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Employment Law in a
Down Economy
Carol M. Goodman, Esq.
Herrick, Feinstein LLP
June 11, 2009
Agenda
•FLSA
•Recent Developments in Employment Law
•Avoiding and Minimizing Wrongful Termination
and Discrimination Suits
•Alternatives to Layoffs
•Coming Attractions
What Is the FLSA?
The Fair Labor Standards Act (FLSA) prescribes
standards for the basic minimum wage and
overtime pay
What Do Employers
Need to Focus On?
• Proper classification of your employees as:
‫ ـ‬Exempt; or
‫ ـ‬Non-exempt
• Improper classification of employees under the
FLSA can have devastating monetary
penalties…
What’s the Big Deal?
Morgan Stanley agrees to $50 million FLSA
Settlement (2008)
‫ ـ‬Class action brought on behalf of Morgan
Stanley’s financial advisors and financial advisor
trainees
‫ ـ‬Action alleges improper FLSA classifications
What’s the Big Deal? (cont.)
Merrill Lynch pays $37 million FLSA Settlement
(2005)
‫ ـ‬Class action brought on behalf of approximately
3,250 of its California stock brokers
‫ ـ‬Action alleges that Merrill Lynch improperly
classified its stock brokers as exempt under the
FLSA and—in violation of the FLSA—failed to pay
them for overtime that they worked
What Are the Exemptions
Under the FLSA?
• Executive employees
• Administrative employees
• Professional employees
• Outside Sales employees
• Computer employees
Exempt Financial
Services Employees
1. Collect and analyze information regarding the
customer’s income, assets, investments or debts
2. Determine which financial products best meet the
customer’s needs and financial circumstances
3. Advise the customer regarding the advantages
and disadvantages of different financial products
4. Market, service, or promote the employer’s
financial products
Exempt Financial
Services Employees (cont.)
5. Mortgage originators: employees of finance
companies who obtain and solicit mortgages
may be exempt outside sales employees, and
are therefore exempt under the FLSA
6. Registered representatives are exempt
because:
‫ ـ‬sales is not their primary duty
‫ ـ‬their work includes collecting and analyzing
a client’s financial information
‫ ـ‬they advise clients about investment
opportunities’ risks, advantages and
disadvantages
Non-Exempt Financial
Services Employees
However, an employee whose primary duty is
selling financial products does not qualify for
the administrative exemption
Penalties
Non-compliance with the FLSA can be
very costly and can include:
‫ـ‬
‫ـ‬
‫ـ‬
‫ـ‬
‫ـ‬
‫ـ‬
‫ـ‬
Back pay
Interest
Liquidated damages
Fines
Penalties
Attorney’s fees
Criminal penalties
FLSA: How Do I Comply?
• Review all job descriptions and classifications
with an employment lawyer
• Understand that salaried does NOT always
mean exempt
• Perform a self-audit
• Apply exemptions based on the employees’ job
duties, NOT the employees’ job titles
FLSA: Common Errors to Avoid
•
•
•
•
•
•
•
Improperly applying an exemption. They grey areas
are what are tricky
Failing to pay for all hours an employee is “suffered or
permitted” to work
Limiting the number of hours employees are allowed to
record
Failing to include all pay required to be included in
calculating the regular rate for overtime
Failing to add all hours worked in separate
establishments for the same employer when calculating
overtime due
Treating an employee as an independent contractor
Confusing Federal law and State law
Recent Developments
in Employment Law
• Lilly Ledbetter Fair Pay Act of 2009
• Broad whistleblower protection under the ARRA
• NY WARN Act
• COBRA premium reductions under the ARRA
• Extension of Unemployment Insurance Benefits under
the ARRA
Lilly Ledbetter Fair
Pay Act of 2009
• New law allows employees more time to assert a
claim:
‫ ـ‬Each paycheck starts a new 180-day clock which
runs for purposes of the statute of limitations
Lilly Ledbetter Fair Pay Act of 2009:
How Do I Comply?
• Advise management of all decisions regarding
employee compensation
• Ensure all decisions regarding employee
compensation can be justified based on
legitimate and non-discriminatory business
factors
• Conduct periodic internal “pay-equity audits”
Whistleblower Protection
Under the ARRA
• Prohibits private employers receiving stimulus
funds from:
‫ ـ‬discharging
‫ ـ‬demoting
‫ ـ‬otherwise discriminating against an employee for
disclosing certain information
Whistleblower Protection Under the
ARRA – How Do I Comply?
• Post a notice of rights and remedies
• Document and fully investigate any complaint
regarding misuse of stimulus funds
• Educate employees and update employee
handbooks periodically
NY WARN Act
• The New York WARN Act requires certain
employers to notify employees 90 days in
advance of a mass layoff
Minimum #
of
Employees
for the Act
to apply:
Minimum
# of
layoffs if
“plant
closing”
US
WARN
Act
100
50 during
any 30day
period
33% and at
least 50 full
time
employees
during any 30day period; or
at least 500 full
time
employees
60 days
NY
WARN
ACT
50
25 during
any 30day
period
33% and at
least 25 full
time
employees
during any 30
day period; or
at least 250 full
time
employees
90 days
Minimum # of
layoffs if
“mass layoff”
Advance
Notice
Required
Notice
Required for
Relocation?
Who Do I Need
to Notify?
Consequence of NonCompliance
NO, if the
relocation
does not
constitute a
mass layoff or
plant closing.
(1) all affected
employees;
(2) the state
disclosed worker
unit; and
(3) the chief
elected local
government
official.
(1) an employee can sue
an employer for back pay
and benefits for up to 60
days if the employer fails
to comply with the notice
requirements; or (2) the
federal government can
impose a civil penalty of
not more than $500 per
day for each day of the
employer’s violation.
YES, if the
relocation
involves the
removal of all
or
substantially
all of the
industrial or
commercial
operations of
an employer
to a different
location 50
miles away or
more.
(1) all affected
employees and
their
representatives,
(2) the New York
Department of
Labor, and
(3) the local
Workforce
Investment
boards.
(1) an employee can sue
an employer for back pay
and benefits for up to 90
days if the employer fails
to comply with the notice
requirements; (2) the
federal government can
impose a civil penalty of
not more than $500 per
day for each day of the
employer’s violation; or (3)
an administrative
enforcement proceeding
by the New York State
Department of Labor
commissioner.
COBRA Premium Reduction
Under the ARRA
• Employees who are involuntarily terminated
between September 1, 2008 and December 31,
2009, may be entitled to a 65% COBRA
premium reduction
• Employers will receive reimbursement from the
IRS for subsidy
COBRA Premium Reduction Under the
ARRA – How Do I Comply?
• Notify all individuals who become eligible for
COBRA coverage on or after September 1, 2008
• All COBRA notices going forward must include
information about the COBRA subsidy under the
ARRA
Extension of Unemployment Insurance
Benefits Under the ARRA
• Regular unemployment benefits are capped at 26 weeks
• Prior to the passage of the ARRA, individuals who had
not found employment after exhausting their regular
unemployment insurance benefits could apply for 13
weeks of Emergency Unemployment Compensation
(“EUC”)
• Under the ARRA, an individual may apply for up to 33
weeks of EUC, extending unemployment benefits to a
maximum of 59 weeks
Wrongful Termination and Discrimination
Claims and Suits Are On the Rise
• EEOC reports a 15% increase in the number of
employment discrimination charges filed against employers
35
30
28.7%
25
20
15
14%
10
11.2%
9.7%
5
0
Age Discrimination Sex Discrimination
Race
Discrimination
Disability
Discrimination
What Steps Can I Take to Avoid and Minimize
Claims or Suits From Employees?
• Update employee handbooks
• Train managers and employees with supervisory
authority on changes to employment laws
• Have documentation and record keeping procedures
• Have terminated employees sign releases precluding
them from asserting employment-related claims upon or
after termination
• Audit termination decisions prior to implementing the
terminations, engage in a “vetting” process
• Consider purchasing Employment Practices Liability
Insurance (“EPLI”)
Alternatives to Layoffs
• Across-the-board pay cuts
• Mandatory vacations
• Mandatory leave
• Reduced benefits
• Flexible work week
• Flex time
The Family Leave Insurance Act
• Provides employees with 12 weeks paid leave to take
time off due to their own illness, or to care for a sick
family member or new child.
• Creates an employee and employer financed insurance
fund to provide for the paid leave.
• If enacted, the bill would take effect on January 1, 2011
and would apply to periods of leave that commence on
or after January 1, 2012.
• Status: The bill has been referred to the House
Committee on Education and Labor, Oversight and
Government Reform, and Ways and Means.
The Healthy Families Act
• Guarantees employees one paid hour off for
each 30 hours worked, enabling them to earn up
to seven paid sick days a year
• Employees are entitled to claim their days when
they, a child, a parent, a spouse or someone
else close to them becomes ill
The Family Medical Leave Act (FMLA)
• President Obama seeks to expand FMLA
coverage to include businesses with 25 or more
employees
Possible Employment-Related
Legislation On the Horizon
• The President is expected to seek to:
‫ ـ‬raise the minimum wage and peg it to inflation;
‫ ـ‬provide a new tax credit to companies that add
jobs in the United States
‫ ـ‬vigorously enforce the recently-enacted EEOC
guidelines on caregiver discrimination
Employment Law in a
Down Economy
Carol M. Goodman, Esq.
Herrick, Feinstein LLP
2 Park Avenue
New York, New York 10016
(212) 592-5933
[email protected]
www.herrick.com