SCOTUS Raises Bar on Contract Discrimination Claims 2020-03-23T14:00:00-06:00

Posted on March 23, 2020

Today the U.S. Supreme Court raised the bar on a wide-ranging Civil War Era statute that prohibits discrimination in the making and enforcement of contracts. Comcast Corp. v. National Association of African-American Owned Media (No. 18-1171, March 23, 2020)

Congress enacted 42 U.S.C. Section 1981 in 1866 in order to ensure that former slaves enjoyed the same rights to enter into contracts as did non-slaves. Section 1981 specifically prohibits discrimination in the making and enforcement of contracts, and the prohibition goes beyond employment contracts to all forms of contract. Congress amended Section 1981 in 1991 to ensure an expansive definition of what it means to make or enforce a contract.

An African-American owned studio sued Comcast for $20 billion, claiming that Comcast refused to air its programming content because the studio was African-American owned. Comcast moved to dismiss, arguing that the complaint only alleged that the studio owner’s race was “a” reason for Comcast’s refusal to contract with the studio. Comcast argued that Section 1981 requires a plaintiff to plead and prove that race was the “but-for” cause of the discriminatory act. Proof that race was “the” cause of the conduct rather than merely “a” cause is far more exacting and difficult for plaintiffs. The district court agreed with Comcast and dismissed the case. The Ninth Circuit disagreed, holding that “but-for” causation is not required under Section 1981. The Supreme Court unanimously reversed the Ninth Circuit and concluded that “but-for” causation is required at the pleading stage, summary judgment, and trial.

Aside from the obvious fact that Comcast now makes Section 1981 cases harder to pursue, it is noteworthy for several other points. First, this was an appeal from a granted motion to dismiss. The case reinforces the need for plaintiffs in Section 1981 cases to specifically plead but-for causation and the detailed facts that would support it. Second, the Court punted on an issue that arises regularly in Section 1981 cases—whether Section 1981 prohibits discrimination in the process of entering into contracts or just in the outcomes of contract processes. Third, and most interesting, Justice Gorsuch’s opinion for the entire Court seems to tee up an argument that there is, in reality, no private right of action under Section 1981. The opinion repeatedly points out that the Section 1981 private right of action was a creature of the Court’s own creation in 1975 rather than a product of the text of Section 1981. Given the current textualist majority on the Court, is Justice Gorsuch inviting an argument to reverse the Court’s precedent and nullify any Section 1981 private right of action? And if so, how does one explain the unanimous decision? Stay tuned.

COMPS Order Now Effective, Along With Some Unexpected Changes and Enforcement Measures 2020-03-19T14:50:00-06:00

Posted on March 19, 2020

By Brooke Colaizzi and Carissa Davis

The Colorado Overtime and Minimum Pay Standards Order #36 (“COMPS Order”) is now effective, but with some last-minute changes and a temporarily modified enforcement scheme. This Order replaces Colorado Minimum Wage Order #35 and institutes significant changes concerning coverage, overtime compensation, and other important wage and hour issues. As the Order became effective this week, the Colorado Division of Labor Standards and Statistics (“Division”), the agency tasked with investigating wage and hour claims, has issued some reassurances regarding its enforcement of the Order.

Read our full advisory here.

Colorado Adopts Emergency Paid Sick Leave 2020-03-12T12:29:09-06:00

Posted on March 12, 2020

By Joe Hunt

The Colorado Department of Labor and Employment adopted the Health Emergency Leave with Pay Rules, 7 CCR 1103-10, to limit the spread of the coronavirus (COVID-19). The emergency rules require employers in certain industries to provide up to four days of paid sick leave to any employee (a) with flu-like symptoms and (b) who is being tested for coronavirus.

The emergency rules apply to employers and employees in the following industries, regardless of pay rates or pay methods:

Leisure and hospitality
Food services
Child care
Education, including transportation, food service, and related work at educational establishments
Home health, if working with elderly, disabled, ill, or otherwise high-risk individuals
Nursing homes
Community living facilities

Employers that already provide paid leave do not need to provide additional sick leave under the emergency rules, unless the covered employee has already exhausted any paid leave allotted by the employer. The paid sick leave ends if an employee receives a negative test result.

The emergency rules are effective March 11, 2020, and will last for 30 days or for the duration of the State of Disaster Emergency declared by Governor Polis on March 10, 2020, up to a maximum of 120 days.

The emergency rules can be found here, and more information about what employers need to know about coronavirus is here.

For any questions about Colorado’s Health Emergency Leave with Pay Rules, contact a member of the Sherman & Howard Labor and Employment Group.

Ninth Circuit: An employee’s knowing violation of the FLSA is the employer’s willful violation, and you can’t necessarily collect from joint employers 2020-03-10T11:29:27-06:00

Posted on March 10, 2020

By Matt Hesketh and Lindsay Hesketh

A staffing company (Company A) got into hot water with the DOL for failing to pay overtime. Scalia v. Employer Solutions Staffing Group, LLC, No. 18-16493 (March 2, 2020). The employees at issue were placed by a second company (Company B). Company B instructed Company A’s payroll employee to pay all time worked as “regular hours” instead of overtime, and this resulted in over 1,000 FLSA violations. The court ordered Company A to make overtime back-payments, and, because the payroll employee knew the pay was violating the FLSA, Company A had to pay an equal amount in liquidated damages.

On appeal, Company A asserted that it should not have to pay the liquidated damages because Company B told Company A’s “low-level” employee to violate the law. Company A also tried to have the court divide the liability between the companies. The Ninth Circuit was not impressed with either argument.

The court held that Company A was liable for its employee’s violation of the FLSA. Allowing an employer to “evade liability simply because none of its ‘supervisors’ or ‘managers’ processed the payroll would create a loophole in the FLSA.” Further, the employee’s conduct was willful (justifying liquidated damages) because the employee repeatedly dismissed the payroll system’s warnings about overtime pay. Finally, the court ruled that the FLSA does not itself imply a right of contribution or indemnification among joint employers.

The court’s ruling serves as a warning and reminder to train and supervise employees. Company A provided FLSA training and implemented the warning system, but it should have exerted more oversight over its payment of wages, the instructions its employees received from outsiders, and the dismissal of the warnings. Also, if Company A was going to accept payroll instructions from Company B, it might have considered assigning the risk through the contract between the two companies.

Ninth Circuit: Prior Pay Rate Not a Defense to Unequal Pay 2020-03-02T10:54:11-07:00

Posted on March 2, 2020

By James Korte

On February 27, 2020, the United States Court of Appeals for the Ninth Circuit issued its opinion in Rizo v. Yovino, No. 16-15372 (9th Cir. Feb. 27, 2020) (Rizo II). The Ninth Circuit ruled that “factors other than sex,” an affirmative defense to the Equal Pay Act (EPA), include only job-related factors, not past pay history. This is the second opinion issued by the Ninth Circuit in the same case. The Supreme Court vacated the original opinion because the author of the majority opinion died prior to the issuance of the decision. See generally Yovino v. Rizo, 139 S. Ct. 706 (2019) (vacating and remanding Rizo v. Yovino, 887 F.3d 453 (9th Cir. 2018).

In this case, the defendant’s pay system set pay for new employees based entirely on the employee’s prior rate of pay. For example, to calculate a new employee’s pay, the defendant began with the employee’s prior wages, increased the wages by 5 percent, and placed the employee at the corresponding step on its pay schedule. This policy was applied equally to both males and females, but it resulted in pay disparities if new employees were paid more at their previous jobs, for any reason.

The defendant argued that the fourth defense to the EPA, reliance on “factors other than sex,” allows an employer to use any factor that is not sex itself, including the prior rate of pay. Rizo II at slip. op. 1. The Ninth Circuit rejected this argument, holding instead that the defense is limited to “job-related” factors. Ultimately, the Court ruled that the plaintiff’s prior rate of pay was not “related” to the new job; thus, the defendant could not rely on prior pay to justify paying the plaintiff less than male employees who performed the same work. The Court highlighted that to allow prior pay to be used as a defense to EPA claims would permit employers to capitalize on the historical pay disparities experienced by women.

Employers with operations in the Ninth Circuit—Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington—should revisit their compensation policies and eliminate any consideration of pay in other jobs. Be aware also of state laws that might preclude even discussing prior pay with prospective employees.

Retroactive Exception to Employer’s Policy Is Not a Reasonable Accommodation Under the ADA 2020-01-16T12:15:06-07:00

Posted on January 16, 2020

By Lindsay H. S. Hesketh

The Fifth Circuit recently affirmed summary judgment against an employee caught sleeping at his desk. A personnel manager for a security company suffered from Type II diabetes and had previously requested and received reasonable accommodations, but none involved the employee’s potential loss of consciousness due to diabetes. After two reports of the employee sleeping at his desk, his supervisor took a photograph of him sleeping again. When the employee awoke, his supervisor confronted him. The employee claimed that he may have experienced a diabetic emergency and immediately drove himself to the hospital. While in the emergency room, the company discharged the employee for violating its policy of requiring employees to remain “alert” at work. The employee filed suit alleging claims of disability discrimination, failure to accommodate, harassment, and retaliation. The district court granted summary judgment for the employer on all counts, and the Fifth Circuit affirmed.

The employee alleged, in part, that the company never gave him an opportunity to request a reasonable accommodation for his loss of consciousness because the company discharged him while he was at the hospital. The Fifth Circuit ruled the employee could have (but did not) request an accommodation any time before his discharge, but that “an after-the-fact, retroactive exception to the alertness policy as an accommodation for his underlying disability” would not constitute an accommodation.

Employees’ after-the-fact, disability-related, excuses for misconduct are commonplace. This court’s approach to that tactic…not so much. Kids, don’t try this at home. The optics of firing an employee while she or he is in the ER are, well, awful, and could give rise to other claims even if not under the ADA. However, here, the employer had an express, written “Alertness” policy that it had previously enforced on the same kind of evidence – a photo of the sleeping employee. It doesn’t hurt to have a written policy to rely on when defending an employment decision.

Clark v. Champion National Sec, Inc., No. 18-11613 (5th Cir. Jan. 14, 2020).

(Link to the opinion: http://www.ca5.uscourts.gov/opinions/pub/18/18-11613-CV0.pdf)

Per-Project Payments – Salary or Fee Basis Pay? 2020-01-16T11:26:43-07:00

Posted on January 16, 2020

By Alyssa L. Levy

Certain exemptions from employee rights to overtime premium pay require the employee to be paid on a salary basis or on a fee basis. On January 7, 2020, the U.S. Department of Labor (“DOL”) issued opinion letter FLSA2020-2 discussing a specific pay arrangement – where the total compensation is set by the scope of an assigned project, but the amount paid each week is a set amount. According to the DOL, these payments indicate a salaried employee (and exempt from overtime), so long as the payments do not change too often. The letter responds to the specific inquiry posed to the DOL, but the opinion informs payments generally for project-basis workers.

The DOL inquiry addresses an educational consultant hired to perform a specific project. The consultant was to receive a predetermined amount in 20 equal biweekly installments paid throughout the district’s academic year. The DOL found this qualifies as a salaried employee, assuming the educational consultant meets the duties tests of the administrative or professional exemptions and the weekly pay exceeds the salary threshold for those exemptions. The DOL’s opinion focuses on the pre-determined nature of the consultant’s weekly compensation. The weekly pay is the same regardless of actual hours spent and the quality of work performed during the week—the definition of a salary basis pay.

The DOL then considered whether additional compensation changes an employee’s pay status. For example, what if the same employee works, not only the agreed 40 weeks to develop the literacy curriculum, but also on a side project conducting teacher workshops over an eight week period? Because compensation in addition to the salary can be paid on any basis, such as a flat sum, bonus, or hourly amount, without undermining the salary basis test, the employee is still salaried if the employee receives an additional pre-determined amount for the side project in addition to their pay for the 40 week project.

The opinion letter specifically notes that an employee’s exempt status may be undermined, however, “if there are such frequent revisions to the contract that the amount of the employee’s biweekly compensation for a certain project is rarely the same from pay period to pay period and the circumstances suggest the amount of the payment is, in fact, actually based on the quantity or quality of work performed.”

No New News on Nondiscretionary Bonuses 2020-01-13T16:52:21-07:00

Posted on January 13, 2020

By Beth Ann Lennon

On January 7, 2020, the U.S. Department of Labor (“DOL”) issued a new Opinion Letter on “nondiscretionary” bonuses. When a bonus is offered to employees “to induce them to remain” with the company, the DOL considers the bonus to be “nondiscretionary.” Nondiscretionary bonuses “must be included in the regular rate of pay” for non-exempt employees. Determining how to allocate such bonuses can get a bit more complicated… When employers require that the employee stick around for some set amount of time to get the bonus and the bonus program does not clearly articulate how much of the bonus was earned in which week, the employer may “assume” each week within that period of time “counts equally in fulfilling the criteria for receiving the lump sum bonus.” In short, the employer allocates the bonus equally to each week in the time period covered by the bonus. Then, the employer must calculate overtime – taking into account this added compensation – separately for each workweek in which the employee worked more than 40 hours.

At the end of the day, this new Opinion Letter is not “new” news – it’s just a reminder that employers must carefully analyze what period of time a bonus is intended to cover and fairly and equally allocate the bonus across that period. DO NOT attempt to game the system and allocate a bonus in a manner inconsistent with this directive or you could find yourself in trouble. Another reminder – not covered in the Opinion Letter but still worth noting – don’t forget that state laws, including Colorado’s, often establish overtime requirements in addition to those set by the federal law. Make sure you are doing all of your overtime calculations in accordance with all applicable laws.

Lethal Danger Needed to Invoke Wrongful Discharge Claim 2019-12-03T12:09:22-07:00

Posted on December 3, 2019

By Joseph Hunt

Zero tolerance against workplace violence is a laudable policy. So too is encouraging employees to withdraw to safety when encountering workplace violence. Thus, when two employees get into a fight, a rational response (and one consistent with these policies) may be to fire both employees. There is an ongoing debate in courts across the country, however, whether an employer may fire an employee for defending himself against serious bodily harm because self-defense is a legally protected right.

The West Virginia Supreme Court recently clarified that self-defense supporting a wrongful discharge claim must be in response to “lethal imminent danger,” not just any physical attack. The court does not explain why self-defense, if justified, should not protect an employee against an adverse employment action in all circumstances, no matter how serious the threat of violence may be. In any event, the court implicitly accepts that an employee does not have immunity in all cases merely by claiming, “He started it!”

This decision represents a significant limitation to the claim of wrongful discharge in violation of public policy in the context of self-defense. Employers would still be wise to evaluate instances of workplace violence on a case-by-case basis. There may be instances when an employee has no choice but to defend himself, and where the right to self-defense may be more compelling than an employer’s zero tolerance policy.

The decision is Newton v. Morgantown Machine & Hydraulics of West Virginia, Inc., Case No. 18-0653 (W.V. Nov. 11, 2019).

OFCCP Renews Focus on Disabled Individuals, Veterans, and Military Spouses 2019-11-15T12:36:14-07:00

Posted on November 15, 2019

By Matt Morrison

Last week was busy for the Office of Federal Contract Compliance Programs (“OFCCP”), the anti-discrimination watchdog that oversees the nation’s federal contractors and subcontractors. On November 8, OFCCP Director Craig Leen announced that the agency will soon begin selecting contractors for “focused reviews” of their compliance with Section 503 of the Rehabilitation Act. Section 503 bars contractors from discriminating against individuals with disabilities. The same day, the agency released a list of 500 contractors selected for an initial round of focused reviews under the Vietnam Era Veterans’ Readjustment Assistance Act of 1974 (“VEVRAA”), and it issued a new directive highlighting VEVRAA’s protection of military spouses.

A “focused review” is an OFCCP compliance evaluation that is narrowly tailored and focused on specific issues. Here, OFCCP’s focused reviews will evaluate whether contractors are complying with nondiscrimination and affirmative action rules for disabled individuals and protected veterans. According to OFCCP, these reviews will include onsite visits to contractors and interviews with managers responsible for compliance – such as, for example, Human Resources personnel or ADA coordinators. OFCCP will also seek “to evaluate hiring and compensation data,” and for disability reviews, “the handling of accommodation requests.” The agency’s new directive also mandates that, during broader compliance reviews, compliance officers must evaluate contractors’ treatment of spouses of protected veterans.

Federal contractors and subcontractors should review their compliance with the agency’s affirmative action regulations for disabled individuals and protected veterans. The regulations, which OFCCP significantly revised in 2013, set specific “aspirational” benchmarks for the recruitment and hiring of disabled individuals and protected veterans, and impose an array of additional requirements on contractors. For example, under the revised regulations, which went into effect in March 2014, contractors must invite their employees to self-identify as disabled or as veterans at least every five years. It may be time for contractors to re-survey their workforce.

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