HR Minute

If Being "Proactive" is a Management Objective, This is a Good Year

At the beginning of the calendar year, many in-house counsel and human resources professionals embark on taking steps to meet their annual management objectives. If history is any guide, many human resources professionals and in-house counsel have as one of their objectives taking “proactive” steps to minimize risk to their organizations. For those who have such objectives, the changes in the legal landscape provide fertile opportunities under (1) wage and hour laws; (2) background screening; and (3) policies and procedures, including related to equal employment laws.

Wage and Hour Laws

In what should come as a surprise to no one, the number of wage and hour lawsuits filed in 2015 were the highest ever recorded. Since 2000, Fair Labor Standard Act (FLSA) lawsuits have increased by 450% and the number of lawsuits increased from 8,066 in 2014 to 8,954 in 2015. Within these statistics, the number of FLSA collective actions have also increased and 75% of the time, state and federal courts grant conditional certification of the class, which means that the cost of defense significantly increases. Employers’ attempts to later decertify the class failed in 2015 64% of the time.

The plaintiff’s bar has not been shy about their intention to continue to file FLSA actions, whether on behalf of single or small groups of employees or as collective actions. The sad fact is that FLSA lawsuits are a low-investment high-return business for plaintiffs’ lawyers and there is no reason—given the billions that have been paid out in settlements—for them to cease pursuing these cases. In addition, the plaintiff’s bar has gone beyond bright-line FLSA violations, such as not paying the minimum wage for each hour worked or improperly classifying workers as exempt, to basing lawsuits on such things as the amount of time that it takes to “boot up” computers. In other words, even the slightest technical deviation from the FLSA can result in a lawsuit.

In addition to the litigation that stems from the FLSA, it is well known that the United States Department of Labor Wage & Hour Division (DOL) has proposed a radical change in the test for determining whether employees are exempt. When that proposed rule change is finalized, if it is finalized, is still unclear. By the end of the period when comments to the proposed rule could be submitted, DOL had received 270,000 comments which is three times the number that DOL received the last time it updated the FLSA rules. DOL has the obligation to respond publicly to those comments which will take some time. Also DOL has suggested it may also look to alter the duties tests for exempt status. In short, much remains to be done with regard to the proposed rule.

Proactive Steps under the Wage & Hour Laws – Audits and Arbitration Agreements

Companies can take many steps now to mitigate risk under the federal and state wage and hour laws. The first step is to audit the exempt status of existing positions. The law under the FLSA continues to evolve in unanticipated ways as the plaintiffs’ bar makes creative arguments that have challenged the courts in applying the archaic and poorly drafted statute and regulations. Since (1) DOL has changed its position on the exempt status of some positions; (2) some states’ wage and hour laws go beyond the requirements of the FLSA; and (3) other states adopt the analysis of the FLSA, it is important that classification of current exempt employees be reviewed. The time and money spent in conducting such audits can save companies significantly more time and money in responding to regulatory investigations and litigation.

Another strategy that employers can adopt is to require employees to execute arbitration agreements which limit the ability of employees to bring class or collective actions on claims against the employer, including wage and hour claims. While there remains a disagreement between the National Labor Relations Board (NLRB) and the federal courts regarding the enforceability of class/collective action waivers, adopting an arbitration policy and arbitration agreements is a mitigation strategy worth considering.

Background Screening

There are three aspects of background screening that should cause companies concern. First, many states and even cities have adopted “ban the box” legislation and otherwise placed limitations or requirements on the use/consideration of criminal background checks. Second, the Fair Credit Reporting Act (FCRA) is becoming another fertile field for class action lawsuits by plaintiffs’ counsel much for the same reason that the FLSA has become so popular. The FCRA has been on the books for decades but somewhat ignored. It and its regulations suffer from the same lack of definition that exists with the FLSA. Also, the FCRA contains an automatic attorneys’ fees provision which, again, provides a low risk high return for plaintiffs’ counsel. Third, the Equal Employment Opportunity Commission (and some state agencies) have targeted the use of background checks as an avenue for asserting disparate impact claims.

Proactive Steps under the FCRA – Audits, Revised Policies and Procedures, and Arbitration Agreements

Similar to proactive steps under the FLSA, employers should audit their current background screening practices and policies and ensure that those policies and practices comport with federal, state and local law. This audit process starts with the application and every juncture and activity along the road to the hiring decision. In addition, an arbitration policy and arbitration agreements that also covers applicants is a potential mitigation strategy.

Employee Handbooks and Policies and Procedures

As recently reported on this blog, the EEOC has recommended policies and procedures for addressing the issue of transgendered employees. These recommendations are worth considering and including in employee handbooks and/or other employer policies and procedures. In addition, the NLRB has inserted itself heavily into regulating employment related policies and procedures which, according to it, apply whether the workforce is unionized. The NLRB’s opinions run a gamut of issues including social media policies, the ability to make recordings or take pictures in the workplace and confidentiality clauses.

Proactive Steps for Policies and Procedures – Review Handbooks and Policies

A review of existing policies that take into account EEOC recommendations, NLRB decisions and wage and hour and background screening policies can be a worthwhile exercise in mitigating potential risk.

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