EEOC Proposes to Modify EEO-1 Form to Include Wage Data

The EEOC is proposing to change EEO-1 reporting requirements to add wage data.  Employers who file the EEO-1 (private sector employers with > 100 employees and federal contractors with > 50 employees) already report race and sex of employees in certain job categories.  If adopted, the proposal would require employers to report the W-2 wages earned by race and sex in each of the job categories for a one-year fiscal period.

The goal in part is to identify wage disparities and eliminate the widely reported "wage gap," which is not based on wage disparity within comparable jobs.  But the information gathered allegedly will permit EEOC analysts to perform statistical tests of employers' equal pay practices beyond the "wage gap."

The equal pay information also covers the EEO-1 race classifications, allowing the EEOC to assert Title VII claims based on disparate impact.  The Equal Pay Act addresses sex but not race. So, this proposed modification to the EEO-1 report is intended to address broader issues than the "wage gap" between all male workers and all female workers you hear about in the press.  The EEO-1 report's race information is often imprecise, so it will be interesting to see how the data is used going forward.

The agency will publish a proposed rule in the Federal Register on 2/1/16, and seek comments for 60 days.  If adopted, this proposal would take effect for the 2017 EE0-1 report.

The EEOC's press release is here.

Some FAQs are here.

Court of Appeal: Employer Entitled to Recoup Training Costs Under Repayment Agreement

Employers invest in employees in different ways. For example, sometimes employers pay for employees to undergo significant training.  And they hope the employee will not promptly leave and use that training while working for another employer.  So, they may ask the employee to repay the cost of the training if they leave employment within a period of time after receiving the training.
At the same time, California law favors employee mobility, and disfavors employers' passing along the costs of doing business to employees.

So, some employees try to escape from their promises to repay training costs by attempting to claim that these arrangements violate the law.  Under most circumstances, though, these are legal agreements, and employers are entitled to the benefit of their bargain.

The Court of Appeal today issued a decision involving a company who sued its former employee and won summary judgment on a claim for breach of contract.  As explained by the Court:

Floyd Case voluntarily enrolled in a three-year, employer-sponsored educational program. He agreed in writing that if he quit his job within 30 months of completing the program, he would reimburse his employer, USS-POSCO Industries (UPI), a prorated portion of program costs. Two months after completing the program, Case went to work for another employer. When he refused to reimburse UPI, the company sued for breach of contract and unjust enrichment. Case cross-complained, asserting the reimbursement agreement was unenforceable and UPI had violated the Labor Code and other statutory provisions in seeking reimbursement.

So, Case received an estimated $46,000 in training while he was paid to work. He agreed that if he left within 30 months of completing the training, he would pay back $30,000, less $1,000 for each month he stayed.  

But Case left just two months after completing the training. So, UPI, the employer, sued him for $28,000.  Case cross-claimed against UPI, claiming that the agreement to repay the money was illegal for every reason under the Labor Code, and that it was a de facto non-compete agreement, that it violated the National Labor Relations Act, and that caused cancer.  OK, not the last one.

The trial court granted summary judgment and the court of appeal affirmed.  The court rejected all of the arguments essentially for the same reasons.  First, there was a written agreement.  Second, this was not an employer-mandated training program.  Third, participation was voluntary, in that Case could have taken the test for the position he sought without going through the training. Fourth, he did not have to lay out any money of his own, rendering most of his Labor Code claims inapposite.  Fifth, the training was transferable to other employers and other work.

The Court, however, noted that if an employer developed its own program and mandated it, it might not be something for which the employer could obtain reimbursement.  That was the case in In re Acknowledgment Cases (2015) 239 Cal.App.4th 1498, when Los Angeles tried to recoup certain costs of special training that it required of its police officers, unique to its own operations.  

We posted about another case on this subject a couple of years ago here.  In that case, Hassey v. City of Oakland, it was legal for Oakland to recoup its training costs from police officers who left employment before the agreed-upon date. (It was illegal to deduct the costs from the final paycheck, though).

Another issue this court addressed in this case was the revised attorney's fees statute in the Labor Code, section 218.5.  That section used to be purely "two-way" and award fees to the prevailing party. The Legislature has now made it so that employers can recover fees only if the plaintiff brings the case in bad faith.  The court held that this statute is retroactive because it is procedural, and therefore applies to all pending cases.  That's bad news for employers litigating a variety of wage-hour lawsuits that were pending before the amendments to section 218.5. 

This case is USS-POSCO Industries, Inc. v. Case, and the opinion is here.

U.S. Supreme Court: Rejected Settlement Offer Cannot "Moot" Plaintiff's Class Action Claim

Back in 2013, a 5-4 U.S. Supreme Court "assumed" in Genesis Healthcare v. Symczyk that an unaccepted "offer of judgment" could moot a plaintiff's class action, if the offer would have provided the plaintiff complete relief on her individual claim. We posted about that here.

The Court chose not to address the issue directly because of the way the case had been litigated.  As a result of the assumption, though, the court held that the plaintiff's decision to ignore the settlement offer took her out of the case, leaving the case without a proper named plaintiff.  Because the Court "assumed without deciding" the issue, it had no binding effect on lower courts.

Fast-forward to now, and the Court directly addressed the "assumed" issue above, and came out the other way.  This time, in Campbell-Ewald Company v. Gomez, the Court adopted the Genesis Healthcare dissent's position:  the unaccepted offer of compromise does not affect the plaintiff's right to continue litigation on behalf of the class. Let me explain.

Gomez was a recipient of a "spam" text message, for which he claimed he had not opted in. Campbell-Ewald Company, via a sub-contractor, sent the text message on behalf of the Navy. The Navy had hired Campbell to help with a recruiting campaign.

Gomez sued on behalf of a class of other recipients under a federal law not related to employment law. During the litigation, Campbell made an "offer of judgment" under Federal Rule of  Civil Procedure 68, under which Gomez would receive full payment for the text messages he received, including "treble damages." The offer included a proposed injunction, but no attorney's fees, and no relief for the other potential class members. (The statute does not provide for attorney's fees. The court had not yet granted class certification.)

Gomez let the offer lapse, resulting in a rejection. Campbell then asked the district court to dismiss the case. Campbell argued that its expired offer rendered Gomez's claim "moot" because he could not hope to recover more than Campbell had offered.  Campbell also argued that, as a federal contractor, it was immune from suit.  I'm focusing on the mootness argument here. The district court and 9th circuit rejected both arguments.

So, the Supreme Court had to decide if the unaccepted offer resulted in the case being "moot." Mootness is a doctrine that federal courts use to ensure that they are deciding "live" controversies, required by the Constitution.   A case may be moot if the plaintiff no longer has any personal stake in the litigation.

The 5-4 majority, led by Justice Ginsburg, decided that Campbell's offer did not mean Gomez had no personal stake in the litigation:

Having rejected Campbell’s settlement bid, and given Campbell’s continuing denial of liability, Gomez gained no entitlement to the relief Campbell previously offered. See Eli- ason v. Henshaw, 4 Wheat. 225, 228 (1819) (“It is an undeniable principle of the law of contracts, that an offer of a bargain by one person to another, imposes no obligation upon the former, until it is accepted by the latter . . . .”). In short, with no settlement offer still operative, the par- ties remained adverse; both retained the same stake in the litigation they had at the outset.

 * * *

Because Gomez’s individual claim was not made moot by the expired settlement offer, that claim would retain vitality during the time involved in determining whether the case could proceed on behalf of a class. While a class lacks independent status until certified, see Sosna v. Iowa, 419 U. S. 393, 399 (1975), a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.

The majority of course is correct that once expired, the offer could not be accepted. But the majority's decision weakened the point of Rule 68.  Rule 68 is supposed to end litigation early, and penalize parties who continue with litigation when they are offered a viable settlement.  

Justice Thomas concurred in the judgment, adding a sixth vote in favor of Gomez.  Justice Thomas, however, did not agree with the majority opinion. Rather, he focused on the fact that Campbell did not actually "tender" the settlement funds, and denied liability.  Historically, Justice Thomas noted, Campbell's actions were not enough to end the case. Therefore, there was no basis to hold the case was moot.

Chief Justice Roberts, writing for himself, and Justices Scalia and Alito dissented. They opined that Campbell offered Gomez what he wanted the district court to award him under federal law:

When a plaintiff files suit seeking redress for an alleged injury, and the defendant agrees to fully redress that injury, there is no longer a case or controversy for purposes of Article III. After all, if the defendant is willing to remedy the plaintiff’s injury without forcing him to litigate, the plaintiff cannot demonstrate an injury in need of redress by the court, and the defendant’s interests are not adverse to the plaintiff.

Seizing on language in the majority opinion, the Chief Justice suggested that there is a way for defendants to moot future plaintiffs claims by actually paying the offered sums:

The good news is that this case is limited to its facts. The majority holds that an offer of complete relief is insufficient to moot a case. The majority does not say that payment of complete relief leads to the same result. For aught that appears, the majority’s analysis may have come out differently if Campbell had deposited the offered funds with the District Court. See ante, at 11–12. This Court leaves that question for another day—assuming there are other plaintiffs out there who, like Gomez, won’t take “yes” for an answer.

 The majority did not actually decide this question. Therefore, it remains to be seen whether five justices will hold that paying an offer into Court will moot a plaintiff's case in a class action.  Stay tuned. 

This case is Campbell-Ewald Company v. Gomez and the opinion is here. 

U.S. Dept of Labor's Administrator Interpretation Explains Joint Employer Status Under FLSA

We recently wrote an article about how courts and agencies are embracing the concept of sharing.
That is, forced sharing of responsibility among employers for the employment law violations of one.
(You can read our article here.  EMPLOYERS FACE NEW LIABILITY FOR OTHERS’ WORKERS )  As you'll see in that article, the National Labor Relations Board weighed in on joint employer status last year in a big decision.

Almost on cue, the U.S. Department of Labor has weighed in with one if its Administrator's Interpretations.  That is an opinion letter generally explaining an area of enforcement, which is not a full fledged regulation.  The Administrator Interpretation, No. 2016-1, is here.

Entitled "Joint employment under the Fair Labor Standards Act and Migrant and Seasonal Agricultural Worker Protection Act," the Administrator of the DOL's Wage and Hour Division seeks to explain how it will apply the Fair Labor Standards Act to "joint employer" relationships.

For the government,  "joint employer" relationships are helpful in different contexts.  And by "helpful in different contexts" I mean "ways to facilitate holding as many employers responsible as possible." Let the Administrator explain just some of the ways:

When two or more employers jointly employ an employee, the employee’s hours worked for all of the joint employers during the workweek are aggregated and considered as one employment, including for purposes of calculating whether overtime pay is due. Additionally, when joint employment exists, all of the joint employers are jointly and severally liable for compliance with the FLSA and MSPA.4 Where joint employment exists, one employer may also be larger and more established, with a greater ability to implement policy or systemic changes to ensure compliance. Thus, WHD may consider joint employment to achieve statutory coverage, financial recovery, and future compliance, and to hold all responsible parties accountable for their legal obligations. the 

 Rather than issue a regulation, with its notice and comments, and possibility of congressional action to stop it, the Administrator has chosen to issue this opinion letter.  It is helpful for employers to understand the federal wage-hour agency's position on how it will treat multiple employer business relationships, such as staffing agencies, temporary firms, and subcontracts.  

Here are some of the highlights:

1.  The letter distinguishes between "horizontal" relationships and "vertical" relationships.  Horizontal means that an employee works for two employers, but they are related enough that each employer is responsible for the wage-hour issues of the other.  For example, if there is a joint employer relationship between two horizontal employers, then the hours worked in a week are aggregated for overtime purposes.   Vertical means that the employee works for an entity like a staffing agency, but economic realities are that the employee also works for a joint employer that receives the benefit of the employee's labor. 

2.  With respect to horizontal employment, the interpretation surveys cases and regulations and comes up with several bulleted factors that the DOL will consider relevant in deciding whether separately owned businesses may be considered joint employers of an employee:

• who owns the potential joint employers (i.e., does one employer own part or all of the other or do they have any common owners);
  
• do the potential joint employers have any overlapping officers, directors, executives, or managers;
  
• do the potential joint employers share control over operations (e.g., hiring, firing, payroll, advertising, overhead costs);
  
• are the potential joint employers’ operations inter-mingled (for example, is there one administrative operation for both employers, or does the same person schedule and pay the employees regardless of which employer they work for);
  
• does one potential joint employer supervise the work of the other;
  
• do the potential joint employers share supervisory authority for the employee;
  
• do the potential joint employers treat the employees as a pool of employees available
  to both of them;
  
• do the potential joint employers share clients or customers; and
  
• are there any agreements between the potential joint employers. 
  

3.  With respect to vertical employment - like temporary staffing agencies' staff working at a factory owned by another company, the DOL explains that there sometimes is NO actual employment relationship with the joint employer, whereas there usually is an employment relationship with both horizontal employers.  So, the question is whether the DOL should impute - find - a relationship based on "economic realities."
The economic realities test will include an analysis of multiple factors including

• who directs and controls the work
• who directs and controls the employment conditions
• what is the permanency of the relationship - is this a long term contract?
• how repetitive and rote is the work?
• is the work integral to the potential joint employer's business?
• is the work performed on the joint employer's premises?
• does the joint employer perform administrative tasks for the employees that employers normally do?

The Administrator concludes that the joint employer relationship will be scrutinized in future cases to ensure broad coverage:

As a result of continual changes in the structure of workplaces, the possibility that a worker is jointly employed by two or more employers has become more common in recent years. In an effort to ensure that workers receive the protections to which they are entitled and that employers understand their legal obligations, the possibility of joint employment should be regularly considered in FLSA and MSPA cases, particularly where (1) the employee works for two employers who are associated or related in some way with respect to the employee; or (2) the employee’s employer is an intermediary or otherwise provides labor to another employer. 

The result is that employers may be found liable for wage-hour issues for which they are not necessarily aware of, or in control of. Therefore, employers must ensure that they account for these potential liabilities in their business relationships and contracts.