By: Philip M. Keating, Esquire
Bean, Kinney & Korman, P.C.
Arlington, Virginia

We all have that list of projects that we know need attention, but always seem to be pushed aside due to more pressing concerns. The following is a brief discussion of some of these issues that need to rise to the level of pressing concerns as a result of trends in employment law litigation and renewed enforcement efforts by government agencies.

Exempt Classifications and FLSA Compliance

The fastest growing area of employment related litigation involves the Fair Labor Standards Act (FLSA). Major factors in this boom in litigation are the statutory award of attorneys’ fees to plaintiffs’ attorneys, the fact that the FLSA places all record keeping and compliance obligations on the employer, and the doubling and tripling, in some cases, of the damages awarded under the law.

Cases under the FLSA include those involving questions of what is and is not compensable time. These disputes may include questions of whether the time employees are preparing for and cleaning up after work is compensable, whether certain travel time is compensable, whether lunch brakes are compensable, and whether time spent away from the office but the employee is “on call” is compensable. For example, there are many instances in the commercial and residential real estate industry where building engineers, property managers, and maintenance personnel are required to be on call and able to report to their property within a specified period of time if an emergency arises. Depending on the precise terms of the on call obligations, this time may be compensable under the FLSA. This, in turn, may have a significant impact if the on call time pushes the non-exempt employee beyond 40 hours in a week and into overtime.

The other major area of litigation involves whether employees are entitled to overtime payments for work in excess of 40 hours in a week. The FLSA is written such that employees are entitled to overtime unless they qualify for one of the designated overtime exemptions (professional, executive, administrative, and outside sales). The standards for the overtime exemptions have been modified in recent years, and technology has changed certain types of jobs such that positions that once were assumed to be exempt no longer may be. Particular areas of dispute always include first line supervisory positions where the employee has some supervisory functions, but also performs the job duties of the position being supervised. As far as technology changing job obligations, the most prominent examples are some financial services industry jobs where employees now are working in call centers utilizing scripts that remove their exercise of independent discretion. As a result, job classifications that once were considered exempt now are non-exempt, and entitled to overtime.

Given this situation, it is important that employers take the time to review how they classify employees under the exempt classifications. It also is important to review and, if needed, modify time keeping procedures so that accurate records exist. Finally, managers in the field must understand the employer’s policies on working hours, overtime, and record keeping.

Employee Handbooks and Policies

Employers have the right to set the policies and procedures that govern the workplace. Not only do handbooks and other policy documents serve an important human resources purpose, but they are vitally important documents in the event of litigation. In particular, employment discrimination litigation is, by definition, comparative in nature. Thus, the existence of an established policy that the employer can demonstrate has been followed consistently is a vital piece of evidence and may well be decisive in most discrimination case.

What employers need to do, however, is to review their handbooks and policies periodically to be certain the policies are current and appropriate. Secondly and more importantly, if you have policies that you are not following, change them now. Areas of particular concern include the interaction of various leave policies, and how to coordinate issues involving the Americans with Disabilities Act, the Family and Medical Leave Act, and any state and local laws on these topics. Furthermore, it always is important that employers review their sexual harassment complaint reporting and investigation procedure to be certain it is effective and followed.

Non-solicitation and Non-distribution Policies

If you are in industry in which you suspect union organizing activity may occur, you need to consider what your company policies are concerning solicitation of employees and distribution of non-work literature by and/or to employees. Specifically, if a company allows employees to solicit fellow employees, or outside groups to solicit employees, for non-work causes such as PTA candy and wrapping paper sales, you may well be unable to prohibit them from soliciting for union membership. The same is true for rules concerning outside groups soliciting on company property. If the Employee Free Choice Act proceeds through the U.S. Congress and becomes law, union organizing will become much easier and more employers in a wider range of industries will confront these challenges.

The implementation and enforcement of non-solicitation and non-distribution policies is an extremely important issue for all employers, not just those in traditional labor intensive fields. In fact, jobs in the financial services industry such a mortgage lending and other call center type positions have been identified as ripe for union organizing. Moreover, shopping center and office building owners and property managers have an extremely legitimate business need to control the environment experienced by customers and tenants. However, it also is an area that has been the subject of much litigation before the National Labor Relations Board (“NLRB”) and in the federal courts.

In Lechmere, Inc. v. NLRB, 502 U.S. 527 (1992), the U.S. Supreme Court ruled that private property owners may prohibit union organizers from picketing or distributing literature unless the union can prove there is no other reasonable means of access to the targeted employees, or that the property owner was discriminating against union activity. However, in California, the U.S. Court of Appeals for the Ninth Circuit ruled that the California constitution mandates that free speech rights prevail over private property rights, and thereby allowed literature distribution by unions in shopping centers. Glendale Associates, Ltd. v. NLRB, 347 F. 3d 1145 (9th Cir., 2003) Unfortunately, what these cases make clear is that what employers and property owners are and are not permitted to do depends on location.

It also is important to update non-solicitation and non-distribution policies to account for new methods of communication such as the company email system, or other electronic sites that may now essentially serve as the company bulletin board. While from the pre-Blackberry and Twitter age, the decision of the U.S. Court of Appeals for the Seventh Circuit in Guardian Industries Corp. v. NLRB, 49 F. 3d 317 (7th Cir. 317) is instructive. The Court stated that if the employer had allowed announcements on the company bulletin board of meetings for groups such as the Red Cross, Boy Scouts, VFW or churches, the prohibition on posting information on a union meeting would violate the National Labor Relations Act (NLRA). In contrast, allowing the posting of notices for the sale of used cars, swap meets, or a fund raising cup cake sale, while prohibiting the union organizing notice, would not violate the NLRA because they were not invitations to meetings. Obviously these cases are very fact specific and different courts, and certainly the NLRB, may interpret the fact patterns differently. Nevertheless, the essential point is that property owners and employers should review the current state of the law in the states in which they operate, and modify their policies as needed.

Non-competition Agreements

Many companies regularly require new employees, and in some cases existing employees, to sign non-competition agreements that prevent the employee from working for a competitor for a specified length of time following separation from employment. Such agreements are an important means of protecting the legitimate business interest of the current employer, but the agreements are controversial. The degree to which these agreements are enforceable is a function of state law, courts in many states will enforce the agreements if, and only if, the terms of the non-competition are very specific to the particular employee and narrowly tailored to fit the specific business situation of the employer. California, on the other hand, prohibits non-competition agreements, except in very narrow circumstances such as the sale of the goodwill of a business by a business owner.

Employers wishing to implement non-competition agreements must carefully review the court decisions in the states in which they operate. What is enforceable in one state may not be in another. In addition, employers need to be aware of new court decisions on non-competition agreement issues, as these decisions frequently modify the standards for enforceability.

I-9 Audits

The new emphasis of immigration enforcement by the U.S. Department of Homeland Security is on employers who are suspected of employing individuals not authorized for employment in the United States. The method of enforcement is not new, but a practice that had gone out of fashion for many years. That is, the U.S. Department of Homeland Security and the U.S. Department of Labor are now conducting a significant number of I-9 audits of employers pursuant to the Immigration Reform and Control Act of 1986 (IRCA). Some of these audits are based on suspicion and ongoing investigations, and some are random. Nonetheless, employers should take the time to self-audit their I-9 files and be certain they are in order.

An area of concern involving I-9 audits involves contractors and sub-contractors. U.S. immigration law does not allow employers to avoid the obligations of IRCA by classifying individuals as contractors when they properly are considered employees. Furthermore, employers should take steps to require and verify that their contractors and sub-contractors are complying with IRCA.

Finally, companies that are federal government contractors now are required to utilize the
E-Verify system as part of their hiring process as a supplement to the I-9 verification. This becomes complicated for companies that have both federal contract accounts and private sector accounts. Employees assigned to work on federal contracts must be cleared through the E-Verify process, regardless of their date of hire. As a result, there are examples of long-term employees who either are grandfathered under IRCA or who presented documentation that appeared genuine on its face, thereby allowing the employer to satisfy its I-9 obligations, but who are rejected by the E-Verify system. Assuming the rejection is not an error, the employer then has knowledge that the employee is not authorized for employment and cannot continue the employment unless the employee corrects the situation. A number of states also have laws requiring the use of the E-Verify system if a company is going to do business with that state.

In conclusion, a regular review of employment practices and policies should be a vital part of every employer’s ongoing operations and human resources functions. Court and regulatory decisions, as well as the latest litigation trends, can have substantial impact on a business. Preparation and effective implementation are the key elements to successful outcomes.

About Philip Keating
Philip Keating is a Shareholder of Bean, Kinney & Korman, P.C. based in Arlington, VA. Keating practices primarily in the areas of labor, employment and immigration law. He has extensive experience in matters before the EEOC, Department of Labor, U.S. Citizenship and Immigration Services, Federal and State Courts, and various state, county and local agencies. For more information, visit http://www.beankinney.com.