Butler Williams & Skilling Blog

Overtime Cases Certified for Notice in Timeshare Sales and Cable Installer Cases

Senate Votes to Ban Forced Arbitration of Sexual Assault and Discrimination Claims Against Military Contractors.

$22.75 Million Overtime Settlement

According to an August 20th press release, a massive national Uniform provider, Cintas, came to terms recently on an almost $23 million settlement with a class of hundreds delivery drivers to whom it failed to pay overtime compensation.

The Fair Labor Standards Act (“FLSA”) is the Federal law mandating overtime compensation to persons who work more than forty hours a week.  The law has a number of carve outs, more properly called exemptions, for broad groups of employees who are not entitled to overtime.  The lawsuit alleged that Cintas misclassified the drivers as exempt employees under the FLSA.  After an arbitrator ruled in favor of the drivers, the parties agreed to settle the matter for the above amount. 

            Many misconceptions exist about who is and is not entitled to overtime.  For example, just because a person receives a salary does not mean they are exempt from overtime.  Another mistaken belief is that “managers” cannot be entitled to overtime.  The truth is that salary and title have little to do with the analysis.  The law is far more concerned with an employee’s actual duties and responsibilities than anything else.

Race Discrimination Class Action Lawsuit Wins Key Ruling on Certification at Fourth Circuit Court of Appeals.

The generally conservative Fourth Circuit Court of Appeals recently issued a ruling effectively granting class action status to a racial discrimination lawsuit originating out of South Carolina. The case involves alleged racial discrimination at a Nucor Steel plant. The Plaintiffs in the case claim, among other things, that African Americans were improperly denied promotions. They further allege that far more blatant incidents of racism took place at the plant as well. For example, the Plaintiffs contend that paraphernalia exhibiting the Confederate flag was available at the plant gift shop and that certain Caucasian employees openly used racial epithets while on the job.

Class status means that not only the named plaintiffs can be a party to a suit and that the interests of many, many affected people can be represented all at once. In this case, class status had been denied at the lower court level and was appealed to the Fourth Circuit. There, it was ultimately determined that the District Court Judge abused his discretion in refusing to certify the class.

The decision in Brown v. Nucor was just published on August 7, 2009 and can be found at Brown v. Nucor Corp., 2009 U.S. App. LEXIS 17643. For a number of reasons, the opinion may be significant. For starters, it gives a clear roadmap on when and how a race class can win certification in the Fourth Circuit. Secondly, the opinion may signal a shift in how the Fourth Circuit Court of Appeals will treat similar cases going forward.

It is important to recognize that while this opinion marks a clear and decisive victory for the Plaintiffs, it says little about the merits of the case itself. The Court did not pass judgment on any facts or liability; it merely allowed the case to proceed as a class action. In laymen’s terms, the Plaintiffs won a big battle, but they have not yet won the war. It remains to be seen what happens next. Nevertheless, the precedential value of the Court’s opinion is undeniable as it will almost certainly play a prominent role in future discrimination actions where class status is sought.

Wal-Mart Settles Wage and Hour Lawsuit

Are Timeshare Sales Employees Entitled to Overtime Pay?

President Obama to Sign Lilly Ledbetter Fair Pay Act of 2009 on January 29, 2009

Supreme Court Reaffirms Retaliation Protection

Lilly Ledbetter Fair Pay Act Passes Senate!

WellPoint Age Discrimination Collective Action (Class) Moves Forward

Defamatory Job Evaluation Statements: Virginia Supreme Court Clarifies Actionable Defamation Cases

We all know that employers can ruin reputations by creating false impressions of poor job performance.  However, when employers mix partially true statements and opinion with false statements, some courts have been reluctant to enforce the rule that requires the statements to be viewed as a whole to discern the underlying defamatory message or content conveyed.  Now, the Virginia Supreme Court has delivered a clear message that an alleged defamatory statement must be viewed as a whole to determine the truth or falsity of the statement – and this includes the falsity created by accompanying inference and innuendo.

On January 16, 2009, the Virginia Supreme Court reiterated that damaging defamation can occur in the workplace when untrue statements are combined with partially true statements and opinion.  The Supreme Court again reviewed the case of defamatory statements made in a performance review which, when read together with all the circumstances, inferences and innuendo, were alleged to have a defamatory meaning.  The case, decided Friday, January 16, 2009 is Hyland v. Raytheon Technical Services Company, et al, Record No. 080157.  The case may be read in its entirety at http://www.courts.state.va.us/opinions/opnscvwp/1080157.pdf

In Cynthia Hyland v. Raytheon Technical Services Company, et al, the Virginia Supreme Court held that a claim for defamation is stated when one makes a false factual statement that concerns and harms a person’s reputation.  Ms. Hyland’s case arises out of defamation that occurred in the workplace.  Cynthia Hyland worked for Raytheon for about 21 years and was a senior VP and general manager of a Raytheon division when the statements which she contends were defamatory were made.  Ms. Hyland oversaw a division that bid for government contracts.  While her division lost government contract bids in 2000 and 2002, Ms. Hyland continued to receive positive performance evaluations - and was even appointed senior VP and general manager for her division and two additional units.  However, after Ms. Hyland made critical statements about the leadership style of the president, Bryan Even, in a supposedly confidential internal job assessment, she saw a dramatic change.  Apparently, Mr. Even learned of the critical comments.  Ms. Hyland’s next performance appraisal was negative and her employment was later terminated.  She filed suit for defamation.  A jury returned a verdict for $1,850,000 (including $350,000 punitive damages), based on five allegedly defamatory statements, and a judgment was entered for Ms. Hyland.  Raytheon appealed.

That judgment was reversed by the Virginia Supreme Court in a 2007 Virginia Supreme Court case, Raytheon Tech. Servs. Co. v. Hyland, 273 Va. 292 (2007) and the Supreme Court sent the case back to the trial court because 3 of the 5 statements relied on by Ms. Hyland at trial were determined to not be actionable defamation (the Supreme Court determined that 3 statements were opinion).  Because the jury considered all 5 statements in its verdict, the Supreme Court could not determine which statements the jury had relied upon: the 2 statements of defamation or the 3 statements of opinion. 

The second trip to the Supreme Court involves the trial court’s dismissal of the case.  On remand to the trial court, the Fairfax Circuit Court (the trial court) granted judgment to Raytheon, this time holding that the 2 defamatory statements contained true elements of fact and opinion and, therefore, were true - and that Ms. Hyland admitted as much.  Ms. Hyland took the position that she had not conceded this, relying on the full inferences and defamatory implications of the entire statements as a whole, and she appealed. 

Last week, handing down an opinion in its second review of this case, the Virginia Supreme Court reversed and again returned the case for trial on the 2 statements Hyland relied on as defamatory.  The Supreme Court stated that the trial court was wrong when it parsed the defamatory statements to separate factual portions and when it failed to consider the statements as a whole.  Defamation may be stated by inference, implication or insinuation.  While opinion is not considered actionable defamation, factual statements made in support of an opinion can form the basis for a defamation action.  A court may not isolate one portion of the statement from another portion of the statement to sanitize it or insulate it from a defamation claim.  A court must consider the statement as a whole.  Factual portions of an allegedly defamatory statement must not be viewed in isolation, but must be considered in view of accompanying opinion and other stated facts.  The key is what message is conveyed and whether the facts used to support the message may be proved false.  Once a court determines that an allegedly defamatory statement is capable of being proved false it is the jury’s function to evaluate the evidence presented and determine whether the plaintiff has proven that the statement is false.     

            The Virginia Supreme Court recognized the following performance evaluation statements as stating a claim for actionable defamation:

Cynthia lead [sic] [Raytheon] in the protest of the FAA’s evaluation selection process for the TSSC contract and through a difficult procurement for the TSA, both of which demanded her constant attention.  These visible losses created significant gaps in our strategic plans and in her business unit financial performance.

Cynthia and her team met their cash goals, but were significantly off plan on all other financial targets including Bookings by 25%, Sales by 11.5%, and profit by 24%.

The employer’s use of the word “significantly” did not make the statements non-actionable opinion because the factual statements used addressed Hyland’s responsibility for the losses and purportedly missing goals.  Raytheon convinced the trial judge that the case should be dismissed because, it alleged, Ms. Hyland admitted the truth of aspects of the two allegedly defamatory statements.  By improperly limiting its consideration to the separate factual portions of statements (and excluding consideration of the statements as a whole) the trial court denied Ms. Hyland the opportunity to demonstrate that the messages conveyed, “including any implications, inferences or insinuations that could reasonably be drawn from each statement,” were defamatory.  Ms. Hyland returns to Fairfax Circuit Court to have a jury determine whether her employer defamed her – under the rule of law that allegedly defamatory statements must be viewed in their entirety, as a whole, for defamatory content.

The Bottom Line:

• Virginia law protects employees from defamatory employer statements in the workplace, even in performance appraisals;

• Defamatory statements must be viewed as a whole, with all defamatory inferences and innuendo;

• Employees’ reputations are not legally subject to an employer’s whim when it mischaracterizes facts to convey that the employee has failed to perform, has cost the employer money or to otherwise falsely paint an employee as a poor performer;

• Situations where employers dramatically change position on performance to retaliate against employees for some reason are often the starting point for such false statements – this may occur when, for example, an employee has taken legally protected actions such as reporting illegal or unethical conduct by the employer, has responded honestly to an internal request for information (as it appears was the case with Ms. Hyland) or has reported sexual harassment, gender discrimination or racially based discrimination or harassment;

• Virginia trial courts should be expected to follow this clarification of defamation law where someone makes false statements to harm one’s reputation.  Under our legal system, employers should not escape the harmful result of their actions by arguing to judges that portions of their statements were true or were opinion.  Under the clear rule in Virginia, juries should be permitted to determine the falsity and reputational damage done to employees in workplace situations and in other situations involving reputational damage.

• With this case and other helpful case law, Virginia employment lawyers and civil rights lawyers can better protect employees whose reputations have been damaged by malicious defamatory statements in the workplace. 

Fixing a Systemic Problem - Discriminatory Race and Gender Pay Claims May Become Easier to Prove

On Friday, January 9, 2009, the U.S. House of Representatives passed legislation which could make proving race or gender based pay practices a little easier.  The Ledbetter Fair Pay Act and the Paycheck Fairness Act were passed by the House of Representatives as combined H.R. 11. 

This legislation, if enacted and signed into law, will overrule a hurdle to proving race or gender pay practices erected by the U.S. Supreme Court in Lilly Ledbetter v. Goodyear Tire & Rubber Co., Inc.  That 2007 U.S. Supreme Court decision erected a wall to proving such cases that meant many people receiving lesser pay than their white or male peers, would effectively, be out of court.  The Ledbetter rule states that if an employee fails to challenge the discriminatory pay practice or plan within a short time after the first notice or indication of the discriminatory pay practices, the case is untimely – and a discriminating employer is not legally responsible. 

But when was the last time an employer who was shorting women or minorities sent a memo around to bring attention to the fact that it is paying women or African American employees less, or providing lesser promotional or advancement opportunities to such workers?  Let’s face it - many, many employers do pay women and minority employees less than they pay comparably situated male or white employees.  Often, this fact does not come to light until the pay structure is examined more carefully, such as when a termination is questioned, or some other, more apparent differential treatment is observed – say the failure to promote or advance minorities or women.  But, under the Ledbetter rule, if that challenge is too late, then too bad – you cannot enforce the laws that prohibit pay discrimination based on gender or race.

Prior to the Ledbetter decision, most courts accepted a ‘paycheck accrual’ rule that held that every paycheck under a discriminatory pay plan was a separate actionable event, allowing an employee to go back in time to capture the underpayment once the discrimination becomes apparent.  Under such a rule, all discriminatory payments would be due under a theory which recognizes that an employer must be responsible for past, as well as present, violations under a ‘continuing violation’ theory. 

The Ledbetter decision rejects such a ‘paycheck accrual’ rule and makes it much more difficult for a women, African American, Hispanic, Asian American or other racial or religious minority to challenge the discriminatory pay practice.  H.B. 11, the legislation currently identified as the Ledbetter Fair Pay Act and the Paycheck Fairness Act, will reaffirm the prior ‘paycheck accrual’ rule and will allow underpaid women and minorities the ability to enforce the laws which prohibit such discriminatory pay practices.  It will eliminate artificial time barriers to challenge these illegal pay practices and will remove the employer defense that a person did not challenge the discrimination soon enough!  Please contact your U.S. Senator to encourage them to vote in favor of this legislation.  There is no legal excuse for paying women or minorities lesser wages for performing the same work – and there should be no legal incentive to avoid the law (or for keeping illegal pay systems in place) because some woman or racial minority failed to ‘beat the clock’ to challenge the practice.  Our laws should encourage following the law – not avoiding it!

President-Elect Obama and Congress Working to Overturn Supreme Court Ruling on Equal Pay

Congressional Democrats are working to legislatively overrule the Supreme Court's controversial decision in Ledbetter v. Goodyear Tire & Rubber Co., Inc., which severely limits a woman's right to bring a claim for unequal pay under federal law.  In its ruling the Court held that the statute of limitations on a claim made by a female employee for unequal pay begins when the employer decides that it will pay her less than male employees, and requires that a female employee bring a claim for unequal pay within 180 days of the employer's decision regardless of whether the female employee had any knowledge of the pay disparity during that time.  In other words, a female employee who does not discover that her employer is paying her less than male employees performing the same work is forever barred from being able to protect her rights to equal pay under Title VII. This is precisely what happened to Lily Ledbetter, who filed her discrimination claim within 180 days of learning of the pay disparity.  The Court's ruling is out of touch with the American working world, where most people are not aware of the salary or wages that their employer is paying other workers.

Under the Lily Ledbetter Fair Pay Act, a female employee who is a victim of wage discrimination would have 180 days from the date of each paycheck to file a claim.  The Act has already passed the House of Representatives, and the Senate is preparing for a vote. 

Employee Misclassification Lawsuit Settles for $26.8 Million

FedEx recently agreed in principle to settle a California lawsuit filed by its workers alleging that FedEx had misclassified them as independent contractors for $26.8 Million. The lawsuit alleged that FedEx should have classified the workers as employees under federal labor laws, and sought damages for unpaid overtime work and expense reimbursements. According to FedEx officials, the IRS had also been pursuing tax penalties against FedEx in the amount of $319 Million based on the misclassification of its workers, but that the IRS had withdrawn the proposed penalty. FedEx also faces legal challenges to its classifications of workers in the states of Washington and Indiana. 

Many workers who should be classified as employees under federal labor and tax laws are misclassified by their employers as independent contractors to the detriment of the employee and the benefit of the employer. Under the law, an employer must show that a worker meets the qualifications of an independent contractor, which typically involves an evaluation of the amount of control it exercises over the worker. Employers have an incentive to classify a worker as an independent contractor because the cost of an independent contractor is typically significantly smaller than that of an employee. Employers can require independent contractors to work longer hours because they are not eligible to receive overtime pay under federal labor laws. Independent contractors are also not entitled to participate in the employer's benefits plans offered to employees, such as health insurance, dental insurance, retirement plan contributions, stock options, and family and medical leave, which saves the employer on paying these costs. Thus, workers who are classified as independent contractors must pay the costs of these benefits rather than the employer. 

Unfortunately, most workers don't question the classification either until they are fired or other traumatic events in their life cause them to need benefits to which they would be entitled as an employee, such as a serious health condition for which they need family and medical leave.  Workers who are classified as independent contractors should take proper steps, such as seeking a ruling from the IRS, to be sure that this classification is proper. Most applicable federal laws allow a worker to challenge the classification, and provide protection against retaliation by the employer.

Employers (Ab)Use Arbitration To Gain Unfair "Home Court" Advantage

Suppose you were involved in a dispute with your employer over whether you were entitled to pay and benefits for two years, and your employer suggested that, instead of filing a lawsuit and letting an impartial jury decide your case, you resolve the dispute according to a set of rules that your employer, with the help of its lawyers, drafted without your input; would you agree? How about if your employer suggested that the dispute be decided by a person that they pay to make the decision? Or that you go through a multi-stage process where you meet with various teams of management personnel, by yourself, over a period of months to discuss the case before you can even talk to the person who will decide who wins?  Or that even after you go through that lengthy process, you then have to wait several months in order to investigate the case prior to meeting with the decision maker, and that during that time your lawyer would be performing the same type of activity that would be involved in the court process, only under the employer’s rules you cannot ask for certain evidence regarding the employer's actions that would otherwise be available to you through the court system, allowing the employer effectively to cover its behavior? Or if once you get through all of that, you only have a limited number of witnesses that you can call to produce evidence on issues that you are required to prove? Or, if after all of that, you can only appeal a decision that was made without any basis at all? Or that, even if you prevail, you would not be entitled to recover your attorney's fees that you would be able to recover in the court system? Of course you would not agree to such a process; what reasonable person would?

Unfortunately, this type of “dispute resolution” process, known as arbitration, is becoming more commonplace among employers. Many employees who have claims for workplace discrimination, harrassment, or other violations are being required to resolve their disputes seeking the loss of their pay, benefits, and other damages, through this lopsided process. Moreover, many employers are even attempting to require employees to engage in this process without the employee’s agreement.  For instance, unwitting employees have had their employer’s put “small type” on timecards or complaint forms reading that any employee who punches the card in the time clock or completes and signs the form agrees to arbitrate all disputes with the employer.

Fortunately, help may be on the way. Congress is currently considering the Arbitration Fairness Act, which is aimed at curbing these abuses not only in the workplace, but also in consumer and franchise disputes, which also involve parties with great disparity in resources. The Act is aimed at returning arbitration to a fair process that can save time and resources to the parties and the court system when implemented fairly. You can find out more about the Act, and also send a letter to your representatives in congress supporting passage of the Act, by visiting the National Employment Lawyer’s Association website.

Help Is Coming for Improperly Classified Independent Contractors

President-elect Barack Obama and the Democrat majority appear likely to amend federal tax law to prevent companies from benefiting by misclassifying their employees as independent contractors.  The change to the law will eliminate the tax exempt status of many companies who classify workers as independent contractors based on a long standing practice in the industry, which proponents of the change say is a lenient standard that is prone to abuse. Because companies do not pay payroll taxes or incur the costs of employee benefits for independent contractors, as they do for employees, the cost of an employee is significantly higher. A business can save up to 30% on payroll taxes alone simply by designating a worker as an independent contractor.

Under the current tax law, whether a worker is an employee or an independent contractor is determined by examining the level of control that the company exercises over the worker.  The IRS looks to three broad categories to make the determination: (1) Behavioral Control (e.g., Does the company determine what work the worker performs and how the worker performs it?); (2) Financial Control (e.g., How is the worker paid and are expenses reimbursed?); and (3) Type of Relationship (e.g., Is the relationship continuing or limited in time?).  The IRS examines each of these categories to evaluate the nature of the relationship as a whole. Other federal labor and employment laws use similar tests to determine whether a worker is an employee, and thus entitled to the rights these laws provide, such as minimum wages and overtime pay, family and medical leave, and protection against workplace discrimination. Accordingly, workers with the status of employee have significant rights and protections that are not shared by those who are deemed to be independent contractors. Workers who believe they have been misclassified as independent contractors can seek a determination by the IRS as to the proper classification of their work status by filing a Form SS-8. Misclassified workers can often also seek to recover for unpaid employment benefits, overtime compensation, as well as their overpayment of taxes. Combined with the protections afforded to employees by federal employment and labor laws, the reward to a misclassified worker who becomes properly classified as an employee is substantial.

Congress Amends ADA to Broaden Protections for More Disabled Workers

On September 25, 2008 President Bush signed the ADA Amendments Act of 2008 ("ADA-AA"), which will broaden the protections of the Americans with Disabilities Act for more workers with disabilities.  The ADA-AA was the result of bipartisan efforts and was supported by advocacy groups for both employers and employees. The legislation overrules several rulings of the Supreme Court of the United States that had diminished both the protections of the ADA, and the scope of workers with disabilities whom the ADA protected. For instance, the ADA-AA overrules the Supreme Court's decision in Sutton v. United Airlines, Inc., which allowed a court to consider mitigating measures, such as medications or prosthetic devices, in determining whether a person has a disability. The ADA-AA also overrules the Supreme Court's decision in Toyota Motor Manufacturing, Kentucky, Inc. v. Williams, under which the Court set forth an exacting standard that further limited the scope of persons protected under the ADA. These cases left many capable and qualified workers who had been discriminated against because of their disability without jobs and without recourse.  In addition, these cases resulted in significant litigation in the federal courts regarding whether a person had a disability so as to be protected under the ADA, and not whether the person had been the victim of unlawful discriminatory practices. In enacting the ADA-AA, Congress intended to move the focus of these cases back to the behavior at issue, and whether it was discriminatory, and away from whether a person was "disabled enough" to have federal protection.