Human Resource Insights

Simple FLSA Based Mistakes in Calculating Bonuses & Overtime Lead to $165K Owed in Back Wages

Throughout the course of the pandemic, AIM has been working hard to ensure that employers understand how a bonus affects the calculation of employees’ overtime pay. The first thing to remember is that there are two types of bonuses: discretionary and nondiscretionary. Our June 30, 2021 HR Edge included an article discussing the difference between the two types of bonuses.

Keep in mind that from the point of view of the Fair Labor Standards Act (FLSA), most bonuses are nondiscretionary. If a bonus is nondiscretionary, the value of that bonus must then be calculated as part of the employee base pay for purposes of determining overtime rates.

The U.S. Department of Labor (DOL) recently issued a news release highlighting the risk that employers face in ignoring bonus payment requirements. In response to the pandemic, a supermarket chain operating in the central Atlantic region of the U.S. initially increased workers’ hourly rates by $2 per hour from March 2020 through May 2020 and calculated any and all overtime payments correctly. In May 2020, the employer decreased the hourly wage by $2 and instead began paying lump-sum bonuses on a quarterly basis.  They paid a quarterly bonus in June and October 2020 in February 2021. When they did, they failed to include those bonus amounts in workers’ regular rates when calculating overtime pay due, resulting in violations of the FLSA.

The employer either did not understand or disregarded the fact that these quarterly bonuses were non-discretionary. In failing to properly include the bonus in calculating the employee’s proper overtime rate, the retail chain ended up paying overtime at rates lower than required by law.

This decision by the company adversely affected more than 3,300 workers in four states, the DOL investigation determined. The investigation led to the wage and hour division of the DOL’s recovery of $165,653 in back wages for 3,314 workers.

As the press release from the DOL noted, “shifting pay from the hourly rate to a bonus does not mean the employer can exclude it when calculating overtime.”

Final thoughts

As regulatory agencies such as the DOL’s Wage and Hour Division or their state counterparts begin to investigate nonpayment of wage complaints coming in as the pandemic drags on, situations such as this are likely to be repeated throughout the country. It’s important to remember that any time a company says it’s going to institute some form of the bonus plan, the HR person should call the AIM Hotline and/or begin to research the FLSA to determine what type of bonus it is. If it is nondiscretionary it’s going to be part of the employee’s pay and ultimately part of their base rate for purposes of determining overtime pay. And as you can see the penalty for failing to properly do so is significant.

One other important point is that the FLSA demands a great deal of research and interpretation to comply with its various requirements.

While this case arose in Pennsylvania, don’t forget that under the Massachusetts wage law there is the possibility of treble damages for violation of the law.

The US Department of Labor website contains a fact sheet available here to help understand and calculate bonuses. Https://www.dol.gov/agencies/whd/fact-sheets/56c-bonuses

If you are an AIM member and have further questions about FLSA related matters or other HR-related issues, please contact the AIM hotline at 1-800-470-6277 to discuss them.

Massachusetts Lawyers Weekly recently published several articles about  Massachusetts Commission Against Discrimination (MCAD) decisions of the past year that will be of importance to our members. The decisions are summarized below.

Employment – Discrimination – Retaliation

According to MCAD’s FY 2020 annual report, retaliation was the number one complaint filed. One case addressed retaliation charges and the complex issue of evidence supporting arguments by both parties.

The employer (Respondent) argued the case should be dismissed based on the following:

• the decision did not establish any adverse action to support a finding of discrimination or an adverse action to support a finding of retaliation;
• the Hearing Officer erred in finding a causal connection between any adverse action and the employee’s protected activity;
• the Hearing Officer’s decision is unsupported by substantial evidence
• the Hearing Officer erred in crediting the testimony of Complainant; and
• the Hearing Officer’s award of emotional distress damages was unsupported by substantial evidence.

Notwithstanding the allegations by the employer, the Hearing Officer determined that objective aspects of the employee’s work environment were affected by discrimination and retaliation. Evidence showed that the African-American employee was assigned more difficult work than his Caucasian coworkers; he was denied training opportunities in certain programs and his supervisor’s attitude towards him worsened after two Caucasian employees were transferred to the unit.

The hearing officer also recognized that the employer’s own internal investigation noted that the supervisor’s many criticisms of Complainant’s (employee’s) performance ‘were in stark contrast to other supervisors’ opinions of Complainant’s work and attitude.’

The retaliation claim was also supported by the employee receiving at least seven deficient performance notices in the seven months after he filed his internal complaint, as well as excessive supervisory monitoring of the employee’s performance, suggesting that the employee was being held to a different standard.

While the hearing officer found that “some of Respondent’s alleged infractions likely had a kernel of truth to them and Complainant may not have been a model employee in every instance, the evidence suggests that many of the cited infractions were largely exaggerated.” Based on the foregoing, the Hearing Officer concluded that the ensuing excessive monitoring and numerous reprimands that followed Complainant’s protected activity were not valid, job-related responses to legitimate performance issues but, rather, were the result of retaliatory animus.

In upholding the hearing officer’s ruling, the MCAD affirmed awards for attorneys’ fees emotional distress damages, and orders that the company cease all race-based discrimination and retaliation and remove any disciplinary notices issued during the time in question.

Employment – Discrimination – Disability – Pretext

A watershed moment in the development of sexual harassment prevention law occurred in 1991 when law professor Anita Hill testified before Congress during Supreme Court nominee Clarence Thomas’ hearing alleging he had sexually harassed her. From that moment forward the debate on what to do about sexual harassment in the workplace was transformed into a concrete question of what should be done about protecting victims of sexual harassment in the workplace.

Prof. Hills highly publicized testimony yielded many legacies. One of them was that more and more women began to speak publicly about harassment in the workplace.

Another legacy was the passage of amendments in 1991 to the Civil Rights Act to allow discrimination victims the right to a jury trial when seeking compensatory and punitive damages under the Civil Rights Act. As a result of this amendment, the number of sexual harassment cases rose from 6,127 in 1991 to 15,342 in 1996. Over that same period, awards to victims under federal laws rose from $7.7 million to $27.8 million.

Yet another legacy was that states across the country began to adopt their own sexual harassment prevention laws. Massachusetts adopted its law called An Act Relative to Sexual Harassment Education and Training in August 1996, making this month the 25^th anniversary of the passage of this law.

The statute shapes the Massachusetts workplace in very concrete ways. First, it requires all employers with six or more employees to adopt and issue an individual written copy of its policy against sexual harassment to all employees at the time of hire and annually. Some members have asked in the past if merely having it in the handbook was sufficient. Given the annual requirement to issue the policy the better practice is to provide it to each employee individually unless your company issues an updated handbook every year. The key concern is to make sure that the proper contact people are listed in the policy with their name and contact information and relying upon the handbook may include contact employees that no longer work at the organization.

The law also encourages employers to conduct education and training programs on sexual harassment prevention and reporting.

In part to mark the anniversary of the passage of this law, AIM will be welcoming the acting general counsel from the Massachusetts commission against discrimination (MCAD) to discuss this and other discrimination-related issues at the August roundtable. The roundtable is on August 18, 2021, from 8:30 until 10 o’clock in the morning. For those interested in registering for the roundtable please contact Melissa Wotus at mwotus@aimnet.org.

In addition, AIM HR Solutions offers Harassment and Discrimination Prevention training.  This training is also eligible to be paid for through a workforce training fund grant through Commonwealth Corporation. Please reach out to Kelly McInnis at kmcinnis@aimhrsolutions.com for more information.

AIM members with specific questions about sexual harassment, discrimination-related topics, or any other hotline matter may call the AIM Hotline at 800-470-6277.

Employment – Discrimination – Age

A recent federal court case addressing Massachusetts antidiscrimination law raised the interesting question of how the court should handle “stray remarks” when they are part of the basis of the lawsuit?

Before we discuss the meat of the case there are a couple of background points to be explained to help understand the issues in the case.

McDonnell Douglas

Many employment law cases alleging discrimination falls under the McDonnell Douglas burden-shifting framework. McDonnell Douglas operates in the following manner. An employee alleges one or more acts of discrimination, then the employer must respond by presenting evidence that there was a legitimate reason for its action and finally the employee responds by providing evidence that the employer’s response was a pretext for discrimination. If that burden is met the case moves forward. If not, the court will dismiss the case.

Stray remarks

The other key concept is understanding the challenges the court faces in determining the remarks allegedly made constitute discrimination or were merely stray remarks. There are numerous cases that consider the work environment, comments made and the challenge the court faces in determining whether there is discriminatory intent behind those remarks. Over the years the courts have had to consider whether remarks that may be seen as questionable rise to the level of supporting a claim for discrimination.

For example, one Federal Court opined in 1996 that “direct evidence does not include stray remarks in the workplace, particularly those made by nondecision-makers or statements made by decisionmakers unrelated to the decisional process itself.”  Subsequent courts have relied on that decision to guide their own analysis of when do remarks rise to the level of being discriminatory.

This is not to say that the court ignores offensive remarks rather the court is trying to understand the context and situation within which these remarks were made to determine whether they would support a discrimination claim.

In another case from March of this year, the federal court determined the remarks made by the white male supervising manager regarding a well-regarded district manager’s Spanish accent were not stray but we’re connected to the Hispanic employee’s demotion and thus discriminatory.

Were they or weren’t they?

The most recent stray remarks case began when the plaintiff alleged that his former employer and former managers violated the Massachusetts antidiscrimination law by discriminating against him based on his age. In support of this claim the former employee presented a number of age-related remarks made by former and current supervisors such as ‘slow down, you’re too old’ and ‘don’t run so fast.’ Other remarks included ‘you’re just like my dad,’ … and ‘computers and old guys don’t mix.’

In reviewing the record, the court found that these remarks were uttered over at least a year’s period of time and were not constantly being spoken to or about the former employee.

Moreover, the company had justifiable performance reasons to terminate the employee’s employment. In support of its decision to terminate the employee, The company produced significant documentation showing that the employee’s job performance failed to meet his employer’s reasonable expectations. For example, evidence showed that the employee’s branch location was the worst managed location by far of the company’s various locations. And since the employee could offer no response to the employer’s documentation on the employee’s substandard performance, the court did not consider the employer’s action a pretext for getting rid of the employee.

Final thoughts

While the stray remarks concept is interesting, it often serves to muddy the waters and redirect the focus away from the most relevant facts of the case. In this case, the most relevant facts were the proper and thorough documentation of the decline in employee performance over time.

AIM members with specific questions about discrimination-related topics or any other hotline matter may call the AIM Hotline at 800-470-6277. Top of Form

Q: Now that the Massachusetts paid family and medical leave law is fully in effect and employees are beginning to use it I’m a little confused as to the scope of job protections provided under the law. Could you provide a quick overview?

A: As more and more employees begin to use the paid family and medical leave law (PFML) and questions arise about their legal rights associated with the return to work the issues you’re alluding to will likely come to the fore.

The relevant section of the regulations is called employee job protection and is located at 458 CMR 2.16. The actual regulation itself is available by clicking on this link. https://www.mass.gov/doc/458-cmr-2-family-and-medical-leave/download

While much of this is pretty familiar ground for employers subject to the FMLA, for employers with less than 50 employees and perhaps dealing with this the first time, it’s important to go through these regulations to make sure you understand them.

Job Protection

The job protection provision states that any employee returning to work from a PFML leave shall be restored to their previous position or to an equivalent position with the same status, pay, employment benefits, length-of-service credit, and seniority as of the date of leave. There is an exception due to economic conditions. The exception provides that if other comparable employees (i.e. equal length of service credit and status in the same or equivalent positions) have been laid off due to economic conditions or other changes in operating conditions affecting employment during the period of leave then the employee returning from leave need not be reinstated to the position.

Another exception to the requirement to reinstate exists if the employee was hired for a specific time period or a specific project.

Finally, the employer must maintain the employee’s medical insurance during the leave period under the same conditions as if the person were working. That means each party must contribute its portion of the health insurance cost during the leave. AIM recently released a podcast discussing this issue in more detail. More information is available on the podcast here.

Retaliation

The regulations also make it clear that it is illegal for any employer to threaten to retaliate or to retaliate against an employee for using rights provided under this law. Instances of illegal retaliation include discharging, firing, suspending, expelling, disciplining, (based on company attendance policies or otherwise), threatening, or in any other manner discriminating against an employee for exercising any right under the PFML law.

The same anti-retaliatory provisions apply in the instance of an employee who has filed a complaint or instituted or caused to be instituted a proceeding under or related to this anti-retaliation provision, has testified or is about to testify in an inquiry or proceeding, or has given or is about to give information connected to any inquiry or proceeding relating to this provision.

On the other hand, an employer may require an employee who has been approved for leave benefits to comply with reasonable attendance and call-in procedures established by the employer. An employee who is approved for intermittent leave benefits must work with the employer to make an effort to take leave so as not to unduly disrupt the employer’s operation.

Furthermore, an employee who takes leave on an intermittent or reduced leave schedule and who fails to work during the times agreed to between the employer and the employee may be subject to employer discipline. An employee who fails to return to work or to the employee’s regular work schedule following the expiration of the leave period may be subject to employer discipline.

Presumption.

Employers need to remember that the law offers anti-retaliation protections to employees for up to six months after they have returned to work. The regulation states that any negative change in the seniority, status, employment benefits, pay, or other terms or conditions of employment of:

(a) an employee on leave or during the six-month period following an employee’s leave or return to work or

(b) an employee who has participated in proceedings or inquiries within six months of the termination of proceedings shall be presumed to be retaliation.

The regulation also notes that a negative change shall not include trivial, or subjectively perceived inconveniences that affect de minimis aspects of an employee’s work.

The challenge for most employers dealing with retaliation claims will be the high burden of proof the employer must overcome in order to show there was not retaliation. In a typical employment law case the burden of the proof standard is a preponderance of the evidence which means more than 50% likely something happened. This law requires clear and convincing evidence that such an employer’s action was not retaliation against the employee and that the employer had sufficient independent justification for taking such action. This means the employer must have very solid evidence of its intention to carry out a personnel action unrelated to the employee’s use of the leave.  That said, the regulations do recognize that an employer’s application of a preexisting employment rule or policy shall be deemed to be clear and convincing evidence.

Final thoughts 

PFML is a brand-new law just now starting to take effect. There have been very few if any cases arising under the retaliation statute yet so it is not clear how things will be interpreted by the courts. Employers should take strong care to properly document any and all situations related to someone taking leave to ensure that any subsequent personnel action has a solid foundation prior to engaging in the action. Nobody wants to be the test case.

AIM members with specific questions about the new PFML law or any other hotline matter may call the AIM Hotline at 800-470-6277. Top of Form

Q. My company is preparing to do its own internal I-9 audit. Can you highlight some of the issues we should be on the lookout for?

A. Doing an internal I-9 audit is a great idea. It saves companies a lot of aggravation and minimizes the risk of being fined by the federal government if it were to do the audit. One thing we have heard from many members is that the fewer people in charge of I-9 administration the better because it’s easier to train those few people and to make sure they follow the rules consistently and to have a variety of people trying to figure out the I-9’s on a case-by-case basis.

The list presented below is not in any particular order in terms of importance rather features information on many of the strategies we have learned here at AIM HR solutions over the years.

1. Make sure that employees are filling out the proper form I-9 when they begin work. You can tell the proper form I-9 by looking at the date in the upper right-hand corner. A quick look at the current form I-9 shows that it is effective through October 31, 2022. The current form has been in effect since October 21, 2019. According to the law at that point, the administration must review, revise if it wants to, and issue a new Form I-9 which will be effective after that date. The reality is that often the government does not meet that deadline so they will issue a press release allowing employers to continue to use the current Form I-9 until the new updated version is issued. However, once the new form is in effect, universally employers must stop using the former I-9.
2. The Form I-9 information included on the United States citizenship and immigration services (USCIS) the website includes instructions on how to fill out the form available here. https://www.uscis.gov/i-9  We strongly urge employers to print out and perhaps laminate the pages so that they are available for all employees to look at when they are filling out the Form I-9. For employers with Spanish-speaking workers who have difficulty reading and writing in English, there is a Spanish form I-9 that may be used for instructional purposes. While the employee must complete the English language version of the I-9 they may use the Spanish language version as a guide the two forms say exactly the same thing in each respective language.

3. Section 1 is the responsibility of the employee to complete. Typically, this is done on the first day of employment though it may be done prior to that if the person has accepted a bona fide job offer with a start date. There are 13 fields at the top of section 1 which must be completed by the employee. None of them may be left blank so if they are not applicable the employee should write N/A. Examples of where N/A may apply to include “other last names used” or “apartment number”. No matter what, no field may be left blank.
4. A very common mistake we see in I-9 preparation is the failure to properly write the date. If one or more of these date fields are filled in incorrectly, it is really an inattentiveness error since the correct form of the date appears in the upper range of the date field every time it is called for in the form.
5. Another part of the Form I-9 that may surprise people is that the final three fields; Social Security number, employees email address, and employees phone number are all optional fields with one exception. The Social Security field must be completed by the employee if the employer is an E-Verify employer. If the information is completed it is not incorrect but just unnecessary.

Correcting mistakes found in the audit

Fortunately, there is a remedy employers may use to correct some mistakes in the I-9. Using this correction system usually depends on a couple of things including the severity of mistakes and the frequency of the mistakes. The more mistakes the more the employer may be better served by having the employee complete a new I-9 and append it to the old one. But if it’s a minor error such as the date is written incorrectly the proper remedy is to draw a line through the incorrect information and have the employee write the correct information in the field and initial it. Don’t forget that since section 1 must be filled in by the employee it is the employee’s responsibility to make any edits to the form.

This brings us to another very common question which is what to do if the employee no longer works there. While the federal law requires every employer to have a completed Form I-9 for every employee hired after November 6, 1986, the law also states that the employer need only retain the form I-9 for former employees based on one of the following two dates, three years from the date of hire or one year from the date of termination, whichever is later. So returning to the situation above if there is an I-9 in the file for an employee that no longer works at the company and the form meets the criteria of either three years from the date of hire or one year after the date of separation, the employer may shred the form as part of its standard record-keeping destruction policy.

Final thoughts

Ensuring compliance with the I-9 law can be very daunting for an employer. Fortunately, there are resources available. The USCIS website referred to above includes very helpful information such as model forms in both English and Spanish and instructions. Any employer reviewing their I-9 should also print out a copy of the I-9 Handbook for Employers, M-274. It is available here. https://www.uscis.gov/i-9-central/form-i-9-resources/handbook-for-employers-m-274

AIM HR solutions also do form I-9 audits.  Please contact Kelly McInnis from AIM HR solutions for more details. She is available at kmcinnis@aimhrsolutions.com.

While it may seem like a great deal of work in I-9 audit typically pays off in significant rewards by enabling the employer to remove out-of-date form I-9’s and to correct form I-9’s with errors before the federal government comes knocking on your door.

If you are an AIM member and you have any further questions about Form I-9’s or other HR-related issues, please contact the AIM hotline at 1-800-470-6277 to discuss them.

Question

We may need to hire some teenagers this summer and want to be sure we are compliant with the child-labor laws. Do you have a summary?

(Editor’s note – As we head toward the end of the school year many employers have questions about the rules are regarding hiring minors for the summer. The following Ask the Hotline article ran previously, but still offers necessary information and resources.)

Answer

There are several issues for any employer thinking about hiring children between the ages of 14 and 17. State and federal law set out explicit provisions regarding the hours children may work and the positions and duties they may hold.

Remember that the law categorizes minors by two age groupings – 14 and 15-year-olds and 16 and 17-year-olds – recognizing that children in the older group are eligible to perform more complex/responsible workplace duties.

There is a chart available that includes both state and federal laws in one document.

Age Requirements

With few exceptions, minors must be at least 14 years old to work. The exceptions include babysitting, news carriers, working on farms, and in entertainment (with a special state-issued permit).

Hours

14-15-year-old minors may NOT be employed:

• During school hours except as provided in approved work experience and career- exploration programs;
• Between 7 p.m. and 7 a.m. except from July 1 through Labor Day, when they may work until 9 p.m;
• More than 3 hours per day during school weeks and not more than 8 hours per day during weeks when school is not in session;
• More than 18 hours per school week except in approved work experience and career- exploration programs, in which case, they may work 23 hours;
• More than 40 hours per week when school is not in session;
• More than 6 days per week.

16-17-year-old minors may NOT be employed:

• Between 10 p.m. and 6 a.m. with exceptions:
  • When an establishment stops serving customers at 10 p.m., the minor may work until 10:15 p.m.
  • On nights not preceding a regularly scheduled school day they may work until 11:30 p.m.
  • In restaurants and racetracks, they may work until 12 a.m. on nights not preceding a regularly scheduled school day.
• More than 9 hours per day;
• More than 48 hours in a week; or
• More than 6 days per week.

Supervision

After 8 p.m., minors must be:

• directly supervised by an adult who is located in the workplace and who is reasonably accessible, unless the minor works at a kiosk, cart, or stand in the common area of an enclosed shopping mall that has security from 8:00 p.m. until the mall is closed to the public.

Occupation restrictions

The link here contains a list of prohibited jobs for minors between 14 and 17 years of age.

Applying for an Employment Permit

All minors under the age of 18 seeking work:

• must complete an employment permit application and
• must obtain the permit before starting a new job.  Applications for permits are available This link has been updated to reflect the impact of the Covid-19 pandemic.

For minors who are residents of Massachusetts:

• Permits are issued by the superintendent of schools for the municipality in which the minor lives or attends school – either is acceptable.

For minors who reside outside the commonwealth, the permit is issued by the superintendent for the municipality in which the minor’s job will be located.

No permit may be granted unless there is a specific employer, work address, and job description.

Employer Responsibility

The employer must keep the original permit on file at the place of employment as long as the minor is employed at that location or until the minor reaches 18.

If the minor’s employment is terminated, voluntarily or otherwise, the employer must return the permit to the superintendent’s office within two days of the termination.

Permits are valid while the minor holds the job or until he/she reaches the age of 18. After that, the minor no longer need such documentation, and the permit and copies may be destroyed.

Although you may choose to hire only high-school graduates, remember that some of them may be still under 18 and therefore subject to child-labor laws. The law states clearly that minors who are no longer students are covered by the child-labor laws in the same way that students of the same age are covered until the age of 18.

Transferring Permits

Minors may not transfer a permit from one job to another job.  The process must begin again, even if the employer is the same, but the work location has changed. An employer who wishes to employ a minor at more than one location must keep a permit on file at each business location. A minor does not have to apply for a new employment permit at the beginning of the school year if she or he has the same job.

Final thoughts

Any employer looking to hire a teenager subject to child-labor laws should be familiar with the working hours’ restrictions and permitted jobs. Allow enough time to obtain the proper documentation and make sure that you require and retain those documents.

The child-labor laws are enforced by the Attorney General’s Fair Labor Division and there are significant fines for violations.

AIM members with questions on child-labor laws or other human resources topics may call the Employer Hotline at 800-470-6277. Top of Form

Recent court cases highlight two new flashpoints in employment law – classification of a business under the Massachusetts blue laws and the scope of the Federal Arbitration Act.

The first case involves determining whether workers are entitled to Sunday premium pay while working at a business that is both a retail store and a provider of consumer services.

The case began when two employees of a spa/massage business filed a lawsuit claiming that the business should be considered a “store or shop” engaged in the “retail sale of personal health and sanitary supplies” because the Massachusetts blue laws provide that a store or shop is only permitted to remain open on Sundays if it pays its employees premium pay.

By way of background, until 2019 premium pays for work on Sunday and certain holidays was set by state law at 1.5 times the employee’s regular wage. However, as a component of legislation passed in 2018, premium pay is being phased out and will disappear as of January 1, 2023.  The elimination of premium pay coincides with the final step of the minimum wage increase to $15/hour.

The crux of this case turns on the true nature of the business. More businesses today offer their customers merchandise ancillary to their principal service activity, which in this case is the “cutting and styling of hair, manicuring, and the furnishing of related cosmetological and beauty services” and “the performance of massage therapy services.”  This raises questions about whether the business is eligible for one of the statutory exemptions or if its retail aspect makes it subject to Sunday opening blue laws and the premium-pay requirement.

The judge found that the day spa/massage business “unambiguously fits the exemptions (54) and (54 ½)” while clarifying that as a result of the exemptions “[t]he Legislature’s intent was for those businesses to not pay the Sunday premium.”

On the other hand, the case involved the more complex issue of how a business should be classified when it meets the definition of retailer under the law but also provides a service that the legislature specifically exempted from blue laws premium pay requirements.  In making her decision, the judge determined that the spa operated to provide a service, and any goods it sold were ancillary to those services.

The judge noted that in 2022, it is increasingly common for businesses to sell retail goods for additional revenue rather than solely serving the original intent of the business. In this case, the retail side of the business apparently generated approximately 20 percent of its revenue in the two or three years leading up to the lawsuit. But the court noted that almost all retail revenue came from purchases by customers there for spa or massage services and not consumers entering the business just to purchase items.

Additionally, the judge recognized that no authority exists to require a certain percentage of retail goods to be sold for an exempted business to be deemed a store or shop or retail establishment.

The judge concluded that “if the Legislature meant to require Sunday premium pay for all retail activity permitted on Sunday, it would have attached the requirement expressly to all clauses of Chapter 136, §6,” which the Legislature did not do.

The case bears watching. Lawyers for the employees have already announced their intention to appeal the trial court ruling based on the theory that if a business (i.e., a store or shop) operates on Sunday, and that business has some retail component, it must pay employees premium pay as required under the law. As noted above, however, the clock is counting down on the premium pay issue, so it is unlikely to have a lasting effect.

Left unanswered is the question of what happens if a business meets one of the statutory exemptions but has a significant amount of foot traffic coming into the business specifically to buy items that are sold independently of the actual services being provided.

An example might be a rural Inn with a small shop in its lobby.  Suppose Oprah listed this inn’s pies among her “Favorite Things,” leading customers to flock from all over just for the pie. The inn reaches a point where it is selling more than 150 pies each day, despite it being a small establishment with only 25 guest rooms.

Does this change in revenue sources transform the inn into a retail establishment? And how would a judge parse out the issue to determine the business of the business for purposes of the Blue Laws?

While this may seem like conjecture given the disappearance of the premium pay law, don’t forget that the wage and hour laws include a three-year statute of limitations. That means that if the appeals court rules that they are retail businesses and the premium pay law applies, lawsuits may continue to come forward from employees claiming they were not paid back when the premium pay was 1.2 or 1.3 times an employee’s regular rate of pay.

Federal Arbitration Act

Multiple lawsuits have been filed seeking to resolve the issue of whether an employee’s job was involved in interstate transportation and therefore subject to the Federal Arbitration Act (FAA).

Many of the lawsuits were brought by employers to demonstrate that the employees were covered by the FAA, thus forcing employees to pursue legal challenges through an arbitration system and shielding the employer from being brought into the court system.

Lawsuits brought by employees have focused on whether the FAA’s language excluding from its reach any “[c]ontract of employment of seamen and railroad employees or any other class of workers engaged in foreign or interstate commerce” applies to them, thereby enabling them to avoid arbitration and seek legal redress in the courts.

A recent court decision on the matter comes in the midst of a national debate on the fairness of arbitration in employment settings and on the heels of recent action by Congress to create the Forced Arbitration Injustice Repeal Act that prevents employers from requiring arbitration for sexual harassment cases.

The court case arose when an employee who worked as a merchandiser filed a lawsuit alleging violations of the Fair Labor Standards Act (FLSA) and the Massachusetts wage and hour law. In response to the lawsuit, the court had to consider whether the employee’s position was covered by the exemption to the FAA.

At the same time the employee sought to make her claim, a class action was filed on behalf of other similarly situated employees at the same company. It is worth noting that limiting class-action lawsuits is one of the primary reasons for employers adopting mandatory arbitration clauses with their employees.

As a merchandiser, the employee was responsible for traveling between weekly assigned job sites to audit and stock products, build product displays, update product pricing and signage, and stage point-of-purchase (POP) materials. Performing her assigned duties could take her to clients in four different states across her territory including Massachusetts, Connecticut, New Jersey, and New York. Shortly after quitting her job, the employee filed a lawsuit.

The employee argued that she was the functional equivalent of a last-mile driver engaged in interstate transportation, even though her employer had labeled her a “retail worker.” In its opinion, the court made clear that job titles are irrelevant, and it is job duties that matter. The judge agreed with the employee in holding that the employee’s position was so closely related to interstate transportation as to be practically a part of it.

While traveling from client to client, employees were not paid for transportation time during the workday and only paid for the time on-site at a particular client. Employees were also not paid for any time they spent at home staging the point-of-purchase materials, a factor that appears to have influenced the final decision. The judge determined that the POP materials were shipped to the merchandiser’s home and staged at the employee’s house before the merchandiser brought them to the end-user location.

In response to the lawsuit, the employer sought either arbitration per the arbitration agreement it had with the employees or an outright dismissal of the case. The judge refused to dismiss the case but did not address the issue of compulsory arbitration, leaving that question for the future.

While that gives round one to the employee, there is no final answer yet as the employer has announced its intention to appeal to the Federal Appeals Court.

Final thoughts

Both cases hold the potential to impact the operations of certain employers going forward. AIM will continue to monitor these cases and report any new developments as they arise.

AIM members with questions on any human resources topic may call the Employer Hotline at 800-470-6277. Top of Form

A recent federal court case from Massachusetts allowed an employee to proceed with claims of discrimination and retaliation despite ample evidence that her employer had good cause to fire her for performance issues.

The employee, who is from Poland, worked for a medical device manufacturer and distributor as a quality control inspector for eight years.   Her employment was terminated after she skipped a step in the inspection process and then falsified a record indicating that she had performed the step.

The opinion describes numerous examples of discriminatory behavior by co-workers and supervisors in the two years leading up to her termination. They made disparaging comments about her accent and immigrant status.  They said that Polish people are stupid and that immigrants are taking jobs away from Americans. Her Polish to English translation software was deleted from her computer.

The employee repeatedly reported the harassment to her supervisor, to his manager, and to human resources, but the company failed to investigate except for one incident in the month before she was terminated.  During this time, her work performance was cited for deficiencies, and she was given a final warning three months before her termination.

The employee’s lawsuit included numerous claims of discrimination.  First, she claimed that she was subjected to a hostile work environment and terminated due to national origin discrimination.  The court found that there was evidence of hostile environment discrimination.

As to the termination, the court found that although there was a legitimate, non-discriminatory reason to fire the employee, a “reasonable factfinder could conclude that her performance issues were infected by discriminatory animus and that they affected the company’s decision to terminate her.”

Next, the employee alleged that her termination was in retaliation for reporting instances of national origin harassment.  The employee claimed that her termination arose from her report of a verbal altercation with a co-worker one month before her termination, which the company investigated but claimed that she did not allege discrimination in connection with the incident.

The employee alleged that she thereafter made two additional complaints of discriminatory harassment by other coworkers, which the supervisor dismissed as a personal issue.  Because the employee reported the harassing behavior shortly before her termination, the court found that she had a plausible claim of retaliation with respect to her termination.

Further complicating her exit from the company, the employee requested leave for “severe knee pain” shortly after the final incident, but before she was terminated.  She included a state law claim for handicap discrimination, alleging that her termination was caused in part by her taking a leave.  The leave was not designated as FMLA leave, and it predated the Massachusetts Paid Family and Medical Leave Act, so there was no statutory job protection.  With evidence that the termination was in process before the leave began, the court ruled in favor of the company on the handicap discrimination claim.

Finally, the lawsuit alleged discrimination on the basis of sex, both as to the hostile work environment and her termination.  The court rejected these claims outright as they were not supported by the evidence, other than one accusation that a co-worker had started a rumor about the employee’s sexual preference.

Termination for poor performance, however well documented, does not act as a shield against liability for discrimination or retaliation.  The court’s opinion noted that this employee had a satisfactory record of performance until the time the harassment began.  It gave weight to the employee’s explanation that the constant harassment by her co-workers led to difficulty in her work.

This case may have had a very different outcome had the company taken seriously her reports of harassment, investigated the complaints, and addressed the problem in a timely fashion.  The employer may have avoided a claim entirely had the supervisors and human resources manager acted on her complaints.

AIM members with questions on any human resources topic may call the Employer Hotline at 800-470-6277. Top of Form