Tuesday, November 24, 2015

The Older Workers Benefit Protection Act Holds Traps for Employers Using Severance Agreements, Including Large Corporations

November 2015

Employers use severance agreements hopefully to secure a clean parting of ways with employees who are let go.  Paying a severance in exchange for a waiver and release of potential legal claims, can be a way to avoid costly litigation.  However, any waiver/release that is not drafted properly can allow employees to take the severance package yet still sue the company!  Nowhere are these concerns more acute than with severance agreements involving employees who are over the age of 40. This is because in order to effectively waive age discrimination claims available to workers 40 and older, a severance agreement must comply with nuanced requirements of the federal Older Workers Benefits Protection Act (OWBPA).  As a federal court case now pending in Minnesota illustrates, complying with the OWBPA can be easier said than done.

The case is a class action lawsuit brought against corporate giant, General Mills.  The plaintiffs were among approximately 850 employees who were terminated as part of a corporate restructuring dubbed by the company as “Project Refuel.”  The plaintiffs, all 40 and older and thus covered by the Age Discrimination in Employment Act, are alleging that the releases they signed as part of their severance agreements, were not “knowing and voluntary,” as required by the OWBPA.  Adding insult to injury, OWBPA regulations do not require a person claiming that a waiver and release was not knowing and voluntary, to pay back the severance or other consideration given in exchange for agreeing not to sue.  As a result, the plaintiffs in this case are keeping the relatively generous severance they received in exchange for signing their severance agreements, while suing to get out of their promises not to sue!

It is important to note that no determination has yet been made regarding whether General Mills’ severance agreements did or did not comply with OWBPA.  The company had tried to argue that its agreements included an arbitration clause and, therefore, the lawsuit should be stayed by the court to allow for arbitration of the plaintiff’s claims.  However, the federal district court denied this request, citing explicit language from the statute which states that disputes over compliance with the OWBPA must be heard in a “court of competent jurisdiction.” Further, the court refused to stay the plaintiffs’ lawsuit while General Mills is appealing its ruling regarding arbitration to the U.S. Court of Appeals.

General Mills may wind up prevailing against these plaintiffs’ attempt to use the OWBPA to get out of the waiver and release agreements they signed; however, it does not change the fact that these individuals are keeping the severances they were offered in exchange for not suing, while still suing the company.  Obviously if the agreements are determined to fail to meet the stringent requirements of the OWBPA – that is, if the court finds that the language is insufficient to make the agreements “knowing and voluntary” – the company will be defending against a class action age discrimination case by hundreds of employees laid off in a sizeable reduction in force, or RIF. 

Attorneys everywhere will no doubt be watching this case since its outcome will have a significant impact on how severance agreements will be drafted for anyone 40 or older.  In the meantime great care should be taken to avoid similar challenges afforded to employees by the complicated and very nuanced, OWBPA.


Questions? Contact the attorneys of our Minneapolis office at (952) 746-1700 or email Christine Beggan at chbeggan@wesselssherman.com for more information.

Monday, November 23, 2015

Proposed New DOL Regulations on Overtime Exemptions Pose Challenges/Offer Opportunities to Employers to Address Other Misclassification Issues

November 2015
By: James B. Sherman, Esq.

The DOL’s proposal to more than double the minimum salary level for white collar workers – from $23,660 to $50,440 – may be finalized and put into effect any day now although expectations are that this will occur in a few months, sometime in the coming spring of 2016. When implemented the new regulations could “reclassify” more than six (6) million workers from exempt, to non-exempt status for purposes of overtime pay. Most employers have at least some employees whose status will change as a result of the new regulations.  However, some employers foresee dozens if not hundreds of their employees becoming non-exempt and thus entitled to overtime pay. The most obvious challenge these new regulations present involves paying previously exempt individuals, time and one-half their “regular rate of pay” for all hours worked in excess of 40 hours in any given workweek.  This will involve tracking all hours worked, meal and possibly rest breaks, sick days, etc. for previously exempt individuals who were paid by salary and worked unrecorded hours.  The failure to track hours worked and/or to pay time and one-half for overtime, will leave unprepared employers open to wage and hour lawsuits that have become so commonplace in recent years. Yet the sweeping changes these new DOL regulations soon will bring, present at least one important opportunity for proactive employersthe best possible circumstances in which to switch potentially misclassified employees from exempt, to non-exempt, without causing a noticeable stir.

In today’s legal environment, where class action wage and hour lawsuits abound, it is hard to find a single employer that can say with confidence that its employees all are properly classified exempt/non-exempt from FLSA’s and related state law overtime requirements. Indeed, a great number of employers secretly acknowledge known problems with at least some of their employee classifications.  However, the reason these employers do not act to correct the situation by reclassifying questionable workers currently treated as exempt, is that doing so will expose the fact that they have not been paying overtime to the employee(s) in question.  The rationale is somewhat understandable: why make a change that can result in claims for overtime going back 2-3 years (the potential limitations period under the FLSA)?  But this “ignorance is bliss” approach is likely to work only temporarily, as wage and hour lawsuits continue to grow at an alarming rate and plaintiff lawyers sniff out misclassified workers.  So while the new DOL regulations surely pose concerns for most employers, there may be no better time than now to bite the bullet and make changes to questionably classified workers amid the tumultuous reclassification of some six (6) million workers resulting from the new DOL regulations!

Frankly it does not matter whether the new regulations will have a specific impact on a particular worker or class of jobs.  The important thing is that sweeping changes are being made by the DOL.  Moving employees from exempt to non-exempt to fix past misclassification of their status, at the same time as changes to the regulations are causing massive numbers of workers to be reclassified, provides an easy answer for the change.  Employers asked by an employee why he or she was paid by salary yesterday but must now punch a time clock or fill out time cards, or why the employee now receives overtime pay but did not in the past, will have a simple, honest answer: the U.S. Department of Labor is changing the regulations and we as a company are reacting to those changes. 

The last time the DOL overtime regulations were changed (the first time in 50 years) was in 2004, during the Bush administration.  We assisted numerous employers in seizing the opportunity created by those changes, to make changes of their own to fix problems with their classification of exempt employees who probably should have been treated as non-exempt employees all along and paid overtime.  While there are no guarantees that this approach will not cause affected employees to ask questions, coupling these changes with DOL changes to its wage and hour regulations resulted in relatively smooth sailing and, more importantly, no lawsuits.  Today, 10 years later, these employers sit comfortably in having put their exposure to wage and hour lawsuits over employee misclassification and overtime claims behind them.

There are a number of additional measures an employer can take to minimize the chance of being challenged when reclassifying employees from exempt to non-exempt.  Normally a basic strategy can be prepared through a consultation meeting of no more than an hour or two.  For assistance with preparing for the new DOL regulations and/or to take advantage of their changes to evaluate a strategy to fix problematic exempt employee classifications, feel free to contact any of our offices:

Minneapolis, MN – James Sherman (952) 746-1700, jasherman@wesselssherman.com
St. Charles, IL – Jennifer Murphy (630) 377-1554, jemurphy@wesselssherman.com  
Oconomowoc, WI – Alan Seneczko (262) 560-9696, alseneczko@wesselssherman.com  
Davenport, IA – Joseph Laverty (563) 333-9102, jolaverty@wesselssherman.com

Friday, November 20, 2015

NLRB Gone Wild: Redefining Joint Employers, Confidentiality of Investigations, and Arbitration Agreements with Class Action Waivers

November 2015

The NLRB has been making headlines time and again for its radical departures from years of precedent, impacting unionized and non-union employers alike, from expanding the definition of who will be considered a “joint employer” to limiting employers’ ability to keep their investigations confidential, to preventing employers from entering into arbitration agreements with their employees that require settling disputes individually. The following are just some of the recent drastic actions taken by the NLRB and what they mean for employers.  

NLRB Expands Definition of “Joint Employer”: In a departure from its own decades-old precedent, the NLRB has redefined—with a much broader definition—who will be considered a “joint employer.” Under this new standard, it is sufficient that the employer has the right to control the terms and conditions of employment, even if the employer does not actually exercise that right. Further, this control can be exercised indirectly, such as through an intermediary. The Board’s newly articulated definition leaves its judges wide latitude to determine whether two business entities are “joint employers” based on theoretical hypotheses of potential control, rather than any demonstrated control as was required under past precedent.

What does this mean for employers? No doubt more employers will be considered as joint employers for purposes of collective bargaining, joint liability for unfair labor practices and breaches of collective bargaining agreements, and economic pressure, such as strikes, pickets, and boycotts.

NLRB Inhibits Employers’ Ability to Keep Investigations Confidential: In two separate decisions, the NLRB eroded the ability of employers to keep internal investigations of employee conduct, etc. confidential. In one decision, the NLRB reversed its long-standing precedent that an employer usually needn’t oblige a request that it share witness statements with a union representative. The new standard now, is that witness statements must be provided to a union upon request, unless the employer can demonstrate “a legitimate and substantial confidentiality interest” by showing that the “witness[es] need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, or there is need to prevent a cover up.” Even where an employer meets this high burden the NLRB will weigh the employer’s confidentiality interest against the union’s need for the information.

In the second, related decision the NLRB held that a general policy in an employee handbook or work rule requiring confidentiality in investigations, violates employees’ “Section 7 rights” to “engage in . . . concerted activities for the purpose of . . . mutual aid or protection . . . .” Specifically implicated in this case is the right of employees to discuss potential discipline among themselves and/or with a union or other representative. Under the new rule an employer may not maintain a broad policy, but may require confidentiality only on a case-by-case basis where it can show that “corruption of its investigation would likely occur without confidentiality.” Examples cited in the Board’s decision include circumstances where “witnesses need protection, evidence is in danger of being destroyed, testimony is in danger of being fabricated, [or] there is a need to prevent a cover up.”

NLRB Continues to Invalidate Arbitral Class Action Waivers: The NLRB has continued to apply its controversial holding that arbitration agreements that waive the right to engage in class actions are illegal and unenforceable under the National Labor Relations Act. The Board’s rather questionable rationale, which thankfully has yet to be adopted by any court on appeal, essentially treats the right of employees to bring class-action lawsuits the same as the right to join together in a strike. In other words, suing is just another form of “concerted activity” protected by federal labor law.

The growing number of employers using arbitration agreements that require employees to pursue grievances individually and therefore prohibit class grievances, now face the NLRB declaring their agreements unlawful. The issue seems destined for ultimate determination by the U.S. Supreme Court.

For assistance with these or other NLRB issues, contact Jim Sherman (jasherman@wesselssherman.com)  in our Minneapolis office at (952) 756-1700.

Thursday, November 12, 2015

NLRB Proclaims Confidentiality Requirements Unlawful

November 2015
By Alan E. Seneczko

Having reviewed countless employee handbooks over the past 30+ years, I have found that it is not uncommon for employers to maintain policies that require employees to keep investigations of complaints of sexual harassment and other disciplinary matters confidential. Although the reasons for doing so often vary, most employers contend that this requirement is necessary due to the sensitivity of the subject matter and to protect the identity of potential witnesses. According to the NLRB, such generalized concerns are not enough to prevent such a policy from unlawfully infringing on employees’ right to discuss the terms and conditions of their employment with their fellow employees.

In The Boeing Company, 382 NLRB No. 195 (Aug. 27, 2015), the Board reviewed Boeing’s requirement that all employees involved in human resources investigations not discuss the matter with any other employee, except company officials conducting the investigation or their union representative. The Board found that such a blanket confidentiality policy violated Section 8(a)(1) and unlawfully interfered with employees’ Section 7 right to engage in concerted activity. In doing so, it rejected Boeing’s contention that the policy was necessary to protect witnesses, victims or employees under investigation from retaliation or harassment; to prevent the spread of unfounded rumors; to ensure the integrity of the investigation; and, to encourage employees with complaints to come forward. The Board disagreed, holding that an employer may only prohibit employee discussion of an investigation when its need for confidentiality with respect to that specific investigation outweighed employees’ Section 7 rights. In other words, in order to maintain such a requirement, an employer must be able to demonstrate legitimate concerns about witness intimidation or harassment, the destruction of evidence or other misconduct that might compromise the integrity of its investigation.

With this and all of its other recent decisions concerning employee handbook provisions, “no gossip” policies, interpersonal relations, and social media postings, the NLRB is continuing its aggressive and expanding effort to regulate all aspects of the workplace – and an employer’s ability to manage it, regardless of whether it is a union or non-union environment. Although the NLRB may not be knocking on your door today, it would be prudent to keep these concepts in mind the next time you are reviewing your employee handbook and other policies.

Questions? Please contact Attorney Alan E. Seneczko at (262) 560-9696, or email alseneczko@wesselssherman.com.

ACA FAQ of the Month: Automatic Enrollment and the Contraception Mandate

November 2015
By Peter E. Hansen

Stop me if you’ve heard this one - the federal government repealed one provision of the Affordable Care Act, and the United States Supreme Court will re-examine another provision. This time, automatic enrollment is out, and the contraception mandate is up for review.

Automatic enrollment would have required employers with 200 or more full-time employees to automatically enroll new full-time employees in a health plan unless the employee affirmatively opted out of coverage. The Department of Labor never actually enforced the regulation due to confusion over how employers would implement automatic enrollment, stating that it would issue guidance at a later date. That guidance never came and, after a few years of confusion, President Obama officially repealed the provision on November 2.

Regarding the contraception mandate, you may recall that the United States Supreme Court recently addressed this issue in Burwell v. Hobby Lobby Stores Inc., holding that certain religious employers (including some for-profit corporations) are exempt from portions of the ACA’s birth control mandate. Of course, this could never be the final decision on one of the more controversial portions of the ACA, and now the Supreme Court will now decide how religious employers that oppose covering birth control can register their objections and opt out of offering birth control.

I usually try to end these FAQs with some perspective, so let’s try this: Winston Churchill once said, “to improve is to change; to be perfect is to change often.” I suppose that this bodes well for the ever-changing ACA, but I’m not sure how much help that will be to employers trying to comply with a complex law that Congress, the President, and the Supreme Court keep changing. As always, stay tuned.

Questions? Suggestion for a future ACA FAQ of the Month? Please contact Attorney Peter E. Hansen at (262) 560-9696, or email pehansen@wesselssherman.com.

Fired Muslim Truck Drivers Win Big Jury Award in Religious Discrimination Suit

November 2015
By Nancy E. Joerg

This disastrous and unfortunate EEOC case involved an unsuspecting trucking company employer (Star Transport, Inc. based in Morton, Illinois) that fired two Muslim truck drivers because they absolutely refused, on religious grounds, to make beer deliveries.

Star Transport believed that it had the legal right to fire the two Muslim truck drivers when they would not make the required beer deliveries to company customers. The Equal Employment Opportunity Commission (EEOC) represented the two Muslim truck drivers, arguing religious discrimination. The EEOC argued to a jury that Star Transport, Inc. should have reasonably accommodated the religious beliefs of the two Muslim employees.

The EEOC argued (and won) that Star Transport could easily have “swapped loads” between company truck drivers with very little administrative hassle. As emphasized by the EEOC, there were many other drivers who would and could deliver the beer at issue.

The court (Northern District of Illinois) noted that Star Transport had indeed often swapped loads between its drivers. This fact, of course, injured Star Transport’s arguments that Star Transport is legally entitled to maintain a policy of “forced dispatch.”

The EEOC was triumphant – they won $240,000 in damages for the two Muslim truck drivers. The jury also awarded the two truck drivers $20,000 each in compensatory damages and $100,000 each in punitive damages. The judge also awarded each about $1,500 in back pay.

After announcing the big win, EEOC General Counsel David Lopez trumpeted: “EEOC is proud to support the rights of workers to equal treatment in the workplace without having to sacrifice their religious beliefs or practices. This is fundamental to the American principles of religious freedom and tolerance.”

Learning from this case, employers should carefully weigh the risks of refusing to make religious accommodations for their employees, especially when they place a very light administrative and operational burden on the company. Religious discrimination cases are on the rise.

Questions? Call Attorney Nancy E. Joerg of Wessels Sherman’s St. Charles, Illinois office: 630-377-1554 or email her at najoerg@wesselssherman.com.

Americans with Disabilities Act – “Key Terms to Know”


November 2015
By Walter J. Liszka, Esq.

As every employer knows, as in all areas of the law, employment and labor law has seen the development of “Terms of Art” that affect segmented portions of the legal landscape. In the world of disability discrimination (Americans with Disabilities Act issues) there are numerous phrases that have taken on a special meaning and have become true "Terms of Art.” If supervisors and human resources personnel do not have a clear understanding and “working knowledge” of these key phrases, there may be issues of non-compliance with federal disability laws and state disability laws. The following are some of those “Terms of Art.”

1. Interactive Process:

It is an absolute necessity that employers and employees enter into an “interactive process” when any issue arises with regard to disability discrimination. The “interactive process” is a good faith communication between an employer and the involved employee to explore whether or not there is a need for a “reasonable accommodation” to allow the employee to effectively perform “the essential functions of the job” and to establish what those accommodations must be. The process between the employer and the involved employee must be interactive – i.e. both parties must participate with each other in the process. As well, the process needs to be mutual – i.e. one side does not have the right to break down the communication process and the process must be honest and clear about the information sought by both sides from the other side. The process must have its goal the achievement of a reasonable and good faith approach that both the employer and involved employee will buy into to provide a reasonable accommodation to an individual employee who has a disability. It is extremely important for both sides in the “interactive process” to not only comply with the letter of the law but with the “spirit of the law.”

2. Essential Job Functions:

It is an absolute necessity that there be a clear definition of the essential job functions which are the fundamental job duties of a position. These “essential job functions or duties” must be clearly defined in very straight forward and simple English (i.e. a receptionist position exists so someone may answer the phone and greet guests; a maintenance mechanic position exists so that an individual using the required tools can repair conveyor systems and machines, etc.). It is extremely important that if there are special skills or tools that are needed to perform the essential functions of the job, that those details and requirements are contained in a current and accurate job description.

3. Individual Assessment:


Each case of alleged disability and reasonable accommodation is unique and individualized. Even though a similar incident may have been dealt with in the past, this does not mean that the current situation does not present extremely unique circumstances that must be viewed critically and independently and does not mean that how we handled the last situation will apply to this case. Each case will have individualized and unique requirements involving the job’s essential functions, any employee restrictions and the particular needs of that department. All of this must be an individual assessment and must not delve into a “cookie cutter” application.

4. Job Restrictions:

It is an absolute necessity that the employer and the involved employee have a clear understanding of the disability or medical condition and focus on the nature of the restrictions, not the disability or medical condition itself. The fact that the individual may be suffering from a case of depression is less important than the reasonable accommodations that may be associated with that condition (for example, schedule changes or reduction in hours or change of work location). It is extremely important that both the employer and the involved employee have open and clear discussion with regard to the proposed work restrictions and how long they will last, are “hours of work” constrained or limited, etc.

5. Reasonable Accommodation:

A reasonable accommodation is a modification or adjustment in the employee’s work that allows the employee to perform the essential functions of the job but in maybe a little different way. The key terminology is that the “accommodation must be reasonable and effective.” While the term “reasonable” is, by nature, subjective and extremely difficult to define in an objective sense, it arises from a creative and diligent logical and fair analysis that is participated in by both the employee and the employer. As well, any accommodation if it is reasonable must also be “effective” in allowing the employee to perform the job. If an individual is suffering from a mental or psychological disability, would the providing of a new desk and desk chair be “reasonable and effective?” While the providing of a new desk and chair might be “reasonable,” will it be “effective” to allow the employee with such a disorder to perform the essential functions of the job? Again, while the accommodation may be “reasonable,” it may not be “effective,” and it must be both!

Obviously, the five (5) terms referenced in this article may not be the only appropriate “Terms of Art” for complying with the ADA, but they are certainly five (5) very important terms that must be clearly understood to achieve compliance and lower potential “employer liability.”


Questions? Contact Walter J. Liszka, Managing Shareholder of the Chicago office of Wessels Sherman at waliszka@wesselssherman.com or (312) 629-9300.