar M. Rivera, Esq.

Arbitration agreements between employees and employers often strongly favor the employer’s interests at the employee’s expense. As a result, an unsuccessful opposition to a motion to compel arbitration can be disastrous to a plaintiff’s case. Although a commercial case, the Tenth Circuit’s recent decision in Ragab v. Howard is relevant for plaintiffs and may help defeat a motion to compel arbitration.

In Ragab, the Tenth Circuit affirmed the District Court of Colorado’s denial of Ultegra Financial, its CEO Muhammad Howard, and Clive Funding, Inc.’s motion to compel arbitration.  There were six agreements between plaintiff Sami Ragab and defendants Ultegra and Clive Funding relevant to Ragab’s claims. The agreements contained clear but conflicting arbitration provisions, including conflicts regarding the essential terms of any arbitration, like which rules would govern and how the parties would select the arbitrator. The Circuit Court found that these conflicts between essential terms demonstrated that the parties did not have a meeting of the minds and, therefore, there was no actual agreement to arbitrate.

By Owen Laird, Esq.

A recent decision by the Ninth Circuit Court of Appeals has cast into doubt the validity of a range of lawsuits against Uber by its drivers.  The decision held that the mandatory arbitration provision in Uber’s contracts with its drivers is enforceable; as a result, Uber drivers may be foreclosed from bringing vast majority of their claims against Uber in court.

The ongoing legal saga between Uber and their drivers is one of the most significant labor disputes in the United States today.  Uber – the multi-billion-dollar taxi app – and its Silicon Valley startup brethren seek profitability by transforming the way people interact, work, and live their lives.  In Uber’s case, a central aspect of that transformation is redesigning the traditional employee/employer relationship: Uber classifies its drivers as independent contractors, not employees.  This decision benefits Uber and disadvantages its drivers because independent contractors do not receive the same basic legal privileges ­– such as anti-discrimination protections, minimum wage, and overtime – that employees do.

Yarelyn Mena and Edgar M. Rivera, Esq.

In a 2014 case, Martin v. The United States, the United States Court of Federal Claims held that an employer’s late payment of wages violates the Fair Labor Standards Act (“FLSA”) and may trigger liquidated ”double payment” damages. The case arose out of the 2013 government shutdown (October 1, 2013 to October 16, 2013) which resulted in the untimely payment of wages to government workers.

Towards the end of 2013, Congress failed to issue funds for government workers, forcing the federal government into a partial shutdown. The shutdown took place in the first two weeks of October 2013, in the middle of a pay period, which resulted in plaintiffs unpaid government employees being paid only for work from September 22 to September 30, and not the first five days in October. Two weeks after their scheduled payday the plaintiffs received pay for those five days. They argued that the federal government’s failure to pay them for hours worked resulted in (i) underpayment that constituted a minimum wage violation, (ii) failure to pay non-exempt employees for overtime hours worked, and (iii) failure to pay even exempt employees for overtime hours worked.

Jennifer Melendez

On November 15, 2015, the National Union of Healthcare Workers (NUHW) and the health insurance company Kaiser Permanete (Kaiser) arrived at a tentative agreement ending a 5 year dispute regarding employee compensation and patient treatment.

In November of 2011, NUHW’S health care clinicians made a complaint on behalf of their patients, which prompted a 15-month investigation by the state. The investigation resulted in the California Department of Managed Health Care (DMHC) finding that Kaiser’s patients endured illegally long waiting periods for their treatments and were refused access to care, in violation of California’s Mental Health Parity Act and that Kaiser clinicians were instructed to falsify appointment times to hide those long waits. The DMHC fined Kaiser $4 million for these infractions. The DMHC states:

Daniela Adao and Edgar M. Rivera, Esq.

Most employees never read their employee handbooks even though such handbooks contain important information that sets the framework for, and terms of, their employment relationships. Employee handbooks often communicate valuable information, such as the employer’s mission, policies, and procedures, as well as employees’ benefits and rights under state and federal employment laws. In some circumstances, an employee handbook may be a contract, creating enforceable rights for employees.

In Braun v. Wal-Mart Stores, Inc., two Wal-Mart employees sued Wal-Mart on behalf of themselves and other similarly situated employees for breach of contract, unjust enrichment, and violations of the Fair Labor Standards Act (“FLSA”), alleging violations of their employee handbook. Wal-Mart’s employee handbook stated that all employees must be paid for meal breaks, and that hourly employees who work between three and six hours per shift must be paid for one short break, and hourly employees who work more than six hours per shift must be paid for two short breaks. Under Pennsylvania law, a handbook is enforceable against an employer if a reasonable person in the employee’s position would interpret its provisions as evidencing the employer’s intent to supplant the at-will rule and be bound legally by its representations in the handbook. The employees claimed that, contrary to their employee handbook, Wal-Mart frequently denied them their meal and short breaks and, when they did receive those breaks, they were not paid for that time. Although federal law does not require employers to provide meal and short breaks, the FLSA requires employers that do offer meal and short breaks to pay their employees for interrupted meal breaks, i.e., meal periods in which employees perform work, and for all short breaks.

On August 20, 2014, the Sixth Circuit Court of Appeals affirmed decisions by the Department of Labor (DOL) Administrative Review Board (ARB) and the U.S. District Court from East Tennessee in Kutty v. United States Dep’t of Labor, finding employer Mohan Kutty liable for back wages and expenses related to violations of the Immigration and Nationality Act (INA). Kutty was ordered to pay $1,044,294 in damages to seventeen plaintiffs, all physicians who worked at his medical clinics in Tennessee and Florida, plus $108.800 in civil penalties.

The plaintiffs in the case are physicians who were employed by Kutty after entering the United States on J-2 nonimmigrant foreign-medical-graduate visas. These visas allow physicians to remain in the United States for their graduate and medical training, but then require them to return to their home country for two years before applying for H-1B or L-1 visas or Lawful Permanent Resident status. Alternatively, the physicians can be granted a waiver of the two-year home-return requirement if an interested state or federal agency requests a J-1 waiver on his or her behalf. To get this waiver, the physician must submit a waiver application to the U.S. Department of State and demonstrate that s/he has a contract to practice medicine for at least three years in an area designated by the Secretary of Health and Human Services as having a shortage of health-care professionals. Once they have the J-1 waiver, the physician becomes eligible to apply for an H-1B visa. In order to get the H-1B visa, the physician’s employer must sign a Labor Condition application (LCA) with the DOL, certifying that the physician will be paid the greater of (i) the actual wage level the employer paid to other individuals with similar experience for the type of employment at issue, or (ii) the prevailing wage leve for the occupational classification in the area of employment. In this case, Kutty filed LCAs certifying that he would pay each of the physicians $80,000 per year.

Kutty, acting as an executive of the corporate entities that employed the physicians, signed and filed similar LCA’s for all of the plaintiffs. When business encountered financial difficulties, based on statements by the administrator of his Tennessee operations and his own cursory investigation, Kutty accused the physicians of lying about how many hours they were working and began withholding their salaries until they saw more patients. They sent Kutty a letter demanding to be paid according to their contract and threatening to contact the DOL if he did not comply. They further warned Kutty that he was probited from retaliating against employees for reporting violations of the INA. He responded by withholding their pay of the eight physicians who had joined in the letter.

On July 18, 2014, employees at Jimmy John’s restaurant filed a FLSA class action in the U.S. District Court of Northern District of Illinois against the sandwich chain alleging wage theft. The employees further alleged that the “Confidentiality and Non-Competition Agreement” Jimmy John’s required employees to sign before they could start working was “oppressive, overly broad, unreasonable, against public policy, void as a matter of law and unenforceable.”

Jimmy John’s non-compete agreement restricts employees from working for any type of business for two years within a 3-mile radius of any of the 2,000 Jimmy John’s Sandwich locations nationwide that generates more than 10% of its revenue from sandwiches. If enforced, the clause would dramatically limit a worker’s ability to find employment after working for Jimmy John’s.

Non-compete agreements are typically reserved for managers or high-level employees who could exploit a business’s inside information by working for a competitor; however, Jimmy John’s agreement applies to low-wage sandwich makers and delivery drivers.

On June 15, 2012, the U.S. District Court for Colorado approved a settlement agreement in the class-action lawsuit Tuten v. United Airlines, Inc. Plaintiffs in the case are pilots who took “military leave” from United in order to serve in the United States armed forces between 2000 and 2010, including named Plaintiff James Daniel Tuten and others similarly situated.

The Complaint alleges that United knowingly violated USERRA, the Uniformed Services Employment and Reemployment Rights Act of 1994, by contributing less than the legally-mandated amount to the pilots’ pension fund during their service. The basic claim in the Complaint is simple: the Plaintiff alleges that United calculated its contributions to the “Directed Account Retirement Plan” (PDAP) based on the monthly minimum flight hours guaranteed under the pilots’ collective bargaining agreement, although USERRA specifies that the employer’s liability for contributions to employees’ retirement plans during their military service is “(A) at the rate the employee would have received but for the period of service…or, (B) in the case that the determination of such rate is not reasonably certain, on the basis of that employee’s average rate of compensation during the 12-month period immediately preceding such period (or, if shorter, the period of employment immediately preceding such period).” Pilots were credited for the minimum number of guaranteed work hours, but they typically worked many more hours than the minimum and the law says they must be compensated based on hours they typically work.

More specifically, the Complaint alleges that United contributed to the pension of pilots on military leave based on work schedule of 70 hours per month, the number of hours guaranteed under the terms of the collective bargaining agreement between United and the Air Line Pilots Association (ALPA). But nearly all pilots averaged many more than 70 hours per month in the 12 months prior to taking military leave, meaning that the airline paid them far less than the law requires.

On January 17, 2014, Administrative Law Judge Lisa D. Thompson issued her decision in the case of Keith Cunningham, (Charging Party), and Leslie’s Poolmart, Inc., (Respondent). In his Complaint, Mr. Cunningham alleges that the Respondent violated Section 8(a)(1) of the National Labor Relations Act (NLRA) by requiring that all employees enter into an arbitration agreement. The NLRA grants all American workers a broad right to act collectively vis-à-vis their employers. By entering into this agreement the Respondent’s employees did not explicitly waive their right to pursue class, collective, or representative actions; that is, the arbitration agreement “does not expressly prohibit employees from engaging in protected concerted activities.” Still, the Court found that the company intentionally used the agreement to force employees to arbitrate all claims against the employer individually, and that this requirement amounts to denying employees their right under the NLRA to pursue actions collectively.

In short, then, the Court found that the company’s arbitration agreement was unlawful, although not expressly prohibiting employees from engaging in protected collective activity, because it nevertheless has the intended effect of making employees unable to engage in such activity. What was the basis of the Court’s determination that the Respondent’s policy of requiring employees to sign the agreement was unlawful? The answer to this question lies not in the agreement itself, but how the company had sought to use it.

In February of 2013, Cunningham, on behalf of himself and others similarly situated, commenced a wage-and-hour legal case in the Supreme Court of Los Angeles County against his employer, Leslie’s Poolmart, Inc. In their complaint the plaintiffs alleged that their employer had incorrectly and unlawfully calculated and paid overtime to them since 2009. The company’s response to the filing of this lawsuit was to file a Motion to Compel Arbitration, which would have required Mr. Cunningham to arbitrate his claims against the company individually, along with a corresponding Motion to Dismiss his class/collective action.