Overtime overhaul on the way

The New York Times reported today that tomorrow the Obama administration is expected to direct the Department of Labor to issue new regulations expanding the categories of non-exempt workers (that is, workers who must be paid overtime) to include fast food managers, loan officers, computer technicians, and others who have been classified under the executive exemption.

In addition, the administration is considering significantly increasing the salary required for categorizing employees as exempt. (Please recall that employees must meet both the salary test and fall into an exemption.) Currently, employers are prohibited from denying time-and-a-half overtime pay to any salaried worker who makes less than $455 per week.  Obama would significantly increase this amount but has not yet announced how high; the administration has been urged by liberal think tanks to increase it to $984 per week.  This change alone will likely affect 5 million workers.  Advocates for the increase note that the salary limit has not been adjusted for inflation over the years.  The public will have an opportunity to comment on new proposed regulations after they are released.

Part of the purpose of the changes may be to encourage employers to increase hiring.  Jared Bernstein, a former director of the administration’s White House Task Force on the Middle Class and now a senior fellow at the Center for Budget and Policy Priorities, a liberal research group, is quoted saying that “a potential side effect is that you may see more hiring in order to avoid overtime costs, which would be an awfully good thing right about now.”

Please see the full article here: http://www.nytimes.com/2014/03/12/us/politics/obama-will-seek-broad-expansion-of-overtime-pay.html?hp

Time for employers to update their severance agreements

Employers need to update their standard severance agreements even if they have dutifully included a clause specifying that former employees can participate in EEOC proceedings.  Last month the EEOC sued CVS over its severance agreement, despite CVS stating that employees can participate in EEOC proceedings without violating the severance agreement.  The problem is that CVS also includes language that the EEOC argues may confuse an employee into believing that s/he cannot cooperate with an EEOC investigation.  Remember that an employer cannot through a severance agreement keep an employee from participating in EEOC proceedings–even when the employee receives a significant settlement–because it would undermine the EEOC’s mission.

The Chicago Tribune does a great job covering the lawsuit and explaining the possible ramifications for employers here.

The gist is that employers should not include any clauses that contradict an employee’s right to participate in EEOC proceedings.  The EEOC also took issue with CVS burying a single qualifying sentence in the five-page contract. Considering this, here is what I would suggest.  It is a bit annoying and cumbersome, but so is being sued by the EEOC:

Include a big bold disclaimer at the beginning of the severance agreement that states that nothing in the agreement can keep an employee from participating in EEOC proceedings.

• Every time a clause in the contract could implicate an employee’s ability to participate in EEOC proceedings, include a disclaimer.  For instance, if the contract has a non-disparagement clause, retain it but specify that the clause cannot keep an employee from participating in EEOC proceedings.
• Do not include anything similar to CVS’ cooperation agreement, which bars employees from cooperating with an attorney or investigator unless the employee notifies the company.  CVS’ agreement actually requires employees to notify CVS’ general counsel promptly by telephone and in writing if they receive an inquiry from an investigator.  While I would imagine any general counsel would love to be notified promptly when their company is being investigated, including such a provision is not worth the risk.
• If you need help formulating specific provisions, feel free to contact me at michelle@sparksmacleod.com.

Using SAT scores in hiring may subject employers to liability

The Wall Street Journal reported today on the growing trend of using SAT and ACT scores in hiring decisions, even decades after applicants graduated from high school.  The article reports that “consulting firms such as Bain & Co. and McKinsey & Co. and banks like Goldman Sachs Group Inc. ask new college recruits for their scores, while other companies request them even for senior sales and management hires, eliciting scores from job candidates in their 40s and 50s.”

The article does not address the legal ramifications for employers, who may not have considered their potential liability for creating a disparate impact upon minority applicants.   The EEOC’s Fact Sheet on Employment Testing explains how tests used in hiring can create a disparate impact– that is, disproportionately excluding candidates based on protected categories such as race and sex if the tests are not “job-related and consistent with business necessity.”  Even if the latter standard is met, a candidate could argue that there is a less discriminatory alternative available that will not disparately impact minorities and/or women.

The WSJ article reports that some clients are screening for candidates who score in the 95th percentile on the math portion of the SAT.  This might be permissible for jobs involving math, but for jobs that do not, there is almost certainly a less discriminatory screening alternative.  Applicants desiring to challenge the practice will not have to look far for statistics on the discriminatory impact of the SAT and ACT.   The WSJ gives recent statistics on the racial disparity of SAT results: “In 2013, SAT test-takers in the ‘Black or African-American’ category scored an average 431 on the exam’s critical reading section, 429 on math and 418 on writing. White test-takers, meanwhile, scored nearly 100 points higher on average in every section.”  One employer using  the SAT is quoted in the article as stating that knowing that the SAT is a standardized test was enough for his company to feel comfortable using it.  This, however, is not legally sufficient.

The court approved settlement in EEOC v. Ford Motor Co. illustrates how high liability could be for an employer who uses a cognitive test with a disparate impact when a less discriminatory selection process is available.  Here is the EEOC’s blurb on the settlement:

EEOC v. Ford Motor Co. and United Automobile Workers of America involved a court-approved settlement agreement on behalf of a nationwide class of African Americans who were rejected for an apprenticeship program after taking a cognitive test known as the Apprenticeship Training Selection System (ATSS). The ATSS was a written cognitive test that measured verbal, numerical, and spatial reasoning in order to evaluate mechanical aptitude. Although it had been validated in 1991, the ATSS continued to have a statistically significant disparate impact by excluding African American applicants. Less discriminatory selection procedures were subsequently developed that would have served Ford’s needs, but Ford did not modify its procedures. In the settlement agreement, Ford agreed to replace the ATSS with a selection procedure, to be designed by a jointly-selected industrial psychologist, that would predict job success and reduce adverse impact. Additionally, Ford paid $8.55 million in monetary relief.

While SAT scores may appear to make sorting applicants easier, most employers would rather avoid such liability, and I believe most employers are trying to diversify their workforces.  Employers may also wish to consider some other limitations of SAT scores.  SAT tutors will tell you that there are many tricks to taking the test and that practice can increase scores by 100+ points.  Thus students with the resources for tutoring and intensive preparation courses are at an advantage.  Society may sanction this for college admissions, knowing that administrators are looking for socioeconomic and racial diversity in their incoming class and thus are considering other factors as well.  Is it right for applicants to continue to be judged on one test from high school into their 40s or 50s?  What if the applicant did not take test prep courses or did not consider the SAT important at that time?  Should the applicant retake the SAT now?

Employers are well advised to drop college aptitude tests from their hiring decisions and to look toward more recent and job-related criteria.  I would never advise an employer to use a test that has already been shown to create a disparate impact based on race.

Senate bill would prohibit credit checks for employment purposes

Senate Bill 1837, introduced by Elizabeth Warren and co-sponsored by six Democratic senators, would amend the Fair Credit Reporting Act to prohibit employers from using consumer credit checks for employment purposes.  The Fair Employment for All Act would even prohibit employers from checking credit with written authorization from applicants or employees, as currently allowed in most states.

Senator Warren has issued a press release arguing that credit history does not reflect job performance and is a better indicator of bad luck than bad character, particularly after the recession:

“A bad credit rating is far more often the result of unexpected medical costs, unemployment, economic downturns, or other bad breaks than it is a reflection on an individual’s character or abilities,” Senator Warren said.  “Families have not fully recovered from the 2008 financial crisis, and too many Americans are still searching for jobs. This is about basic fairness — let people compete on the merits, not on whether they already have enough money to pay all their bills.”

Warren’s fact sheet points to inaccuracies in credit reports and on disparate impact on women and minorities as further reasons to prohibit the practice.

Even if the law does not pass, employers may wish to reconsider using pre-employment credit checks as the EEOC has indicated it disfavors (and has sued over) the practice, and it has been prohibited in ten states, including California, Colorado, Connecticut, Hawaii, Illinois, Maryland, Nevada, Oregon, Vermont and Washington.

The Fair Employment for All Act would allow credit checks for positions requiring national security clearance.

Austin city ordinance requiring rest breaks for construction workers imposes criminal and civil penalties

Ordinance No. 20100729-047 requires rest breaks of 10 minutes for every 4 hours worked for workers at construction sites.  The ordinance also includes record-keeping requirements and sign posting requirements.  Violators can be fined $100-$500 per day and can be charged with a Class C misdemeanor. The ordinance is in effect now.  Please contact us with any questions.

Austin Court of Appeals affirms award of punitive damages for Sabine Pilot cause of action

The Austin Court of Appeals recently found in Safeshred v. Martinez that a trucker who was fired for refusing to drive a truck that violated numerous regulations and posed safety risks to himself and the public was entitled to exemplary or punitive damages of $200,000 in addition to his lost wages.  A Sabine Pilot claim is based on the Texas Supreme Court’s 1985 decision in Sabine Pilot v. Hauck and is the primary exception to Texas’ at-will employment rule.  It prohibits firing an employee based on the employee’s refusal to commit an unlawful act.

The court found that the desirability and appropriateness of punitive damages in Sabine Pilot cases “is brought into sharp focus in a case such as this, where the actions of the employer not only violated the law but placed the safety of the employee and the public at risk.”

Supreme Court holds that employees claiming disparate impact for long-held practices not time-barred

Last week, the U.S. Supreme Court found timely the discrimination charges of a class of 6,000 African-American firefighters who sued the city of Chicago for race bias in its employment testing.  In Lewis v. City of Chicago, the justices unanimously held that when an employer institutes an illegal practice having a disparate discriminatory impact, it may be challenged each time the employer uses it.  Justice Scalia, who wrote the opinion, distinguished between the adoption of a discriminatory practice and its application.  The Seventh Circuit below had found that the claims were time-barred.

In 1995 Chicago gave a written test to 26,000 firefighter applicants and began drawing from the top scorers, those considered “well qualified” because they scored at least 89 points of 100.  Those who scored 65-88 were considered “qualified” but were not hired, while those who scored under 65 were told they had failed the exam.  Several classes of firefighters were selected from the testing over the years.  In 2007, a group of 6000 “qualified” African American applicants sued, claiming that the policy caused a disparate impact on them based on race.  ( The well-qualified group was 76% white and 11.5% black.)

The city conceded that the testing produced a disparate impact but argued that claims were time-barred because they should have been filed with the Equal Employment Opportunity Commission within 300 days of accrual; the city said this accrual occurred when the tests were scored and results announced, not during the subsequent rounds of hiring based on the tests.  The Supreme Court disagreed, finding that the application of a long-held policy restarts the clock.  Scalia distinguished between this case and others in which the Court has held that Title VII claims were time-barred, such as the Ledbetter case, which resulted in Congress passing the Lily Ledbetter Fair Pay Act of 2008.  In the Court’s disparate treatment cases, Scalia argued, the intent to discriminate must have occurred within the statutory period, whereas there is no intent requirement for disparate impact claims.

Dallas jury awards Muslim doctor $3.6 million in discrimination suit.

Last week a federal jury decided that UT Southwestern Medical Center owed $3.6 million to one of their former doctors for discrimination based on race and religion and for retaliating against him when he refused to commit billing fraud.

AIDS clinician Naiel Nassar, an Egyptian-born Muslim, was awarded $438,000 for back pay and $3.2 million in other damages.  Nassar told the Dallas Morning News that he was surprised that a Dallas jury supported him as a Muslim.  Read more here.