U.S. Supreme Court Delays Hearing on Cases that may Decide whether Class Action Rights can be Waived

The U.S. Supreme Court may have accepted a group of cases that will determine whether companies can require their workers to waive class action rights, but that doesn’t mean it’ll be deciding this important question anytime soon. After accepting the cases for review in January, the Court announced that it will not hold oral arguments this term. The cases will be argued in Fall 2017 and decided some time thereafter, perhaps well into 2018.

The significance of this is patent. First, it suggests that the Court may be divided on the class action waiver question and requires a deciding voter. The Court now has only 8 justices in the wake of the Republicans’ 2016 refusal to consider President Obama’s nominee to the bench. They won’t do the same with their own party’s nominee(s), and the Court will surely have 9 members soon. Second, the delay means that uncertainty over class action waivers in employment agreements will remain for some time. This will likely encourage litigation in lower courts over the issue and may cause decisions to be delayed.

It is common today for companies to have their workers sign agreements that include arbitration provisions requiring lawsuits to be pursued individually. This is sometimes impractical due to the small size of a claim, and an employee or independent contractor therefore may seek to bring suit on behalf of others. The Supreme Court has previously found that mandatory arbitration agreements are generally enforceable. It’s now being asked to resolve lower court disagreement about whether federal law allows companies to avoid class action lawsuits through arbitration clauses.

Minimum Wage Now at $11 Per Hour

Effective January 1, 2017, the minimum wage for Massachusetts workers rose from $10 to $11 per hour. The new rate applies to almost all employees. For employees who regularly receive tips as part of their pay, the minimum rate is $3.75/hour. Those workers’ total compensation with tips included must be at least $11/hour. All categories of workers remain eligible for overtime pay at 1.5 times their normal rates of pay for hours worked above 40 in a workweek. Some workers are exempt from overtime requirements based on job classifications and administrative requirements.

SJC Holds that Second Element of Independent Contractor Test is Preempted by Federal Law

The Massachusetts Supreme Judicial Court today weighed in on the hot topic whether and to what extent the state’s Independent Contractor Statute is exempted as applied to courier drivers and the companies they work for. Like a federal court that ruled on the same question last year, the SJC concluded that the second of the law’s three elements is preempted by the Federal Aviation Administration Authorization Act (FAAAA).

Legal battle over the applicability of Mass. Gen. L. ch. 149, §148B has raged for years, with courier companies seeking to avoid application of what’s referred to as Prong B of the statute – the requirement that all individuals who perform services within a company’s regular course of business be classified as employees. The companies rely on the FAAAA’s restriction against state laws that impact the prices, routes or services of covered businesses. Because Prong B is so broad, they contend, it effectively bars all uses of contractors to make deliveries. This, in turn, forces courier companies to eliminate services, increase costs, alter routes, and make other business changes.

Though two state judges had previously ruled that the entire Independent Contractor Statute was preempted by the FAAAA, the SJC rejected this approach. The law’s first and third elements thus remain intact. In order to avoid classifying their drivers as employees, courier companies must demonstrate that they do not control the performance of their work and that the drivers are customarily engaged in an independent business. There are currently several active cases on this topic, including two class action suits being handled by my office.

New Overtime Rule Blocked by Federal Judge

In a surprising decision, a judge in the U.S. District Court for Texas not only granted an injunction to 21 plaintiff states that sued to block the U.S. Department of Labor’s overtime updates set to take effect December 1, 2016, he applied his ruling to all 50 states. The result is that, at least for now, employers in Massachusetts need not update pay scales. As long as executive, administrative or professional employees make at least $455/week — the minimum pay requirement now in effect — they will remain exempt from overtime pay requirements.

Judge Amos Mazzant reasoned that the Department of Labor (DOL) could not update the minimum salaries for executives, et. al., because Congress clearly intended the exemption to turn on a duties and not a salary test. Each of the three affected categories or workers carries with it specific criteria for determining applicability, commonly referred to as duties tests. While Judge Mazzant called the Congressional intent in this regard to be so clear that it blocks the DOL from increasing the minimum salary requirement, he did not address the question why or how a DOL regulation has, apparently properly, for years included a minimum salary component for executive, administrative and professional worker overtime exemptions. Indeed, the new DOL rule that was to take effect December 1 seeks to update the minimum salary from $455 to $913 weekly and to implement an automatic pay adjustment mechanism going forward. The court’s November 21, 2016 decision in State of Nevada v. U.S. Department of Labor leaves the old threshold in place.

Legislator will Try Again to Impose Liability on Companies for Wage Violations by Entities they Contract With

After failing to pass what’s referred to as a wage theft bill in the recently ended legislative session, the bill’s sponsor is not giving up. According to published reports, Sen. Sal DiDomenico will reintroduce the controversial measure when legislators go back into session in January.

The proposal would make employers that contract with third parties to have labor performed or services provided to them guarantors of the payment of wages earned by the employees of those third parties. It appears to make such employers, in effect, co-employers of the third party’s employees. If, then, the third party doesn’t pay its workers, the company that received the benefit of the workers’ services would be liable. The proposal does not make an exception for companies that pay whatever is due under their third-party contracts. The effect could be, it seems, that company A pays for labor provided to it by company B and is nonetheless liable directly to the company B’s employees because it failed to remit wages earned by them. This could mean company A pays the same penalties — triple damages and legal fees — as it would if it failed to pay its own employees for work performed.

The statute is apparently aimed at upending a practice under which large companies hire third parties to be employers of workers who actually perform services for them directly. Whether it will ever becomes law remains to be seen.

Not so Fast, Department of Labor — Here come the Republicans (Again)

In a move that once again smacks of partisan politics, Texas and Nevada are leading a 21-state challenge to the U.S. Department of Labor’s recent update to overtime regulations for white collar workers. Not surprisingly, 20 are led by Republican governors. The suit claims that President Obama’s Department of Labor exceeded its authority in enacting the regulatory updates, which are scheduled to take effect December 1, 2016. Its focus appears to be the procedure employed to make the changes, though Republican leaders are plainly more concerned with the new rule’s substance.

The Department announced earlier this year that, after lengthy study that included the review of almost 300,000 comments to the proposed regulatory updates, the following changes would take effect later this year:

  1. An increase in the minimum salary that must be paid to white collar workers who otherwise are exempt from overtime pay requirements, from $455/week to $913/week ($47,476 per year). Workers who make less than this amount must receive overtime, regardless of other factors;
  2. An increase in the ‘highly paid’ employee exemption for white collar workers from $100,000/year to $134,004/year. Workers whose earnings exceed this amount will be exempt from overtime pay; and
  3. A mechanism for automatically adjusting the minimum and highly paid thresholds to keep up with inflation.

Opponents of the changes are concerned with their effect on business; they predict dire consequences if the rules are implemented. Joining the 21 states in suing to block the new regulations is a coalition of 50 businesses led by the U.S. Chamber of Commerce. Not surprisingly, both suits were filed in Texas for the obvious reason that the litigants hope to again find a sympathetic ear in a court that has previously shown its predilection against President Obama’s initiatives.

New Pay Equity Law Means Employers Must Prevent Gender-Based Wage Disparities

In the wake of passage of the new pay equity law in Massachusetts, employers again have work to do. To prevent getting caught up in what is certain to be another fertile area of employment litigation, both individually and on class-wide bases, employers must review current pay structures, implement new policies, and train anyone involved in the hiring process. Fortunately, they’ll have plenty of time to do so and those that comply may have an absolute defense to liability under the equal pay statute.

The law was passed at the end of the 2016 legislative session and signed into law by Gov. Baker. It replaces an existing law that, though it nominally banned pay discrimination based on sex, was a virtual nullity due to evidentiary hurdles set up by the Supreme Judicial Court. Under the new law, an employer that pays employees less based on gender will face liability for double the amount of any underpayments, plus plaintiffs’ legal fees and costs. Complaining employees of either gender will succeed if they prove that the work in question is comparable – that is, it “requires substantially similar skill, effort and responsibility and is performed under similar working conditions.” Job titles are irrelevant. Where workers of different genders perform jobs that satisfy these criteria and one is paid less than the other, employers will be exposed to lawsuits.

Fortunately for employers, the statute won’t take effect until July 1, 2018. As additional protection, the legislature included language to protect employers that perform self-evaluations of their pay practices and make reasonable progress toward eliminating any they may identify. The Massachusetts Attorney General may issue regulations to help guide self-evaluations, but employers are free to devise their own processes to do so. Because the new law bars employers from asking applicants about salary histories prior to a job offer, all should review job applications to remove any questions on the subject and train managers not to inquire about salaries during job interviews. Policies that may bar employees from discussing their salaries must also be amended as they will become illegal under the equal pay law.

U.S. Dept. of Labor Issues New Rules for Overtime Pay

Effective December 1, 2016, new rules will be in effect to cover overtime pay requirements. The long-anticipated changes were the subject of numerous comments after they were proposed in 2015. They focus on updating the salary thresholds for overtime pay purposes and include the following:

  1.  An increase in the minimum salary that must be paid to white collar workers who otherwise are exempt from overtime pay requirements, from $455/week to $913/week ($47,476 per year). Workers who make less than these amounts must receive overtime, regardless of other factors;
  2. An increase in the ‘highly paid’ employee exemption for white collar workers from $100,000/year to $134,004/year. Workers whose earnings exceed these amounts will be exempt from overtime pay; and
  3. A mechanism for automatically adjusting the minimum and highly paid thresholds to keep up with inflation.

The Department expects the changes to cause 4 million new workers to qualify for overtime pay. The changes have been in the works since 2014, when President Obama instructed that the regulations be updated. After publishing proposed rules, the Department received nearly 300,000 comments.

 

Wage Act may not Require Pay for All Hours of Work

In a recent decision that some plaintiff-side employment lawyers found surprising and perhaps troubling, a judge of the superior court held that an employer does not need to pay for all hours that its employees work. The employer did not violate the Massachusetts Wage Act, Justice Robert Gordon found on February 5, because it honored agreements it entered with its workers and did not transgress minimum wage or overtime laws. He wrote,

“[A]n employer and employee who agree at the outset of their contract that the employee will be paid at an hourly rate for selected tasks, but not for all work, are plainly not violating the Wage Act when the employee is paid in accordance with this agreed understanding. To the contrary, an employer who pays an employee as he has agreed to be compensated—provided (as here) that it complies with all applicable minimum wage and overtime laws—has fulfilled the core aspiration of this statute.”

The facts of the case are important. The plaintiff sought to represent a class of auto mechanics who work on a rate pay basis — that is, they are paid specific hours at agreed rates for work they perform on automobiles. While this arrangement resulted in wages in excess of minimum requirements, it also caused the mechanics to necessarily perform daily task for which they were not paid, such as filing paperwork and cleaning their work stations. They also received no pay for down time despite being required to be present for certain hours each day. Because the employer and employee agreed to this arrangement and did not violate other laws, the court found that it did not violate the Wage Act.

The decision may be an important one for employers who do not pay their workers on either hourly or salary bases, such as those that pay only sales commissions or base employee pay on deliveries of good or services. It addresses a previously open question for those employers that is likely to be revisited by appellate courts in the future. The case is Salerno v. Baystate Ford and is pending in Middlesex Superior Court.

 

Massachusetts Attorney General Collects Pay Disparity Data from Employers

In apparent anticipation of proposed changes the state legislature is now considering making to the Massachusetts Equal Pay Act – or, perhaps, in an effort to help determine whether and what changes may make sense – the Massachusetts Attorney General is reportedly using its general records inspection authority to demand a wide range of new employee data.

A recent article by Massachusetts Lawyers Weekly reports that the requests differ from those normally sent by the AG. They seek more demographic data and job details with an apparent focus on whether pay disparities based on gender and/or race exist. The requests ask for information such as employee names, genders, ethnicities, job titles, pay, and job descriptions.

The AG has general authority to seek certain payroll and related information from Massachusetts employers. It typically does so as parts of audits or investigations that may be initiated by specific employee complaints about pay practices. Employers from whom such information is sought are generally required by statute to provide it, and it therefore behooves them to ensure that the full and complete records required by law are properly maintained. Penalties and other damages can flow from failures to do so.