Court Clarifies Federal Summary Judgment Standard in Employment Discrimination Claims

The topic of summary judgment, being procedural, is not frequently a topic of a post.  It is discussed, of course, because, short of settlement, summary judgment is the way most employment-related claims avoid going to trial.

But summary judgment has recently been in the news with the General Assembly's passages of two bills that would override Tennessee Supreme Court decisions on summary judgment and how to analyze employment discrimination and/or retaliation claims in ruling on a motion for summary judgment.

For that reason, I thought the perspective of the federal court of appeals in St. Louis on summary judgment in employment discrimination claims would be of interest.  (It is also a slow employment news day.)  Two applicants brought a failure to hire claim against the Rochester, Minnesota fire department.   After losing the claim in the trial court, they appealed and a three judge panel ruled in their favor.  The full court, on the city's motion, agreed to reconsider the panel's ruling.  The decision on the merits divided the court; one judge made the difference in affirming the dismissal of the failure to hire claims.  

While they split on whether a trial was needed, all of the judges agreed that the same summary judgment rules apply to a discrimination or retaliation claim.

Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed “to secure the just, speedy and  inexpensive determination of every action.”

Celotex Corp., 477 U.S. at 327 (quoting Fed. R. Civ. P. 1). Because summary judgment is not disfavored and is designed for “every action,” panel statements to the contrary are unauthorized and should not be followed. There is no “discrimination case exception” to the application of summary judgment, which is  a useful pretrial tool to determine whether any case, including one alleging discrimination, merits a trial.

What made the decision interesting (at least to legal wonks like me) was that the court specifically and unequivocally disavowed a number of the court's previous decisions that had said summary judgment in employment discrimination cases should “seldom” or “sparingly” be granted, not in “very close” cases, only “with caution,” or after being “particularly deferential” to the employee.

I suppose it always depends on your point of view.

Courts Finds Account Manager for Media Buyer Meets FLSA Administrative Exemption

The administrative exemption from the FLSA overtime requirements presents a challenge for many employers, so much so that some employer don't try to use it.  It is much less clear and therefore more difficult to apply than the professional or executive exemptions (and contrary to the latter's name, the exemption applies to supervisors who have some meaningful input into hiring or firing).  A decision issued today (Verkuilen v. MediaBank) from the federal court of appeals in Chicago helps to better define the rather vague DOL regulation that governs the administrative exemption.

In general terms (from a DOL fact sheet on the subject) the administrative exemption requires that:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
• The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The court of appeals sitting in Chicago dealt with the "primary duty" questions.  The employer was in the business of selling a software package to advertising firms that would help them place advertising in media outlets.  The software was complex, the court explained, "because it integrates so many functions, and it must be customized to the needs of each client, which vary. The complexity and variance are where the account manager comes in. The manager of a customer’s account has to learn about the customer’s business and help MediaBank’s software engineers determine how its software can be adapted to the customer’s needs."

The account manager's job was "to learn about the customer’s business and help MediaBank’s software engineers determine how its software can be adapted to the customer’s needs."  She is

on the customer’s speed dial during the testing and operation of the customer’s MediaBank software. As the intermediary between employees of advertising agencies struggling to master complex software and the software developers at MediaBank, she has to spend much of her time on customers’ premises training staff in the use of the software, answering questions when she can and when she can’t taking them back to MediaBank’s software developers, and then explaining their answers to the customer and showing the customer how to implement the answers in its MediaBank software. Identifying customers’ needs, translating them into specifications to be implemented by the developers, assisting the customers in implementing the solutions—in the words of MediaBank’s chief operating officer, account managers are expected to “go out, understand [the customers’ requirements], build specifications, understand the competency level of our customers. Then they will build functional and technical specifications and turn it over to . . . developers who will then build the software, . . . checking in with the account manager, making sure what they are building is ultimately what the customer wanted.”

 This, the court held, meant that the account managers "primary duty was directly related to the general business operations both of her employer and (as in a consulting role) of the employer’s customers."  It didn't matter, the court further held, that the account manager did not perform all or even many of the functions listed in the DOL regulation on what makes a job administratively exempt. See 29 C.F.R. § 541.202 (listing numerous "[f]actors to  consider when determining whether an employee exercises discretion and independent judgment with respect to matters of significance.")

General Assembly Passes Bill Legislatively Overruling Deeply Flawed Gossett Decision

A prior post addressed a bill pending in the Tennessee General Assembly which would have the effect of over-ruling the Tennessee Supreme Court's decision in Gossett v. Tractor Supply.  (My post on Gossett can be found here).

Last week, both houses of the General Assembly voted to send the bill (as amended) to the governor.  If Governor Haslam approves the bill, it becomes law immediately, but would only apply to causes of action that accrue after the Governor signs the bill (more on that in a minute).

The version of the bill that passes can be found here: http://www.capitol.tn.gov/Bills/107/Amend/SA0598.pdf.  This is an amendment the Senate adopted to clarify the effective date. The Senate passed the bill on May 20, 2011. The House approved the amendment a day later.

The purpose of this bill was to require application of the McDonnell Douglas Burdine (MDB) analysis in all THRA claims and retaliatory discharge claims (common law and statutory) including on summary judgment motions. (“The foregoing allocations of burdens of proof shall apply at all stages of the proceedings, including motions for summary judgment.”) Remember that Gossett held that McDonnell Douglas Burdine was inconsistent with the Court's summary judgment precedent.

The operative language in the bill is (similar language is used for wrongful discharge claims) is:

In any civil cause of action alleging a violation of this chapter or of Tennessee Code Annotated, Section 8-50-103[which prohibits disability retaliation], the plaintiff shall have the burden of establishing a prima facie case of intentional discrimination or retaliation. If the plaintiff satisfies this burden, the burden shall then be on the defendant to produce evidence that one or more legitimate, nondiscriminatory reasons existed for the challenged employment action. The burden on the defendant is one of production and not persuasion. If the defendant produces such evidence, the presumption of discrimination or retaliation raised by the plaintiff’s prima facie case is rebutted, and the burden shifts to the plaintiff to demonstrate that the reason given by the defendant was not the true reason for the challenged employment action and that the stated reason was a pretext for illegal discrimination or retaliation. The foregoing allocations of burdens of proof shall apply at all stages of the proceedings, including motions for summary  judgment. The plaintiff at all times retains the burden of persuading the trier of fact that he or she has been the victim of intentional discrimination or retaliation.

To anyone familiar with employment discrimination litigation, the bill requires courts apply the McDonnell Douglas Burdine analysis to all discrimination and retaliation cases.  An interesting point about the language of the bill is that in some situations, such as where the employee claims to have so-called "direct evidence" of discrimination (e.g., an admission of discrimination by the decision-maker), this bill seems to require application of McDonnell Douglas/Burdine even where a federal court might not.  This isn't a big deal as an admission of this nature is probably going to be sufficient to require a jury trial even under the federal summary judgment rule.  The argument could also be made that this bill negates any hint of a dual motive analysis under the THRA (though that was probably not the intent). Again, this is not a huge issue, as I explained in my prior blog posts about the U.S. Supreme Court's decision in Gross.

As noted, the effective date is interesting:

This act shall take effect upon becoming a law, the public welfare requiring it and shall apply to all causes of action accruing on or after such effective date.

The word "accruing" means, in this context, "happens" but that can be somewhat uncertain in the employment discrimination context.  A termination of employment claim accrues when the employee is informed of the decision.  Easy enough.  But a hostile work environment claim accrues over time, not all at one.   These will not be insurmountable problems, just headaches for judges to work out over the next few years.

Note that the bill has not been enacted yet. It still needs Governor Haslam’s approval.

On another note, the General Assembly also passed a separate bill which would require the Tennessee courts to the federal summary judgment standards.  A full explanation of this issue would be beyond the scope of this blog.   

It is enough to say that both bills, if signed by the Governor, will restore a Tennessee employer's repeatedly dashed hope of obtaining summary judgment in state court when the employee has no competent evidence to warrant a trial.

Court of Appeals Holds Private Employer May Refuse to Hire Applicant Who Has Filed For Bankruptcy

It isn't one of the more familiar retaliation statutes but for years, the bankruptcy code has included a provision that prohibits employers (private and governmental) from taking certain types of employment action "against[] an individual who is or has been a debtor under this title, a debtor or bankrupt under the Bankruptcy Act, or an individual associated with such debtor or bankrupt."  11 U.S.C. § 525(b).

Today, the federal court of appeals in Atlanta held that the bankruptcy retaliation statute, as to private employers, does not prevent an employer from refusing to hire an applicant who has a pending or prior bankruptcy action (I'll call the applicant a "debtor" to use the bankruptcy code terminology).

The court's reasons were pretty simple.  Subsection (a) of section 525 applies to governmental employers.  It provides that governmental employers may not "deny employment" to a debtor.  This "deny employment" language is not found in subsection (b) which applies to private employers.  The court explained:

A comparison of the words used in subsections (a) and (b) demonstrates that subsection (a) prohibits government employers from “deny[ing] employment to” a person because of his or [her] bankrupt status, whereas subsection (b) does not contain such a prohibition for private employers. Rather, the private sector is prohibited only from discriminating against those persons who are already employees. In other words, Congress intentionally omitted any mention of denial of employment from subsection (b), but specifically provided that denial of employment was actionable in subsection (a). Thus, by its plain language, the statute does not provide a cause of action against private employers for persons who are denied employment due to their bankrupt status. “Where Congress has carefully employed a term in one place but excluded it in another, it should not be implied where excluded.”

One point should be stressed (for governmental employers).  As the court said, if the employer "were a governmental unit, [the applicant] would have a refusal to hire claim; because it is not, he does not."  A governmental unit under the bankruptcy code is pretty much any public employer, federal or state.   11 U.S.C. § 101(27).

The decision is called Myers v. Toojays Management Corporation

DOL Develops iPhone App for Employees to Track Time

I received an email from the DOL today that made me scratch my head.  It seems the DOL Wage and Hour Division has developed an iPhone "app" that is a "timesheet" that lets employees record the hours that they work.  The DOL explanation of the app is that it will "help employees independently track the hours they work and determine the wages they are owed."  It will let employees "track regular work hours, break time and any overtime hours for one or more employers."

There is a "glossary, contact information and materials about wage laws" accessible through links to the Web pages of the department's Wage and Hour Division.  The time sheet the app generates can be reviewed and emailed as an attachment.

The purpose of the app seems to be to permit employees to "keep their own record" instead of "relying on their employers' records."  The DOL says: "This information could prove invaluable during a Wage and Hour Division investigation when an employer has failed to maintain accurate employment records."

The app does not yet provide for calculation of tips, commissions, bonuses, deductions, holiday pay, pay for weekends, shift differentials and pay for regular days of rest.  Android and BlackBerry versions are being considered.  

The reason I am skeptical is that, as anyone knows who has tracked time worked, the rules on when the work day begins and ends are not always easy to understand. Just yesterday, for example, I read about a court of appeals decision involving an employee who thought they were "working" when they drove to work because the employee had done some minor tasks at home.  I was also reviewing hand written timesheets where one employee added time for their commute from home to work and back, none of which was properly compensable.

In most instances, the start and end of the work day will not be difficult to discern.  This app, while well-intentioned, will permit employees to record their time based upon their own idea as to when the work day should start and end.  The glossary is no help; it simply instructs employees to record the hour "at what time you started working."  The app gives no caution to employees that there may be grey areas that must be considered, and worse, seems to imply that the DOL will regard the hours an employee records in the app as more accurate than the employer's official time records. 

If nothing else, the app serves as a reminder that employers should scrupulously keep accurate time records for their non-exempt employees.

Federal Court Holds EEOC May Subpoena Records For "Overall" Conditions In the Workplace

The federal court of appeals that sits in Chicago issued a decision today that lets the EEOC subpoena records relating to hiring practices from an employer (Konica Minolta) accused of wrongful termination in the employee's EEOC charge.  The decision serves as a lesson to employers about the broad subpoena power of the EEOC.  The only relevant facts are that Konica Minolta fired a minority employee ("Thompson") for poor sales performance after he had worked for 8 months.  He filed a charge alleging his firing was disparate treatment because of his race.  The EEOC then asked and later subpoenaed records of Konica Minolta's hiring practices.  

As a side note, the facts that led the EEOC to seek the hiring practices records were that it:

discovered that there were only six blacks employed at Konica, out of 120 total employees in the identified facilities, and all six were employed in Tinley Park. Of the approximately 100 employees at the other locations, only one was a person of color. The EEOC also learned that there were two sales teams at the Tinley Park facility, and those teams were segregated largely along racial lines. Thompson’s team was made up of five black employees and two white employees.

These facts were not, strictly speaking, necessary to the court's decision but they do show the EEOC's concern was not completely irrational, either.  The employer took the position that information on hiring practices in a termination claim was not relevant. The court disagreed, saying:

When the EEOC investigates a charge of race discrimination for purposes of Title VII, it is authorized to consider whether the overall conditions in a workplace support the complaining employee’s allegations. Racial discrimination is “by definition class discrimination,” and information concerning whether an employer discriminated against other members of the same class for the purposes of hiring or job classification may cast light on whether an individual person suffered discrimination. For that reason, the EEOC is authorized to subpoena “evidence concerning employment practices other than those specifically charged by complainants” in the course of its investigation.

* * * 

The Commission is entitled generally to investigate employers within its jurisdiction to see if there is a prohibited pattern or practice of discrimination. Here, Thompson alleged both a specific instance and such a pattern of race discrimination. He asserted that he was treated differently from white co-workers in the “terms and conditions” of his employment, and that he was unequally disciplined for not meeting a sales quota. It is true that Thompson was not saying that Konica had refused to hire him, but that does not make hiring data irrelevant. The question under Shell Oil and its progeny is not whether Thompson specifically alleged discrimination in hiring, but instead is whether information regarding Konica’s hiring practices will “cast light” on Thompson’s race discrimination complaint.

(I've omitted citations to other court decisions from these quotes.) 

Pending Tennessee Legislation would Overturn Summary Judgment Rulings of the Supreme Court

A bill pending in the General Assembly would effectively reverse several decisions of the Tennessee Supreme Court that have all but made it impossible for an employer to get an employment lawsuit dismissed without a jury trial.

The bill would add a new provision to the Tennessee code which would say:

In all motions for summary judgment in any civil action in Tennessee, the moving party shall prevail on its motion for summary judgment if it:
(1) Submits affirmative evidence that negates an essential element of the nonmoving party's claim; or
(2) Demonstrates to the court that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim.

One sponsor of the bill explained (in the House Judiciary Subcommittee - see video of the session from April 27, 2011, set out below) the purpose of the bill was to addresses the Supreme Court's 2008 decision in Hannan v Alltel Pub where the Tennessee Supreme Court changed how they applied rule 56 and made a wrong or incorrect decision which makes it almost impossible for a court to grant summary judgment by requiring a party to essentially prove a negative.

A prior post of mine criticized the Supreme Court's "deeply flawed" application of the Hannan decision after it issued the decision in Gossett v. Tractor Supply, which held that the method of analyzing discrimination claims adopted in the U.S. Supreme Court's decisions in McDonnell Douglas / Burdine (an explanation of what these decisions held was included in my prior post) did not apply to summary judgment motions under state law because they were inconsistent with the Hannan decision.

Not surprisingly, the Tennessee Employment Lawyers Association (a group of lawyers that represent employees) opposes the bill, saying it would let employment lawsuits be dismissed without given employees the opportunity to respond.  Their arguments (to the House Judiciary Subcommittee) were poorly founded and were sharply challenged by the bill's sponsor.  The fact that TELA spoke against this bill should tell Tennessee Employers all they need about whether to get behind this bill. Here is a video of the most recent subcommittee discussion about the proposed legislation:

Interestingly, a separate bill (House Bill 1641, by the same sponsor) would directly overturn the Supreme Court's decision in Gossett by adding a provision to the code which specifies that McDonnell Douglas / Burdine principles would apply to claims under the Tennessee Human Rights Act and claims for retaliatory discharge.  I am quite sure that TELA opposes this bill, as well.

Sixth Circuit Rejects DOL Guidelines on Determining Employee Status in a Training or Educational Setting

The Secretary of Labor sued Laurelbrook Sanitarium and School, Inc. (“Laurelbrook”) for potential child labor violations.  Laurelbrook is a nonprofit corporation located in Dayton, Tennessee which observes the Seventh-Day Adventists philosophy and teachings which include the view that children are to receive an education with a practical training component.  The DOL sued contending that the students are really employees and being worked in violation of the child labor requirements.

The principal issue the court addressed (which makes the decision more relevant than it otherwise would be) was the test to apply in this type of situation.  The DOL wanted the court to apply guidelines it established in the DOL Field Operations Handbook and in a publication available on its website: Employment Relationship Under the Fair Labor Standards Act, WH Pub. 1297 (Rev. May 1980).  The publication set out minimum requirements (all of which must be met) for determining whether a student or trainee was not an employe:

1. the training, even though it includes actual operation of the facilities of the employer, is similar to that which would be given in a vocational school;
2. the training is for the benefit of the trainees or students;
3. the trainees or students do not displace regular employees, but work under their close observation;
4. the employer that provides the training derives no immediate advantage from the activities of the trainees or students, and on occasion his operations my actually be impeded;
5. the trainees or students are not necessarily entitled to a job at the conclusion of the training period; and
6. the employer and the trainees or students understand that the trainees or students are not entitled to wages for the time spent in training.

The Sixth Circuit, however, rejected application of this test saying it was "a poor method for determining employee status in a training or educational setting.  For starters, it is overly rigid and inconsistent with a totality-of-the-circumstances approach, where no one factor (or the absence of one factor) controls." Furthermore, the court said, the DOL test is inconsistent with the Supreme Court's decision in Walling v. Portland Terminal Co., 330 U.S. 148, 152 (1947), which "suggests that the ultimate inquiry in a learning or training situation is whether the employee is the primary beneficiary of the work performed. While the Secretary’s six factors may be helpful in guiding that inquiry, the Secretary’s test on the whole is not."

The proper inquiry (the one the district court used) is to focus on "which party receives the primary benefit of the work performed by Laurelbrook students."   The court went into considerable detail (by discussing the facts in a separate court decision) about the considerations for this test. I won't repeat them here.  The following explanation will suffice for present purposes:

If a purported employer receives the primary benefit from a working relationship with a child, it is likely that the child is in competition with adults, whom the employer cannot employ without complying with the FLSA’s costly and burdensome requirements. If, however, a child receives the primary benefit of the work performed for a purported employer, and the child’s presence does more harm to the purported employer’s operations than good (or no good at all), it is unlikely that the child is competing with adults for the opportunity to hinder the employer’s operations.

To conclude, we hold that the proper approach for determining whether an employment relationship exists in the context of a training or learning situation is to ascertain which party derives the primary benefit from the relationship. Factors such as whether the relationship displaces paid employees and whether there is educational value derived from the relationship are relevant considerations that can guide the inquiry. Additional factors that bear on the inquiry should also be considered insofar as they shed light on which party primarily benefits from the relationship.

Harassment Decision Demonstrates Importance of Clear Policies and Training

The federal court of appeals in Richmond issued a decision today which demonstrates the importance of having clear harassment policies and training first level supervisors about reporting harssment complaints. 

The lawsuit, brought by the EEOC (EEOC v. Xerxes Corporation) alleged a racially hostile work environment on behalf of two employees.  The employees say they complained to their supervisor months before the company did anything.  (The supervisor disputed having received any complaints.)  It was clear, that once more senior management learned of the conduct, they took prompt action that was reasonably calculated to end the harassing conduct.

The court of appeals upheld the dismissal of the EEOC's harssament claims for conduct that occurred after management learned of the conduct.  Ironically, this conduct was among the worst of the lot (assuming there are degrees of offensive racial conduct) consisting of anonymous hate-speech (e.g., KKK messages and the "N" word included in a written message) left in the locker of one African-American employees.  The employer promptly and effectively responded to these incidences, the court held, even though it never caught the perpetrator.  The employer called a meeting, threatened to fire the person if caught, and called in the police to investigate. 

The employer's problem was that the employees claimed to have reported to their supervisor a number of racial slurs that were directed at them but it was months before the company took action.  This allegation, the court held, created an issue of fact for the jury over whether the employer had effectively responded to their complaints. 

I don't often get to give advice on how to avoid issues of fact.  An issue of fact isn't discrimination.  There can be all sorts of factual disputes but if a jury believes the employer's testimony, the employer will win.  Factual disputes are only an issue because it is vastly cheaper for the employer to have the discrimination/retaliation claims dismissed prior to a full blown trial.


Here, the employer's policies played into the EEOC's goal of creating a factual dispute.  The court noted, for example, that "Plant employees were instructed to report any violations [i.e., harassing conduct] to their 'supervisor, Plant Manager, . . . or a member of Xerxes’ Compliance Committee.'"  The employer changed the policy (after the employees say the complained to their supervisor) to say that violations must be immediately reported to the supervisor and plant manager.

It would be interesting to see a policy that said harassing conduct must be reported to HR not the supervisor.  I tend to think a court might not look favorably on that policy because supervisors are considered to be agents of the employer.  A policy that says report violations to both is more likely to be enforced if the employee only reports to the supervisor.  Regardless, the safest course, even if not required, is to make sure supervisors are clearly and regularly trained to report up the command chain all reported misconduct. 

Whether or not this avoids an issue of fact, if a case goes to trial, evidence of this kind of training can be used to help convince a jury that no complaints were made to the supervisor.

Court Holds an Employer's Prior Leniency Doesn't Create Inference of Pretext

The federal court of appeals that sits in Denver issued a rather interesting race and retaliation decision today in the case of Wythe Crowe v. ADT.  Numerous complaints of harassment and improper conduct had been made against the employee (he, in turn, had complained about racial bias in promotions).  The employee was a minority, however, and the implication in the decision was that ADT, the employer, had been too lenient towards him because he was a minority.  After one more complaint of harassment, an HR manager wrote a report, which relied upon complaints against Crowe that occurred well before and after Crowe complained about promotion bias.  (The report's conclusion is worth setting out as it reflects a frustration many HR Managers feel): 

 [W]hy have we allowed Wythe to treat management and specifically, women in positions of power, with such disrespect? Why did ADT continue to try to appease this person and not support or protect our management team from this type of harassing and disrespectful abuse?  This behavior is against the law at any company in this country.  Why do we allow it here at ADT?  If Heather England took this case to the EEOC or to court, ADT could lose because we were not there to protect all employees from a hostile work environment that is free from harassment.

. . . .

The ramifications of not terminating Wythe Crowe could be huge! Think about this: What if a white male exhibits the same harassing, insubordinate, discriminatory, and disrespectful behavior as Wythe has done over the years.  If we decide to fire this person, we have now set ourselves up for a reverse discrimination lawsuit.  For that matter, since we have allowed Wythe to exhibit this type of behavior for many years, it does not matter whether the next person  is white, yellow, or pink, we are setting ourselves up for a potential lawsuit due to the precedent we have set by allowing Wythe Crowe to continue his employment at ADT.

(The court rejected Crowe's argument that this report was itself evidence of bias.)  What was most interesting was, when it came to the retaliation claim, the court rejected the employee's argument that the employer's history of being lenient towards him itself raises an inference of pretext:

Accepting Mr. Crowe’s argument would have the peculiar result of penalizing employers which, like ADT did in this case, attempt to rectify alleged inappropriate behavior instead of immediately terminating an employee upon the first transgression. Indeed, Mr. Crowe’s argument effectively inverts an employer’s incentives—if two employees engage in the same protected behavior, terminating the employee with a longer, more extensive history of serious complaints would invite litigation, while terminating the employee with a shorter, less extensive history of minor complaints would not entail that risk. In sum, ADT’s prior leniency with Mr. Crowe, without more, does not constitute evidence from which a reasonable jury could conclude that firing Mr. Crowe based on his long history of alleged in appropriate behavior was pretextual.

The idea isn't unprecedented.  Years ago, the federal court of appeals in Chicago stated essentially the same thing when it said, "we cannot vilify every employer that exercises caution in the handling of delicate employment situations." Vore v. Indiana Bell, 32 F.3d 1161 (7th Cir. 1994).

No doubt, it is always better to be as even handed as possible in imposing disciplinary action but in today's costly litigation climate, the decision preserves some flexibilty for cautious employers.

Federal Court Upholds DOL Regulations on Tip Credit Limits

Applebees had its bar tenders and servers perform a variety of duties which the employees contended were outside the scope of duties for which tips were traditionally paid.  In a decision issued today, the federal court of appeals in St. Louis, sided with the Department of Labor in upholding the DOL's interpretation of its tip credit rules.

Tip credits, for those that don't know, permit employers to pay tipped employees a lower fixed hourly rate ($2.13) and having tips make up the difference to minimum wage.  Today's decision explained the rules governing tip credits:

The FLSA requires employers to pay a minimum hourly wage, which is currently $7.25 per hour. See 29 U.S.C. § 206(a)(1). The "wage" paid to a "tipped employee" is defined as the sum of (1) the cash wage paid to the employee, which must be at least the minimum cash wage that was required to be paid to tipped employees on August 20, 1996 ($2.13 per hour), and (2) an additional amount based on the tips received by the employee that is equal to the difference between the amount stated in paragraph (1) and the current rate required by § 206(a)(1). See 29 U.S.C. § 203(m) (defining "wage").

I mentioned tip credits in a recent post on the recently issued Wage and Hour Division regulations.  As to tipped employees doing other non-tipped duties, the court explained:

The DOL regulations recognize that an employee may hold more than one job for the same employer, one which generates tips and one which does not, and that the employee is entitled to the full minimum wage rate while performing the job that does not generate tips. See 29 C.F.R. § 531.56(e). The DOL's 1988 Handbook provides that if a tipped employee spends a substantial amount of time (defined as more than 20 percent) performing related but nontipped work, such as general preparation work or cleaning and maintenance, then the employer may not take the tip credit for the amount of time the employee spends performing those duties.

The bar tenders and servers contended they did a lot more than their tipped work:

The plaintiff bartenders claim that they were required to perform such duties as wiping down bottles, cleaning blenders, cutting fruit for garnishes, taking inventory, preparing drink mixers, and cleaning up after closing hours. The servers claim that they performed such duties as cleaning bathrooms, sweeping, cleaning and stocking serving areas, rolling silverware, preparing the restaurant to open, and general cleaning before and after the restaurant was open. 

 Applebee's argued these were incidental duties.   The crux of the case concerned the Wage and Hour Division's regulation on performing non-tipped tasks.  The regulation recognizes, the court explained, that an employee may perform "related duties in . . . a tipped occupation" that are not themselves tip producing "part of [the] time" and "occasionally," and that the time spent performing these related duties is subject to the tip credit, but it does not address the impact of an employee performing related duties more than "part of [the] time" or more than "occasionally."  The DOL further explained these limits not in a regulation but in a handbook the DOL prepared for its investigators to use:

where the facts indicate that specific employees are routinely assigned to maintenance, or that tipped employees spend a substantial amount of time (in excess of 20 percent) performing general preparation work or maintenance, no tip credit may be taken for the time spent in such duties.

The court of appeals upheld the 20 percent limitation set forth in the DOL Handbook.  The decision is an unfortunate reminder for any employer with tipped employees that the DOL rules on tips are a frequent source of litigation, are often complex and difficult to follow. 

Bring Your Gun to Work Legislation Passes Tennessee House Judiciary Committee

Looking to create a problem where no problem exists, a bill (HB 2021) pending in the Tennessee General Assembly would prohibit Tennessee employers from barring employees from bring firearms onto the employer's property.  The operative language is:

no private or public employer, including the state and its political subdivisions, shall prohibit an employee who possesses a valid handgun carry permit authorized by § 39-17-1351, from entering the employer’s parking lot and parking in such lot during the employee’s regular work hours when the employee's privately-owned motor vehicle contains a firearm that is stored within the trunk, glove box, or other enclosed compartment or area where the firearm is not visible from outside the vehicle and such motor vehicle is locked.

Forcing employers to permit firearms on their property is an utterly bad idea.  A sad graphic from the Department of Homeland Security listed the "active shooter" incidences in this country, including one at a church in the home town of the state senator sponsoring the "bring your gun to work" legislation:

Prepared by Department of Homeland Security

Bureau of Labor Statistics show an average of 70 people a year are killed at work by co-workers.  Legislation is about balancing competing concerns and any increase in the risk of workplace violence should be weighed against the need for the action.  No doubt, not everyone who would bring a gun to work is going to use it at work.  The point is, however, that it is impossible to fathom the need for legislation that gratuitously increases the risk for all Tennessee employees.

But what is even stranger about the legislation is a separate provision which seems to say that employers may not prohibit firearms but if an employer fires an employee for bringing a firearm onto the employer's property, the employee has no right to sue for wrongful discharge.

Legislation that solves no existing problem but increases risks for employers and is incomprehensible.  It has not been a good week in Nashville.

Vendors who Prey on Employers

I read an article in the Asheville, North Carolina, Citizen-Times that bears repeating for Tennessee employers.  The article, headlined NC Labor Department Warns Businesses of Poster Scams reminds employers that they need to be wary of "private poster companies [who try] to make a buck off businesses by threatening them with huge fines" including, recently by email and phone solicitations.

North Carolina provides posters to employers free of charge.

Tennessee does as well.  The Tennessee Department of Labor and Workforce Development provides downloadable posters on its website: http://www.state.tn.us/labor-wfd/poster.htm

The U.S. Department of Labor provides downloadable posters for the employment laws it administers at http://www.dol.gov/oasam/programs/osdbu/sbrefa/poster/matrix.htm.

The EEOC will provide posters free of charge at http://www1.eeoc.gov/employers/poster.cfm but it also permits fee downloads of printable posters.  The current one (November 2009) poster is available at: http://www1.eeoc.gov/employers/upload/eeoc_self_print_poster.pdf

You may prefer the commercially available posters (which seem to run about $30 dollars) but there are free alternatives.  The main point, however, is not to taken in with threats of fines.