The United States Department of Labor (US DOL) was dealt a significant blow in its attempt to revise regulations relating to the overtime exemption applicable to home companions.

New Regulations: Over the last two years, the US DOL finalized regulations that barred third-party employers from claiming a minimum wage and overtime exemption for “companionship” domestic workers along with barring third-party employers from claiming an overtime exemption for live-in employees. The regulations were originally going to be effective as of January 1, 2015, although the US DOL had notified employers that it would not commence enforcement efforts until July 1, 2015.

DC Circuit Case: However, the US DOL was dealt a significant blow in December 2014 by the United States District Court of the District of Columbia. The DC District Court held that Congress had not changed the Fair Labor Standards Act’s (FLSA) definitions which granted an exemption for “any employee” providing “companionship services” or employees who were “live-in” domestic service providers. The court particularly noted that Congress had failed to change the statute to accomplish the same purpose six times, which was considered evidence that the US DOL’s changes were contrary to Congressional intent.

In January, the DC District Court dealt another blow to the US DOL revisions which dramatically changed the definition of what was considered exempt duties. Specifically, the US DOL had limited exempt-eligible employees to those who provide care or assist with daily living activities during less than 20% of their total hours. The court rejected the changes on the basis that the statute directly contradicts the US DOL’s changes. The statute specifically refers providing services to elderly and disabled individuals who are unable to “care for themselves.” The court reprimanded the US DOL stating,

Redefining a 40-year-old exemption out of existence may be satisfyingly efficient to the Department of Labor, but it strikes at the heart of the balance of power our Founding Fathers intended to rest in the hands of those who must face the electorate on a regular basis.

Planning for 2015: These two decisions together reestablish the exemption as employers have used it for many years. Employers who are engaged in the homecare and companionship business should carefully review the duties of their employees to ensure that they meet the old definition of “companionship services” and carefully watch developments in this area to ensure they keep up to date with changing occurring in the law.

The Colorado Minimum Wage will be increasing this year, while the federal minimum wage remains the same. Employers should update their policies, procedures, and posters to reflect the most recent changes.

Colorado Minimum Wage Increase:
Article XVIII, Section 15 of the Colorado Constitution requires that the minimum wage be adjusted on an annual basis for inflation. As a result, the Colorado Department of Labor announced that effective January 1, 2015, the Colorado Minimum Wage will increase to $8.23 per hour. In addition, tipped employee’s minimum wage increases to $5.21 per hour. This increase applies to employees who either (1) is covered by the minimum wage provisions of the Colorado Minimum Wage Order Number 31, or (2) is covered by the minimum wage provisions of the Fair Labor Standards Act.

Colorado Minimum Wage Order Number 31:
As most employers know, Colorado Minimum Wage Order Number 31 applies to private sector employers and employees in Colorado in the (1) retail and service, (2) commercial support service, (3) food and beverage, and (4) health and medical industries. It does not apply to public sector employees, independent contractors, and other industries like construction, manufacturing, and wholesale.

Overtime must be paid after either forty hours in a single workweek, or after twelve hours in a single workday, whichever is most beneficial to the employee.

Fair Labor Standards Act:
Employers should remember that the federal government also has a minimum wage law that requires employers to pay at least the federal minimum wage and overtime after forty hours in a single workweek. The federal minimum wage is $7.25 per hour, and $2.13 for tipped employees. In addition, employees must be paid overtime after forty hours in a single workweek, and employers may not average an employee’s hours over a two week pay period.

State v. Federal Rules:
Many employers find these rules confusing and at time contradictory. Employers should keep in mind that they must comply with the most restrictive rules that benefit employees.

Planning for 2015:
Employers should carefully review their policies and procedures to ensure that they are complying with the state and federal minimum wage and overtime laws. Penalties for violating these laws may include back wages, liquidated damages, treble damages, and attorneys fees. It can be very costly, and planning with an experienced attorney can prevent serious problems down the road.

All companies experience attrition. Employee turnover is costly for a variety of reasons, including finding candidates, employee on-boarding, training, and other issues. Of growing concern in today’s marketplace is loss due to the disclosure of trade secrets, intellectual property, and confidential information. Employers should take proactive steps to protect their business.

Where to Begin:
Start with the end in mind. What is the objective? What needs protection? Is there a physical asset that needs protection? Is it an algorithm that needs protection? Is it a formula? Is it a recipe? Is it data? Once the employer understands exactly what needs protection, the employer can identify what steps are necessary to protect its confidential information and trade secrets.

Thorough consultation with an attorney can help the employer establish protocols and protections for the employer. This may include physical protections if appropriate, workplace processes that ensure that certain aspects of the manufacturing process are restricted to limited individuals, and other similar protections. Employer’s may also consider implementing contractual protections, like having employees sign non-compete agreements, non-solicitation agreements, and non-disclosure or confidentiality agreements, as further explained below. Other options may include litigation under the contracts describe above, or other common law causes of action. These options may be used in a variety of combinations providing multiple protections to ensure that the employer’s confidential information and trade secrets remain protected.

Non-Compete Agreements:
Non-compete agreements are used to prevent an employee from working for a competitor. The intent is to prevent the employee from sharing confidential or competitive information with the former employer’s competitor. NCAs are generally prohibited in Colorado, except in limited circumstances. Colorado courts have applied the statute to NCAs with employees and independent contractors in some circumstances.

While generally prohibited, non-competes are permitted in the following limited circumstances:

  1. When purchasing/selling a business;
  2. Contracts protecting trade secrets;
  3. Contracts to recover training expenses under certain conditions; and
  4. Contracts for specific executive and management personnel and professional staff to the same.

The statute contains specific provisions restricting the use of non-compete agreements involving physicians, although it does provide that an employer may recover damages in certain circumstances involving physicians.

Non-Solicitation Agreements:
Non-solicitation agreements can take various forms. NSAs attempt to prevent employees, current and former, from soliciting the employer’s clients on behalf of competitors, or NSAs may attempt to prevent employees from soliciting the employer’s other employees to work for a competitor. While these types of agreements may not constitute a direct ban on competition, Colorado courts have struggled to identify clear guidelines for whether NSAs are enforceable. However, Colorado courts appear to have determined that NSAs that prohibit employees from soliciting customers for a competitor generally constitutes a non-compete agreement and are therefore prohibited unless an exception applies. On the other hand, Colorado courts appear to approve of NSAs that prohibit employees from actively soliciting employees to leave a company where the NSAs is narrowly drafted for such a purpose.

Non-Disclosure or Confidentiality Agreements:
Non-disclosure or confidentiality agreements protect an employer’s confidential information from disclosure to third parties. Confidential information may include trade secrets, customer lists, pricing data, marketing information, strategic plans, and other information. If an employee is required to disclose confidential information as a result of a court order or similar circumstance, this agreement will require the employee to give the employer immediate notice. This will allow the employer to review what information is being requested, and whether or not to challenge the disclosure. However, NDAs generally do not prohibit an employee from working for a competitor or starting a competing business.

Other Options Available:
Employers may also consider pursuing other legal claims under Colorado common law. These may include filing a lawsuit for breach of fiduciary duty, tortious interference with business or contractual relations, employee raiding, and others. An employer’s success in protecting its business on any of these common law claims is heavily dependent on the facts of each individual case.

Planning Ahead:
Employers should carefully consider what information and trade secrets need protection in their workplaces. Careful planning will provide significant protections against disclosure maintaining the competitive edge the employer has worked so hard to establish. Employers should consult an attorney to discuss options and how to implement protections moving forward.

Medical certifications under the Family and Medical Leave Act (FMLA) can be complicated. Questions about what notices are required, how often inquiries may be made, what to do when certifications are not clear, and other questions. Here we address several circumstances in which medical certifications can be used and the limits of requiring employees to provide the same.

Certification Generally:
Employers may require employees to support requests for leave with medical certification when leave is needed to care for the employee’s covered family member, to care for the employee’s own serious health condition, for a qualifying exigency, or to care for a covered servicemember.

Initial Notice of Requirement of Certification:
If the employer requires certification, the employer is supposed to provide notice of the requirement to the employee at the time the leave is requested, or within five (5) business days after the request is made. If the need for leave is unforeseeable, then the employer is supposed to inform the employee of the requirement within five (5) business days of commencement of the leave.

Medical Certification:
Certification forms vary depending on the reason for leave. Generally, employers may request information including, but not limited to:

  1. The date the condition commenced;
  2. The probable duration of the condition;
  3. The employee’s ability to perform essential functions of the position;
  4. The amount of leave needed; and
  5. Whether the need for leave is intermittent or full-time.

Employers must inform employees if the medical certification is insufficient or incomplete. This may occur when the employee returns a certification without the required information or the information is vague, ambiguous, or non-responsive. The employee has seven (7) days to provide information to complete the certification.

Clarification & Authentication:
After receiving a complete and sufficient certification, the employer may not contact the health care provider except for very specific reasons and under very specific conditions. The employer may contact the health care provider to authenticate and clarify the certification if needed. “Authentication” and “Certification” have specific meanings and employers should consult an attorney prior to contacting any health care provider. In addition, the employee’s immediate supervisor may not contact the health care provider. Rather, the regulation requires that another health care provider, a human resources professional, a leave administrator, or a management official other than the supervisor make contact if permitted and necessary.

Recertification:
An employer may also begin to question the need for leave or have concerns about FMLA abuse. The regulations do provide employers a means to recertify the need for leave in specific circumstances.

  1. Employers may request recertification no more often than every 30 days under specific circumstances, except as otherwise stated below in 2, 3, or 4;
  2. If the certification states that the need for leave will be for more than thirty (30) days (e.g., forty (40) days), then the employer may request recertification if additional need is requested, except as otherwise stated below in 3 or 4;
  3. Employers may request recertification every six (6) months (e.g., intermittent leave that will last more than six (6) months); or
  4. Employers may request recertification in less than thirty (30) days if: (a) the employee requests an extension of leave; or (b) circumstances described by the previous certification have changed significantly; or (c) the employer receives information that casts doubt on the employee’s stated reason for the absence or continuing validity of the certification.

Proactive Compliance:
FMLA leave can be complicated with the many notices, certifications, recertifications, fitness for duty certifications, and other information that needs to be exchanged between the employer and employee. The DOL has regularly changed these regulations since 2008 through the regulatory process as well as administrative guidance. Employers should proactively review their FMLA policies and practices. Waiting until the employer receives a request for FMLA leave is often too late as the time constraints relating to notice requirements and disclosures do not provide for sufficient time to review and alter policies as may be required. Employers should consult with a qualified attorney to ensure compliance with the FMLA.

Since it’s Labor Day, this is as good a time as any to discuss the distinction between independent contractors and employees. The Colorado Supreme Court issued two significant decisions earlier this year rejecting a long-held rule that relied on a single determinative factor in identifying independent contractor relationships.

The Colorado Employment Security Act & Court Construction:
The Colorado Employment Security Act (CESA) requires employers to pay unemployment taxes on compensation paid to employees, but not on compensation paid to independent contrators. An employer asserting an independent contractor relationship must show that the independent contractor is “free from control and direction in the performance of the service, … and such individual is customarily engaged in an independent trade, occupation, profession, or business related to the service performed.” C.R.S. 8-70-115(1)(b).

For many years, Colorado courts have focused their analysis almost exclusively on whether the purported independent contractor performed services for multiple entities, with lip service to other factors. If the business failed to show that the individual performed services to other entities, the individual would be deemed to be an employee. The statute lists several factors for consideration in making this determination, including whether the employer prohibited competition, paid the individual a salary or hourly rate, and others.

ICAO v. Softrock Geological Services, Inc & Western Logistics, Inc. v. ICAO.:
But the Colorado Supreme Court rejected this approach. Instead, it held that courts should look to the “totality of the circumstances” when determine whether the individual is an independent contractor. The Colorado Supreme Court specifically stated that the nine factors listed in the statute may be considered, as well as factors outside the statute. Such factors may include whether the individual was required to work exclusively for the purported employer; establishing quality standards for the work performed; paying a salary or hourly rate; maintaining independent business cards; employing others to assist in completing the project; carrying separate liability insurance; and others.

Other Independent Contractor Tests:
The Colorado Supreme Court decisions draw the Colorado test closer to other tests used by the United States Department of Labor and Internal Revenue Service. The DOL generally looks at six factors, while the IRS generally looks at twenty factors.

Exercising Caution:
State and federal agencies continue to invest resources to eliminate misclassification. The Colorado Industrial Claims Appeals Office, the U.S. DOL, and the IRS are diligently trying to recover unpaid taxes and back wages. Some of these state and federal agencies share information relating to misclassification of independent contractors. Employers should carefully review any independent contractor relationships they currently have to ensure compliance with both state and federal law.

Richard Castleton represents employers in a variety of employment-related matters, including compliance, preventive maintenance, and litigation.

Once in a while there is a case that teaches a very poignant lesson. Snay v. Gulliver Schools, Inc. is one of those cases.

Patrick Snay (Snay, Plaintiff), the former headmaster of the Gulliver Schools, Inc. (Gulliver, Defendant), sued Gulliver for age discrimination and retaliation. Snay and Gulliver reached a settlement in which Gulliver agreed to pay the former headmaster $10,000 in back pay, $80,000 for a release of his claims, and $60,000 in attorney’s fees. The settlement agreement had a confidentiality provision which prohibited the former headmaster from disclosing or discussing the settlement with anyone except his attorneys, professional advisors, and wife.

Enter Facebook. Several days after the settlement was signed, Snay’s daughter posted a small entry on her Facebook page which read, “Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.”

Gulliver discovered the post and refused to pay Snay the $80,000 release payment based on the breach of the confidentiality provision of the settlement agreement. Snay filed a motion to enforce which was granted by the trial court, but overturned on appeal. The appellate court held that the daughter’s post was a breach of the confidentiality provision of the settlement agreement and that Gulliver was not required to pay the $80,000. Good-bye European vacation.

This is an excellent example of the practical implications of well drafted settlement agreements combined with vigilant enforcement of the same in a social media era.

Richard Castleton represents employers in a variety of employment-related matters, including compliance, preventive maintenance, and litigation.

The Equal Employment Opportunity Commission (EEOC) recently issued its first guidance on pregnancy discrimination and related issues in over thirty (30) years. The document, “Enforcement Guidance on Pregnancy Discrimination and Related Issues,” should be considered carefully in making decisions involving pregnant employees. This is “guidance,” and therefore does not carry the weight of law. However, it represent the enforcement policy of the EEOC and may carry persuasive authority in a lawsuit.

Purpose: The purpose of the Guidance is to “update the Commission’s guidance” relating to pregnancy discrimination and “the application of the Americans with Disabilities Act (ADA) … to individuals who have pregnancy-related disabilities.” It is organized in four sections: (1) the PDA; (2) the ADAAA; (3) other requirements affecting pregnant workers; and (4) best practices.

We could take many pages to analyze what the Guidance means and how it will impact employers. But this will be a very brief overview highlighting some of the portions of the guidance that will have a significant impact on employers.

PDA:  The first significant departure from common interpretation of the PDA is when the Guidance takes the position that the source of an employee’s limitation may not be considered when determining whether the employee is temporarily unable to perform the functions of her position.

…an employer is obligated to treat a pregnant employee temporarily unable to perform the functions of her job the same as it treats other employees similarly unable to perform their jobs, whether by providing modified tasks, alternative assignments, leave, or fringe benefits. An employer may not refuse to treat a pregnant worker the same as other employees who are similar in their ability or inability to work by relying on a policy that makes distinctions based on the source of an employee’s limitations (e.g., a policy of providing light duty only to workers injured on the job).

This position will have a significant impact on employer policies that only permit light duty assignments based on specific causes (e.g., workplace injuries). Under the guidance, such restrictions would constitute a violation of the PDA.

ADA:  The Guidance also takes the position that pregnant employees are entitled to reasonable accommodation just as disabled employees are under the ADA.

Changes to the definition of the term “disability” resulting from enactment of the ADA Amendments Act of 2008 (ADAAA) make it much easier for pregnant workers with pregnancy-related impairments to demonstrate that they have disabilities for which they may be entitled to a reasonable accommodation under the ADA. Reasonable accommodations available to pregnant workers with impairments that constitute disabilities might include allowing a pregnant worker to take more frequent breaks, to keep a water bottle at a work station, or to use a stool; altering how job functions are performed; or providing a temporary assignment to a light duty position.

While the Guidance states that pregnancy does not constitute a disability, it states that impairments arising out of a pregnancy may constitute an ADA-covered disability. The EEOC effectively prohibits employers from inquiring as to the source of the impairment. If the impairment meets the ADA definition of disability, then the request for reasonable accommodations is subject to the undue hardship analysis regardless of the cause of the impairment.

Lactation Requirements:  Many employers are already required to provide unpaid breaks for nursing mothers to express milk under the Fair Labor Standards Act (FLSA), as amended by the Patient Protection and Affordable Care Act, or similar state laws. However, the guidance requires employers to allow employees to use sick leave for purposes of lactation if the employer allows employees to change their schedules or use sick leave for routine doctor appointments and other non-incapacitating medical conditions.

This raises questions when an employer has a “minimum-use” policy which requires employees to use at least one hour (0r some other amount) of leave at a minimum. This policy would not likely cause a problem for employees seeking medical treatment for non-incapacitating medical conditions as those appointments likely last longer than one hour. However, such a policy may have a disparate impact on a lactating employee when she only uses thirty (30) minutes to express milk but is required to take more sick leave under the policy.

Best Practices:  The EEOC lists many “best practices” for employers to consider. These are wide-ranging. Some are generally accepted and should already be in place. For example, employers should “have a process in place for expeditiously considering reasonable accommodation requests …” Or “train managers to recognize requests for reasonable accommodation …”

But others are not as common, and have caught the attention of some practitioners. For example, the EEOC recommends that employers “ensure that employees who are on leaves of absence due to pregnancy, childbirth, or related medical conditions have access to training, if desired, while out of the workplace.”

Additional Controversial Aspects of the Guidance:  While there are many questions that remain unanswered, two glaring issues stand out from a political perspective. First, the EEOC’s guidance indicates that prescription contraceptives must be provided to all employees to avoid violations of the PDA. This appears to be a direct conflict with the recent Hobby Lobby case recently decided by the U.S. Supreme Court. The Supreme Court held that some privately held corporations may be exempt from Affordable Care Act requirements to provide prescription contraceptives. The EEOC guidance is clearly a response to the case, but does not mention the case by name. This puts some employers in a remarkably precarious position.

In addition, two members of the Commission have issued public statements denouncing the timing of the guidance given that the U.S. Supreme Court recently announced that it will review Young v. United Parcel Service which specifically involves an employer policy that limits light duty assignments to employees who (1) had been injured on the job; (2) had lost their U.S. Department of Transportation certification; and (3) were disabled under the ADA. The Fourth Circuit Court of Appeals held in favor of UPS’s policy concluding that there was no evidence to suggest that the employee was disabled and finding that UPS did not discriminate with its pregnancy-neutral policy.

How to Proceed: Much of this Guidance may be altered or overturned depending on the Supreme Court’s decision in Young v. United Parcel Service. And it is possible that the prescription contraceptive requirement set forth in the Guidance may also be invalid.

However, given that this Guidance represents the enforcement policy of the EEOC, employers should consult with counsel to determine whether it is necessary to change policies restricting light duty assignments and sick leave policies and provide training to management personnel to appropriately receive requests for accommodations under the new Guidance.

Richard Castleton represents employers in a variety of employment-related matters, including compliance, preventive maintenance, and litigation.

Hiring new management can present a valuable opportunity to eliminate entrenched productivity and morale problems, modify employment policies, and renew enforcement of long-dormant policies. But attempts to revitalize policies and reinvigorate discipline in the workplace, while well-intentioned, can cause problems when done incorrectly and without proper guidance.

Case No. 1 – The New HR Manager:
Prior to hiring a new human resource manager, Oak Harbor Freight Lines, Inc. did not have a consistent policy for requesting medical certifications for intermittent leave under the Family and Medical Leave Act (FMLA). Then they hired a new HR manager. While reviewing FMLA use, several employees appeared to be abusing intermittent FMLA (i.e., disproportionate absences around weekend and holidays). To curb the suspected abuse, the HR manager issued a policy requiring that employees provide a “medical note … from your provider for that absence. The note will need to indicate you were seen by a provider during the absence and how the absence relates to the FMLA qualifying condition.” In time, two employees failed to comply with the policy, and was eventually terminated as a result.

Although the policy was intended to curb FMLA abuse, the court held that the company violated the FMLA when it terminated the employee because the medical note policy went above and beyond what was allowed by the law. The court stated that

the statute and regulations show an intent to limit medical verification to certification and recertification as delineated. Neither the FMLA nor its regulations provide for any other means by which an employer can require documentation from an employee’s medical provider.

Case No. 2 – The New Department Manager:
Over the course of ten years, New York City has allowed one of its case managers to arrive late to work as a result of medications he was taking for schizophrenia. Sometimes he would get to work after 11:00 AM, well after the flex time policy that permitted employees to arrive between 9:00 and 10:00 AM. But NYC had still tolerated the tardiness, and the employee worked late to ensure that his work was completed. In 2008, management determined that tardiness would no longer be tolerated telling the employee that it was management’s job to prevent such tardiness. The employee submitted letters from his medical provider stating that the employee needed to arrive tardy. The employee requested accommodations including flex-time, banking hours, and working late, but management refused leading to a grievance and eventual lawsuit.

NYC argued that punctuality was an essential function of the employee’s position. The lower court granted NYC’s motion for summary judgment. But the Second Circuit Court of Appeals overturned the decision stating that (1) NYC had “explicitly and tacitly approved” of his tardiness for over ten years; (2) the employee had proffered a plausible reasonable accommodation including late arrivals, working late, and banking time; and (3) the proposed accommodations aligned with NYC policies allowing flex-time and banking time.

How to Prevent Similar Mistakes:
Unnecessary expenses and costs could have been avoided had the employers in these cases consulted with legal counsel before taking adverse employment action against these individuals. It is true that employers may generally implement employment policies that govern the terms and condition of the workplace. But these policies must comply with the law. New management may be a good way to “get your house in order,” but policy changes should be reviewed by legal counsel to ensure compliance with local, state, and federal law.

Richard Castleton represents employers in a variety of employment-related matters, including compliance, preventive maintenance, and litigation.

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