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KZA's Top 10 Labor & Employment Law Developments in 2010

Volume 9, Issue 13
December 30, 2010

Here for another year is KZA's list of the Top 10 developments in labor and employment law affecting Nevada employers. Some developments in this year's list also indicate things to watch in the New Year:

#1: The increasingly activist U.S. Department of Labor targets employers

The Department of Labor (DOL), basically, has decided employers are "bad" and has staffed up and structured its initiatives and targets employers accordingly. The DOL has said many times it believes that 70% of employers are out of compliance with one or more of the laws it enforces, and is in the process of hiring 250 new investigators (a 33% increase) and wants funding for many more. The number of lawsuits filed by the DOL against employers has increased 20% over FY 2009, and will increase in FY 2011 41% over FY 2010.

The DOL's focus under Secretary Solis is relevant to all employers, as it has implemented many new steps. Many of our clients are beginning to see increased enforcement activity - quantitatively (more audits) and qualitatively (stricter enforcement):

  • In accordance with its view, the DOL has honed its focus on unpaid overtime under the Fair Labor Standards Act (FLSA) - and strict enforcement of exemptions - with its "FairPay Initiative: Overtime Security in the 21st Century Workforce."
  • The DOL Wage and Hour Division's announced priorities involve minimum wage and overtime violations against "low wage and vulnerable" workers, child labor, recidivist employers, retaliation or discrimination, or criminal violations. The DOL's Strategic Plan for Fiscal Years 2011-2016 involves "targeting 'fissured' industries" such as those who engage in subcontracting, third-party management, franchising, independent contracting, or "other contractual forms that alter who is the employer of record or make the worker-employer relationship tenuous and less transparent." Specified are the agricultural, construction, janitorial, and hotel/motel industries. KZA's July 13, 2010 Report reviewed this as affects the hospitality industry. See http://www.kzalaw.com/reports.php?vol=9&iss=5&art=1.
  • Posting on the DOL's website of recommendations to employees to keep their own time records, including providing a calendar to assist.
  • DOL will no longer issue fact-specific opinion letters to employers. These letters opined that the employer was or was not in compliance based upon a specific set of facts. These have been important to many companies, where the presence of an opinion letter has effectively shielded employers from further DOL action during multiple audits and may, under the federal statutes, provide valuable defenses to employers in litigation with the DOL and employees. In the future, DOL will only provide a listing of the applicable laws and regulations.
  • DOL has also begun issuing "Administrator's Interpretations" that represent its view of the law in specific areas. Based on the interpretations issued in 2010, the common denominator appears to be an expansion of the law. For example:
    • The definition of "son or daughter" under the Family Medical Leave Act ("FMLA") as it pertains to individuals who do not have a biological or legal parent-child relationship now includes persons who provides either "day-to-day care or financial support" of a person where the person intends to assume the responsibilities of a parent. See Administrator's Interpretation No. 2010-3. The DOL's interpretation of what "clothes" means when determining compensable preliminary and "post-liminary" activities has changed. While Section 3(o) of the FLSA provides that "time spent changing clothes or washing" at the start and end of shift is not compensable, the DOL announced that it considers "clothes" not to include "protective equipment" required to be worn by the employer or by law, and "changing clothes" is, in some cases, a "primary activity" for which the employer must pay. The Administrator considers this to be an "exemption" that, under law, must be narrowly construed. See Administrator's Interpretation No. 2010-2.
    • A changed interpretation of the scope of the administrative employee exemption for overtime payments that sets forth a regulatory view at variance with its past practice of years. DOL now holds that the exemption does not apply to mortgage loan officers. Additionally, of importance to all employers, the DOL interprets, in a very troubling manner, the portion of the duties test for the administrative employee exemption that requires the "primary duty" of the employee be the "performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers." According to the DOL, work for customers of the employer, rather than work serving the internal needs of the employer, can defeat the successful use of the exemption. See Administrator's Interpretation No. 2010-1.

There is undoubtedly more to come in 2011.

#2: NLRB proposes new regulation requiring employers to post notice and, in the process, creating a new unfair labor practice

On December 21, 2010, the National Labor Relations Board posted a Notice of Proposed Rulemaking and a proposed Rule that, if adopted, would require employers to post a notice to employees of their rights under the National Labor Relations Act (NLRA). Stating it "believes that many employees . . . are unaware of their rights," the Board notes that the intended effect is to "better enable the exercise of rights under the statute." In addition to the posting requirement, failure to comply with the posting requirements would be an unfair labor practice; extend the statute of limitations (now 6 months) if the notice is not posted; and the failure to post could be considered evidence of the employer's unlawful motive in any other case. Once the final rule is enacted, KZA will provide another update.

#3: Tip-Pooling remains alive and well

This year, tip-pooling was the focus of two legal developments important to Nevada employers. First, as reported in the February 24, 2010 KZA Dispatch, the Ninth Circuit Court of Appeals issued a decision in Cumbie v. Woody Woo, Inc., addressing whether a restaurant violated the FLSA by allowing non-tipped kitchen workers to participate in a tip pool. The Court's decision is refreshingly concise and offers simple information about tip pools while reaffirming the employer's discretion in this area. The Court importantly and pointedly rejected an argument from the DOL, which submitted a "friend of the court" brief in which it urged the court adopt a broad and highly-questionable construction of the FLSA. See http://www.kzalaw.com/reports.php?vol=9&iss=1&art=2.

Then, in July, the Nevada Labor Commissioner soundly rejected Wynn Las Vegas' dealers' claims that a tip-pooling policy that required tips be shared with Casino Service Team Leads violated Nevada law. In a case handled by KZA, this decision reaffirmed a Nevada employer's right to unilaterally establish and change a mandatory tip pooling policy for at-will employees. The case involved the highly-publicized change in the tip pooling procedure at Wynn Las Vegas to include the positions of Casino Service Team Lead and Box Person in the tip pool. The Casino Service Team Lead position was created following the elimination of the floor supervisor and pit manager positions. See http://www.kzalaw.com/reports.php?vol=9&iss=6&art=1

#4: IRS and DOL join to more closely scrutinize independent contractor status and cooperate with state taxation agencies

A major new joint program of the DOL and the Internal Revenue Service (IRS) was created to carefully examine independent contractor arrangements. DOL is interested in wage and hour and other legal enforcement, and IRS and the affected state agencies want to collect the tax revenues they believe are often incorrectly saved by companies. Features involve: DOL, during audits, requesting review of IRS 1099 forms and determining whether the person or company receiving the funds was, in its view, really an "employee;" IRS reporting to DOL when it finds what it believes to be a questionable independent contractor arrangements and vice-versa; considerations as to whether the contractor's employees really employees of the company or whether the company and the contractor are a "joint employer" of the employees; and cooperating with revenue-hungry state agencies with such information.

#5: EEOC issues final regulations under the Genetic Information Non-Discrimination (GINA)

On November 6, 2010, EEOC issued final regulations for GINA, which restricts acquisition, use and disclosure of genetic information in the workplace and employment context. To be part of a larger KZA Dispatch after the first of the New Year, the GINA regulations -

  • Define "genetic tests" in greater detail
  • Focus on requests for otherwise-permissible requests for medical information that result in a company's inadvertent acquisition of genetic information
  • Address issues affecting voluntary wellness programs
  • Confidentiality requirements
  • Set forth posting obligations

#6: What did NOT happen in Congress in 2010

Several legislative initiatives failed to result in new laws in 2010, two of which would have resulted in far-reaching changes in the workplace:

  • The Employee Free Choice Act - originally a major initiative of the Obama Administration - again died (or stayed dormant). Many commentators believed that a somewhat watered-down EFCA would wind its way through Congress, but with the changes in the House following the mid-term elections, this likely will not happen before the next election.
  • The Paycheck Fairness Act, although having passed the House, went down to defeat in the Senate after its supporters failed to overcome a Republican filibuster. This statute would have represented a massive change in the equal pay laws governing differentials in pay between males and females. Among other things, employers would have been required to report gender and salaries to the government, and the law would have imposed new burdensome standards on employers. Presently, the long-standing federal Equal Pay Act (and Nevada's version) recognizes non-discriminatory reasons for pay differences such as seniority, qualifications, experience, quality or quantity of work so long as these are business related. Under the PFA, however, employers would have been required to prove such reasons were a "business necessity," a difficult burden indeed.

#7: More indications the newly-reconstructed National Labor Relations Board will issue more pro-labor rulings

The "Obama Board" in September held that a labor union did not violate the National Labor Relations Act's (NLRA's) prohibition on secondary boycotts when it set out "shame on" banners attacking neutral employers doing business with a company with which the union has a labor dispute. The Board found that the "peaceful stationary display" of such banners was not inconsistent with the Act. According to the Board, such banners did not "threaten, coerce or restrain" the neutral employer and so did not fall under the secondary boycott provisions. See Carpenters & Joiners of America(Eliason & Knuth of Ariz.), 335 N.L.R.B. 159 (2010). The NLRB's Acting General Counsel has waded into the social networking fray, filing a complaint against an employer which terminated an employee for violation of the company's blogging and internet policy. Following a workplace dispute, the employee used her home computer to post on Facebook a negative comment about her supervisor, following which other employees joined and the employee then made further negative responses. The complaint alleges that the Facebook postings constituted protected concerted activity and the company's policy contained illegal provisions barring disparaging remarks when discussing the company and its supervisors.

#8: Nevada Federal Judge gives preliminary holding that short pre-shift meetings are compensable time because they are not "de minimis"

A federal judge refused to dismiss a lawsuit that alleged, among other things, that an employer violated wage and hour laws by not paying employees for a ten to fifteen minute pre-shift briefing. The employer had argued that such time was de minimis, such a small amount of time that, as the U.S. Supreme Court has held, was a non-compensable "trifle" that is only a few seconds or minutes of work beyond the scheduled working hours. The judge disagreed, holding that such time is easy to record with a time clock, amounts to "2500-3750" minutes in a year, and is a regular, planned activity. This aspect of the case awaits more definition and further litigation as the facts are developed, but is an indication that employees may be successful in challenging the unpaid status of pre-shift meetings.

See Daprizio v. Harrah's Las Vegas, Inc., 2:10-CV-00604-GMN, 2010 WL 3259920 (D. Nev. Aug. 17, 2010).

#9: U.S. Supreme Court rejects employee's claim that he had a right of privacy enabling him to "sext" on his employer's equipment

As reported in KZA's September Employer Report, the U.S. Supreme Court held that a city's audit of its police officers' text messages, sent using city-issued pagers, was reasonable under the Fourth Amendment to the U.S. Constitution, thereby negating the Ninth Circuit Court's prior ruling that the City's audit was improper given the police officers' reasonable expectations of privacy caused by lax enforcement of the City's related personnel policy. See City of Ontario v. Quon, discussed in the September 26, 2010 Employer Report at: http://www.kzalaw.com/reports.php?vol=9&iss=8&art=2.

This decision provides important support for even non-governmental employers, who can be sued under state common law privacy torts, to have a comprehensive written workplace technology policy that clearly notifies employees that they have no expectation of privacy when using employer provided equipment as their use of such equipment and any data transmitted are subject to monitoring and review.

#10: Breaks for nursing mothers for the purpose of expressing milk.

Effective with the signing of the new healthcare reform bill, the Patient Protection and Affordable Health Care Act amended the FLSA to require employers to furnish "reasonable" breaks to nursing mothers for the purpose of expressing milk. This requirement went into effect with the signing of the Act on March 23, 2010 and was reported in KZA's April 26, 2010 Employer Report. This law requires a private place to express milk, other than a bathroom, that is shielded from view and free from intrusion from co-workers and the public. Although not requiring paid breaks for this purpose, if a nursing employee uses the paid breaks she is entitled to under Nevada's break time law or an employer's policies for the purpose of expressing milk, she should be paid for the time. See DOL Fact Sheet.

Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.