DOL Changes its Position FLSA Exemption for Mortgage Loan Officers

Today, the DOL issued its first wage and hour opinion of the current administration.  The DOL has historically issued a number of opinion letters each year and the absence of any new opinion letters has been puzzling.  The DOL has decided to change how it issues official pronouncements.  In an email notice sent out today, the DOL explained:

In order to provide meaningful and comprehensive guidance and outreach to the broadest number of employers and employees, the Wage and Hour Administrator will issue Administrator Interpretations when determined, in the Administrator’s discretion, that further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate. Administrator Interpretations will set forth a general interpretation of the law and regulations, applicable across-the-board to all those affected by the provision in issue. Guidance in this form will be useful in clarifying the law as it relates to an entire industry, a category of employees, or to all employees. The Wage and Hour Division believes that this will be a much more efficient and productive use of resources than attempting to provide definitive opinion letters in response to fact-specific requests submitted by individuals and organizations, where a slight difference in the assumed facts may result in a different outcome. Requests for opinion letters generally will be responded to by providing references to statutes, regulations, interpretations and cases that are relevant to the specific request but without an analysis of the specific facts presented. In addition, requests for opinion letters will be retained for purposes of the Administrator’s ongoing assessment of what issues might need further interpretive guidance.

(Sorry for the long quote but for some of us, knowing the process is as important as the result.)

The first "Administrator Interpretation" takes the position that the typical duties of a Mortgage Loan Officer does not qualify the employee as being in an administrative exempt position.  In a lengthy, eight page analysis,  the DOL explained that "mortgage loan officers typically have the primary duty of making sales on behalf of their employer; as such, their primary duty is not directly related to the management or general business operations of their employer or their employer’s customers."  

The DOL did not take a position on whether Mortgage Loan Officers might be exempt under a different exemption.  It noted that employers had argued loan officers are exempt as commissioned employees but cautioned that the employer would need to qualify as a "retail or service establishment."

Perhaps what is more interesting about this administrative interpretation is that it "withdraws" (legalese for "rejects") a 2006 DOL ruling which had concluded mortgage loan officers could qualify for the administrative exemption if their primary duties were not "sales."  The difference in positions (between the 2006 and 2010 rulings) seems to be that the 2006 ruling had permitted officers who were making loans to individuals in their personal capacity to qualify as exempt.  The 2010 ruling explained:

work for an employer’s customers does not qualify for the administrative exemption where the customers are individuals seeking advice for their personal needs, such as people seeking mortgages for their homes. Individuals acting in a purely personal capacity do not have “management or general business operations” within the meaning of this exemption. However, if the customer is a business seeking advice about, for example, a mortgage to purchase land for a new manufacturing plant, to buy a building for office space, or to acquire a warehouse for storage of finished goods, the advice regarding such decisions might qualify under the administrative exemption.

Employers who have relied upon the 2006 ruling need to understand that they can no longer rely upon the 2006 ruling to establish that they made a good faith attempt to comply with the FLSA.  That doesn't mean an employer is now liable because they relied in the past on the 2006 ruling.  It simply means that they will have to re-evaluate their position in light of today's ruling.

DOL Releases Updated COBRA Notice For Recovery Act Extension

The DOL has released several model COBRA notices that employers may use when providing notices of the availability of premium reductions and additional election periods for health care continuation coverage.  The notices cover the March 2, 2010 premium assistance extension.

The DOL includes other model forms as well.  These are included in various packages the DOL has created to cover different situations.  The packages include the following disclosures:

• A summary of ARRA’s premium reduction provisions.
• A form to request the premium reduction.
• A form for plans (or issuers) that permit qualified beneficiaries to switch coverage options to use to satisfy ARRA’s requirement to give notice of this option.
• A form for an individual to use to satisfy ARRA’s requirement to notify the plan (or issuer) that the individual is eligible for other group health plan coverage or Medicare.

COBRA Premium Assistance Extended Again

Yesterday, Congress and the President extended COBRA premium assistance again.  The has updated the introduction on the COBRA webpage at http://www.dol.gov/COBRA to reflect the Temporary Extension Act of 2010. Hopefully, the DOL will soon release the new information as the TEA does more than simply extend the premium assistance period for a month.  I add links to the updated the fact sheet, FAQs and other materials when the DOL updates its COBRA webpage.

Religious Practices that Discriminate Because of Gender

Consider the following scenario:

You have recently hired a male employee.  When you are introducing him to his co-workers, an African-American co-worker offered her hand to greet him but he refused to shake hands. The new employee explained that he did not touch women because of his Muslim religion. When a human resources manager spoke with him about the incident, the new employee said that it was the co-worker’s female gender, not her race, which prompted his response.

What do you do?  You have an obligation to accommodate the new employee's religious practices but you also have to make sure that his religious practices do not create a hostile environment for women.

This scenario was presented to the EEOC for an opinion last year.  The EEOC's associate general counsel  responded by letter in an "informal" (non-binding) opinion.  Her answer was to say it depends on what is an undue hardship under the religious discrimination principles of Title VII:

• courts have found, and the Commission has stated, that encroaching on co-workers’ ability to perform their duties or subjecting or threatening to subject co-workers to a hostile work environment “will generally constitute undue hardship.
• a showing of undue hardship requires more than speculation about negative consequences or expressions of discomfort, irritation, or annoyance by co-workers.

What if the newly hired employee is a sales person?  Can the employer consider customer offense in deciding whether the new employee's refusal to shake hands with a woman is an undue hardship?

• The courts also are inclined to find undue hardship if the employee’s religious expression can be perceived by customers as the employer’s own message.

The employer, the EEOC said, should evaluate the actual impact the new employee has.  If he "conveys negativity about women" (or conveys "an intent to demean based on gender") then the employer can take action but if he get along fine with women, they should not.  The same rule would apply to interactions with co-workers.  

When an employer is faced with what we can call the "no win" scenario, there are at least two key points to remember.  

• I have never heard of a court criticizing or punishing an employer for providing appropriate training to its employees.  Bad training, of course, is a different story.
• It is far better to document observations than to make conclusory statements.  If you are like me, and don't well recall details, writing down what you observe ("just the facts") is crucial.  Getting in court and simply saying, to use this scenario as an example, the new guy didn't get along with women because of his religion, is only going to increase the fees you pay your attorney.

Impact of Gross on ADEA Claims

I cautioned earlier that the Supreme Court's decision in Gross v. FBL Financial shouldn't be taken by employers as dramatically making it harder for employees to prove age discrimination.  I have also said that newspaper reports saying Gross requires employees to prove age was the "sole" cause are dead wrong.

A recent decision by the  federal court of appeals in Atlanta (deciding appeals from Florida, Georgia and Alabama) illustrates that Gross doesn't  immunize an employer from its stupid mistakes and loose statements nor does it require employees to prove age was the sole cause of their firing.

A non-profit employed an older worker as a fundraiser.  She was moved to a different job for poor performance (instead of being fired - no good deed goes unpunished).  She was shortly later fired for poor performance in the new job.  The employee fought back by putting on evidence that her boss made the following age statements:

• “I need someone younger I can pay less"
• "you are very old, you are very inept. What you should be doing is taking care of old people. They really need you. I need somebody younger that I can pay less and I can control.”
• “[Plaintiff] is too old to be working here anyway.”

The employer tried to argue that under Gross, it should win because it would have fired the employee for poor performance, even if the decision had age issues (he denied making the statements).  The court didn't buy it, saying the jury had to decide whether age was the reason for the firing.

EEOC Proposes Definition of "Reasonable Factor Other Than Age"

In light of recent Supreme Court decisions construing disparate impact liability under the ADEA, the EEOC has issued a proposed rule meant to define what is a "reasonable factor other than age" or RFOA.  (This is one of the potential rules I mentioned in December.)

The EEOC's definition won't have a significant impact on the routine age discrimination claim most employers face.  It could, however, result in an increase in the number of disparate impact claims asserted in ADEA lawsuits, particularly in IRIF claims.

The RFOA defense only applies when the proof establishes that the employer has engaged in conduct that is "otherwise prohibited" by the ADEA.  In an intentional discrimination claim it will be unusual (but not theoretically impossible) for an employer to be able to show that its conduct is intentionally discriminatory but yet reasonable.  (Some "reasonable" factors are hard wired  into the ADEA and implementing regulations, most relate to employment benefits, allowing employers to "discriminate" against older workers in end result where the cost of providing the benefit is equal to what it costs for a younger employee).

So, the RFOA defense will appear most in disparate impact claims, where the employer has a facially neutral practice that adversely affects older workers.

The EEOC says that "a reasonable factor is one that an employer exercising reasonable care to avoid limiting the employment opportunities of older persons would use."  To decide this you look to various criteria.  I won't go deep into these criteria here.  They can be summed up as follows: An employer taking action that adversely affects employees should (1) make sure it is aware of the effect of the decision on older workers (indeed, on all classes), (2) evaluate the severity of the impact on older workers, (3) consider whether there is some other, less harmful, means of achieving the same goal, and (4) conduct training of managers on how to avoid age-stereotyping.

I said at the outset that the RFOA defense will apply primarily in disparate impact cases.  But as I was reading through the EEOC's comments, what struck me was that this rule will have a significant impact on reduction in force litigation when older employees are disproportionately laid off.

Employers need to realize that disparate impact age claims can be brought (in the same complaint that alleges intentional age discrimination) to challenge the result of any "practice" the employer adopts, including "practices" the employer does not "officially" adopt.   If there is a statistical disparity, it won't be too hard for an employee to argue that there is a  "practice" that causes the skewed statistics.  (One practice can be, the EEOC says, where the employer gives "supervisors unchecked discretion to engage in subjective decision making.")

At that point, the employer will need to be able to show, in an IRIF case, that the criteria used to select employees to be laid off were  "reasonable" and based on some factor other than age.  While the employer does not have to adopt an employment practice that has the least severe impact on older workers,ignoring ways to lessen the impact will not look good.  Employers must also remember that under existing EEOC regulations (not modified by this proposed rule): "A differentiation based on the average cost of employing older employees as a group is unlawful" (with certain exceptions for benefit issues).

Pending Tennessee Legislation Permitting Mandatory Direct Deposit - Debit Cards

Earlier this week, the Tennessee Senate Commerce, Labor & Agriculture Committee passed a bill (SB2633/HB 3095) that would amend Tenn. Code Ann. 50-2-103 so that employers could require employees to be paid by direct deposit or, if the employee does not want direct deposit, by a prepaid debit card.

 If a debit card is issued, it must permit the employee to make one no cost withdrawal from it (such as at an ATM within the network) for up to the full amount on the debit card.  That could pose problems for ATM withdrawals where there are daily limits on the amount that can be withdrawn.  The employee would then have to go into a bank and obtain the funds from a teller.

There would also be certain disclosure requirements for debit card use, namely, the employer must explain any fees the employee would have to pay for using the debit card.

Employers can do this now with the consent of the employee.  This bill - if it passes - would permit employers to require employees chose between direct deposit or debit cards instead of, as now, cash or checks.

The bill is being promoted by Visa.  Visa's lobbyist explained (the video of the committee meeting can be seen here) that over 20 other states have passed laws or adopted regulations of this nature.  Visa's interest, obviously, is in increasing the use of debit cards as they get a percentage (from the merchant) of every dollar spent.  I'm told by at least one bank that they do not charge an additional fee for obtaining a debit card over and above the fees charged for making direct deposits.

Must an Employer Provide Lodging as a Reasonable Accommodation

I'm always looking for unusual legal precedents.  I shouldn't be surprised when they come from unusual sources. I receive emails from the Government Accountability Office listing the Comptroller General decisions they issue.  The Comptroller General of the U.S. GAO issues legal decisions and legal opinions on appropriations law, bid protests, and other issues of federal law.  Agencies can ask the Comptroller General for advice on whether federal law permits a specific expenditure. 

Today's e-mail from the GAO addressed whether the Department of Housing and Urban Development, Office of Inspector General, could us appropriated funds to pay for a reasonable accommodation for an employee who wanted the IG's office to provide her with lodging closer to where she would be performing audits.  

The Comptroller General decision addresses an unusual accommodation request.  Federal employees, by statute, are paid lodging expenses when they are "away from the employee's designated post of duty."  The employee's need for lodging, however, was not away from her post of duty.  There was, in other words, no authorization for paying the employees lodging for these trips. 

The Comptroller then addressed whether the appropriated funds could be spent nonetheless, as part of a reasonable accommodation, and concluded they could not because the requested accommodation was not reasonable:

An employer, however, is not required to provide for accommodations that fall outside the scope of employment, like commuting. Laresca v. American Telephone and Telegraph, 161 F. Supp. 2d. 323 (D.N.J. 2001). In this case the employee's drive is akin to a commute, traveling from the employee's home to the work site. Reasonable accommodations are directed at enabling an employee to perform the essential functions of the job itself, 29 C.F.R. sect. 1630.2(o)(1)(ii), and federal courts have held that activities like commuting to and from the workplace fall outside the scope of a job. Consequently, an employer is not obligated to provide a reasonable accommodation for such activities.

The Comptroller General encouraged the IG's office to find some other accommodation that would be effective.

Sixth Circuit Clarifies Reduction in Force Standards

Today's decisions from the Sixth Circuit included a reduction in force age discrimination case, Harriet Schoonmaker v. Spartan Graphics Leasing, LLC, that helps to clarify the legal standards for RIFs and addresses other issues that commonly arise in RIF litigation.  The employer had between 50 and 75 employees and, as is not uncommon for employers of that size, did not have detailed RIF procedures.  When the employer decided to cut two employees because work was slow, they made a "consensus" decision to cut from the third shift because it was the least productive. One employee (not the plaintiff) was cut because she had been giving the job as a favor and was retiring soon. As to the 58 year old plaintiff, the employer chose a 29 year old because, as the decision says, plaintiff "was sometimes hard to work with" and the other employee was "the better team player." Both were equally qualified but the employer felt the other employee was "more productive" even though there were no work records to support this one way or the other.


Several parts of the decision are significant.  

• First, the court clarified that, in a RIF, the retaining a younger employee and laying off an older employee is not by itself enough to establish a prima facie case.  There had been some doubt about this because of loose language in a prior decision.
• Second, the court re-emphasized that an employee cannot show an employer's decision is discriminatory by arguing that she was more qualified or more productive than the employee retained.
• Third, the decision shows that minor discrepancies during a RIF do not necessarily amount to proof of discrimination.

Tennessee Court of Appeals Upholds Breach of Employment Contract Claims

Yesterday the Tennessee Court of Appeals issued a decision involving two physicians who sued Methodist Healthcare-Memphis Hospitals when the hospital decided that the doctors had "voluntarily relinquished" their medical staff privileges.  The physicians argued this decision breached their contract with the hospital and tortiously interfered with their patient relationships (at least those patients who had insurance through the hospital).  The hospital took the action it did because the physicians failed to obtain malpractice insurance coverage that satisfied the requirements in the hospital's bylaws (which the court assumed amounted to a contract of employment).

The decision isn't a remarkable one in the traditional HR sense.  It is a reminder that employment relationships are contractual, albeit usually a contract for at will employment.  Employers, however, must take care to observe  any contractual terms when they take action involving a contract employee.  The doctors were not, of course, employees in the strict sense but the same basic rules apply nonetheless.

In the world of contract law, a party that breaches the contract can't complain when the other party later refuses to perform the contract. Here, the court held the physicians could not complain when the hospital "fired" them because they failed to maintain a contractually required condition (insurance).  The lesson here is that any contract of employment should be clear in stating what is a condition the employee must maintain.  If driving is required, then the contract should say so.  Don't leave conditions of employment to chance.  Of course, being specific about the job prerequisites is a good practice even when there is no employment contract.

Ricci v DeStefano - Clarifying What it Means for Affirmative Action

This is for the federal government contractors.  The Office of Federal Contract Compliance Programs (OFCCP) enforces certain obligations contractually imposed on larger companies that contract with the government.   The rules OFCCP enforce require contractors to, among other things, have affirmative action plans. 

Ricci v. DeStefano raised some questions about these affirmative action plans but only if they were being relied upon to fullfil a quota, something genuine affirmative action eschews.

The OFCCP looks to remedy systemic discrimination, however, so it is only natural for the OFCCP to clarify that Ricci does not significantly (if at all) change the agency's procedures or a contractor's obligations.  Some highlights:

• Ricci does not affect how OFCCP examines the use and impact of selection procedures, such as tests.
• Ricci does not change a contractor's affirmative action obligations under the mandates enforced by OFCCP.
• Ricci indicates that an employer's failure to conduct an appropriate job analysis, or to validate a test or other selection procedure prior to its implementation, places an employer in a position that may be difficult to defend should the test be found to have an adverse impact after it is used.

Seventh Circuit holds ADA Does not Adopt Mixed Motives Damages Provision from Title VII

When I previoulsy wrote about the age discrimination decision in Gross v. FBL Services, which held the mixed motives analysis doesn't apply to age discrimination claims, I deliberately avoided explaining what was meant by mixed motives analysis.  I simply said that in a Title VII mixed motives claim, "the employee can partially win."

Today's Americans with Disabilities Act decision from the Seventh Circuit requires me to more fully explain what I meant. 

Because of amendments to Title VII in 1991, if a jury finds that the employer's motives were not entirely pure but that it would have nevertheless made the same decision, the court may award the employee limited relief.  The employee cannot get damages (including backpay) nor can the court order the employee be  reinstated.  The employee can get other injunctive relief (i.e. an order prohibiting future discrimination) and can recover attorney fees (which can add up to a lot).

The 1991 amendments, however, divided up this into two different statutes.  One statute (42 U.S.C. 2000e-2(m) states (essentially) that if the employer had an illegal motive but would made the same decision nonetheless, the employer is nevertheless liable to the employee (the "liablity" provision).  The other statute (2000e-5(g)(2)(B)) limits the relief the employee can obtain in such a situation (the "remedy" provision).

Just a year before the Title VII amendments, Congress enacted the ADA.  Instead of establishing new procedures within the ADA itself, Congress simply invoked by reference the Title VII procedures (several statutes were invoked but the one we are currently concerned with is section 2000e-5).  This is why employees must file charges of discrimination with the EEOC in ADA claims.  The ADA does not, however, invoke 2000e-2, which is, to repeat, where Congress, a year later, inserted a provision making employers liable (but with limited relief) if race, sex, religion or national origin actually motivated the decision even if the decision would have been the same without that illegal motive.

In the Seventh Circuit ADA claim, the jury found that the employer (Rockwell) terminated the employee because of her perceived disability.  The jury also found, however, that Rockwell would have terminated the employee even if it did not believe she had a disability.  The district court granted the employee injunctive relief (requiring Rockwell to put a copy of the judgment in the employee's personnel file) and her attorney fees (which the court reduced from $153,290.54 to $30,658.11, because of the jury's finding).

The Seventh Circuit decision wiped out even this "limited" relief by holding that because Congress did not expressly invoke the mixed motives liability provision (2000e-2) in the ADA, its invocation of the mixed motives remedy provision (2000e-5) was not enough after the Supreme Court's decision in Gross.

I don't ordinarily discuss here questions of statutory interpretation.  This decision is important because it further demonstrates the impact of the Supreme Court's decision in Gross.  It makes trying or briefing an ADA claim simpler.  Of course, it doesn't mean employers should be less cautious or more sloppy in making decisions, especially now that the ADA has been amended to vastly increase the number of folks who have "protected" disabilities.  It is far better to convince a jury (or judge) that the decision was completely free from bias. 

DOL Prepares COBRA Premium Assistance Extension Notices

My prior post covered the December 2009 extension of premium assistance for employees involuntarily terminated and extending the assistance to those employees who lost their job between December 2009 and February 2010.  One of the requirements was that Plan Administrators send notices to affected employees.  The DOL has now prepared notices and these can be found at http://www.dol.gov/ebsa/COBRAmodelnotice.html

Because Congress waited until December to extend the notice, there will be COBRA participants who lost their job more than nine months before Congress extended the assistance period to 15 months.  As the DOL explained, “In addition, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35 percent of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator.”

The DOL explains that these "transition period" individuals:

• must be provided this notice within 60 days of the first day of the transition period. An individual's "transition period" is the period that begins immediately after the end of the maximum number of months (generally nine) of premium reduction available under ARRA prior to its amendment. An individual is in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and they otherwise remain eligible for the premium reduction.

Suppose, for example, a former employee's nine month assistance expired 12/1/2009.  The notice must be sent to the former employee before the end of January 2010.  The employee would have until February 17, 2010 in which to pay the December premium.  (If the full premium was paid, the employee is entitled to a refund.)

Calculating when the COBRA premium payment is due requires some thought.  I read the extension provision as saying that any premium (for a transition period former employee) that would be due January 1, 2010, need not be made until February 17, 2010 (instead of being due January 30, 2010, as it would under the 30 day grace period).  A premium payment due February 1, 2010, must be received no later than March 2 (i.e., 30 days later).  Fortunately, the DOL interprets the December extension as extending the grace period rather than the due date.