EMPLOYMENT LAW. Sean A. Monson Bennett Tueller Johnson & Deere

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1 EMPLOYMENT LAW Sean A. Monson Bennett Tueller Johnson & Deere Litigation Overview Employment claims generally fall into one of the following categories: (i) discrimination or harassment based on membership in a protected class; (ii) retaliation for complaining about unlawful discrimination/harassment or participation in an investigation; (iii) breach of an implied contract (statements, policies, handbooks); (iv) termination in violation of public policy. Under federal anti-discrimination statutes relating to unlawful discrimination, the employee is entitled to his or her attorney fees in the event he or she prevails but the employer is not entitled to its fees should it prevail. This asymmetrical framework often leads employers to settle cases where liability exposure is high (even if the potential damages are low). An employee may bring a claim against his or her employer for breach of an implied contract or for termination in violation of public policy on his or her own. In order to bring a claim for unlawful discrimination/harassment or retaliation for complaining or participating in an investigation regarding unlawful discrimination/harassment, the employee must file a Charge of Discrimination with the Utah Anti-Discrimination Division within 300 days of the date of the event of discrimination (or last day of harassment). The Division will then send a copy of the Charge of Discrimination to the employer. The employer will have the opportunity to provide a written statement and relevant documents explaining why the employee s Charge of Discrimination should be denied (usually within 30 days). The Division will also try to set up a mediation early on in the process. If the case does not settle at an early mediation, the Division will investigate the claim which usually entails interviewing individuals who might have knowledge regarding the employee s Charge of Discrimination. After the investigation is concluded, the Division will issue a determination regarding whether unlawful discrimination/harassment occurred. If the Division finds that discrimination has occurred, it will try to get the employer to settle. If the employer does not settle, the Division will issue the employee a Right to Sue letter which enables the employee to bring claims for unlawful discrimination/harassment in Court. If the Division finds that discrimination has not occurred, it will issue the employee a Right to Sue letter which, again, enables the employee to bring claims in Court. 1

2 Other litigation matters that employers often deal with involve audits from the IRS regarding classification of workers as independent contractors versus employees and audits by the Department of Labor regarding payment of overtime and minimum wage. Audits by the Department of Labor are almost always precipitated by an employee complaint. Discipline and Termination The importance of contemporaneous documentation relating to employee discipline and termination cannot be overemphasized. It is vitally important to the employer s assertion of defenses to claims of discrimination and wrongful termination. For example, in defending against a claim of unlawful discrimination or retaliation, the employer is going to be required to demonstrate a legitimate, non-discriminatory reason for its actions. Contemporaneously executed documents are vital to that showing. If a reason for a disciplinary action was not documented, it effectively did not happen. The Division and jury and judges will not listen to any defense that is not documented Consider the following process for documenting disciplinary actions and/or terminations: a. Write down the work place deficiency. b. Interview any witnesses that may have knowledge of the workplace deficiency. c. Confront the employee with the problem/complaint. d. Give the employee a chance to respond. e. Write down your decision, what you believe happened and why and what discipline, if any, is going to imposed. f. Put your decision along with the interview summaries in that employee s file. g. Do not put the interview summaries of witnesses in their personnel file. When documenting performance issues, the best reasons are those that can objectively be verified. For example, if the employee works in a call center and he or she provides inaccurate information 25% of the time, that work-place deficiency is a good, objective deficiency that a judge or jury can understand. Likewise, if an employee works on an assembly line and his or her production is 25% lower than the average, a judge or jury will likely understand that the employer had objective, rational, good-faith reasons for disciplining or terminating that employee. Another decision that is easy to defend as a legitimate, non-discriminatory reason for an employment action is a decision to eliminate or outsource a position. 2

3 Conducting Unlawful Harassment Investigations When confronted with a claim of unlawful harassment, preparation before the claim can be vital. Unlawful sexual harassment falls into two categories. First, is quid pro quo harassment, which is a demand for sexual favors in exchange for workplace benefits. Second, hostile work environment, which is a claim that sexual comments or behavior is being directed at the employee because of his or her sex in such a pervasive way that a reasonable person would find the work place hostile. Unlawful harassment has also been found relating to membership in other protected classes. But the harassment must be based on the employee s membership in a protected class. As the Tenth Circuit has stated, the various anti-discrimination statutes are not general civility codes. In order to be liable for sexual harassment based on a hostile work environment, the employer must have known or should have known about the harassment and failed to take corrective measures. If the harassment is by a supervisor, and no tangible employment against the employee has occurred, the employer has a defense against the claim of harassment if the employer has a policy regarding unlawful harassment and the employee has failed to take advantage of it. The best practice is for the unlawful harassment policy to identify at least two individuals to whom complaints of unlawful harassment can be directed. Once a complaint is made, the following steps should be taken: a. Separate the alleged victim and alleged harasser. b. Consider putting the alleged harasser on leave (paid or unpaid, depending on company policy). c. Effectively depose the victim what happened, when did it happen, who said or did what, where did it happen, who witnessed this. d. HAVE THE VICTIM SIGN OFF ON HIS OR HER ALLEGATIONS. e. Interview the other witnesses and ask the same questions. f. Have the witnesses sign statements regarding what they said in the interviews. g. Confront the alleged harasser with the allegations. Give him or her a chance to respond/explain. h. Consider the response/explanation from the alleged harasser and then make a decision. Document the basis for the decision who you believed and why. i. If you find that unlawful harassment took place as alleged, decide what discipline will be taken against the alleged harasser and why. j. Put the witness interviews and the document describing the basis for the decision in an investigation file. k. Put the disciplinary decision in the alleged harasser s personnel file. Proper investigation is key to managing future complaints of unlawful harassment. Employee Handbooks 3

4 Employers often misunderstand the purposes of an employee handbook. An employee handbook is not a document to make employees feel good about working for the company. The purposes of the employee handbook are to: (i) inform employees and have them acknowledge in writing that they are at-will employees; (ii) outline employer s drug and alcohol testing policy; (iii) outline the employer s unlawful harassment policy (noting at least two people to which unlawful harassment can be reported); (iv) if the employer is subject to the Family and Medical Leave Act, set forth the employer s FMLA leave policy; and (v) a description of the employer s other benefits and policies (benefits, paid time off, cell phone usage, computer usage etc.). The language in the employee handbook describing what the employer is going to do should use discretionary language the employer may or at its discretion. The words describing what the employee is going to do should be mandatory the employee will or shall. The handbook should not contain a progressive discipline policy (unless you are one of the very few Utah employers subject to a collective bargaining agreement in which case that document will control). Employers should consider having employees sign separate at-will acknowledgements each year in order to eliminate any implied-in-fact contracts that may have crept in during the year. Independent Contractor Versus Employee Employers often want to classify their workers as independent contractors as opposed to employees. By doing so, the employer avoids having to pay the employer portion of FICA taxes, workers compensation insurance and unemployment insurance for the worker, and overtime and minimum wage. There is a significant economic incentive to classify employees as independent contractors. But misclassifying can lead to payment of back taxes and significant penalties. There is a different test to consider whether an employee is an independent contractor or an employee in the different contexts in which such a distinction is important. For example, the IRS generally looks at three factors. Does the paying entity have the right to control what the worker does and how he or she performs his or her job? Are the business aspects of the worker s job controlled by the paying entity such as how the worker is paid, whether expenses are reimbursed, who provides the tools and supplies used etc. Are there written contract or employee type benefits (i.e. pension plans, insurance, vacation pay, etc.)? Will the relationship continue and is the work performed a key aspect of the paying entity s business? If the paying entity wants a determination from the IRS regarding the proper classification of a particular employee or class of employees, it can file a Form SS-8 with the IRS and get a determination (usually within about six months). Different, but similar, tests may be applied to determine whether an employee is covered under the Fair Labor Standards Act or for purposes of workers compensation or unemployment insurance. 4

5 Overtime Exemptions The Fair Labor Standards provides that every worker who works more than 40 hours a week is entitled to overtime pay (1 ½ times the regular pay rate) for any hour worked over 40 hours in a week. The calculation is not done by the day, by averaging two weeks, or on a monthly basis. It is calculated on a weekly basis. There are a number of exemptions to this requirement. The threshold for most of the exemptions is that the employee be paid a salary in the amount of $455 per week ($23, per year). If the employee meets that test, then the employee must meet certain criteria to be considered an exempt executive or administrative employee. An exempt executive employee is an employee who manages two or more full time employees (or their equivalent), whose primary duty is management, and who has the authority to making hiring and firing decisions (or give substantial input on those types of decisions). An administrative employee is one whose primary duty involves the performance of office work related to the company s business who exercises independent discretion in performing his or her job responsibilities. There are other exemptions such as outside sales persons, professional employees and computer programmers. The Obama administration has proposed raising the salary threshold to $970 per week ($50, annually). Thus, most workers making less than this amount would automatically be entitled to overtime. 5