I cannot count the number of times per month a client calls and explains that they want to terminate an employee, and starts the conversation along the lines of, “I know you are going to tell me I should have terminated him/her a long time ago but [fill in the poor excuse here].”. I used to think this was Minnesota nice. We don’t want to hurt people’s feelings, try to see the best in everyone, and think that everyone needs a second, third, fourth, tenth, etc. chance. For most, I tell them their initial gut was the best one and yeah, after reviewing the file, they should have been terminated long ago (and now they have a mess on their hands as the employee has made discrimination complaints, etc.). If the person is not cutting it, you typically know within 30 or 60 days. They either have it or they don’t. The fit the culture, or they don’t. They can grasp the concept or they can’t. Why keep them longer?

Apparently, this may have less to do with “Minnesota nice”, and more to do with an economic theory called the sunk cost fallacy. I was reading a BBC article today discussing the phenomenon of why we make bad decisions, such as the losing gambler that just keeps losing, the poor business model that we keep trying to pump money into to make it work, watching a bad movie all the way to the end, eating way too much at an all-you-can-eat buffet, staying in a bad relationship, or, yep, you guessed it, keeping a poor performing employee when we know that additional training is not going to make the person perform to expectation no matter how much more money we spend on him/her. What about the recruit that you relocated? The high-dollar guaranteed severance executive? The sign-on bonus for the new CDL? The more money/time/effort put into an employee, the harder it becomes to terminate the employee when need be.

These economists and physiologists theorize that people hate cutting their losses. We are more likely to irrationally continue to sink money into a lost cause, rather than to admit failure. And, according to the University of Minnesota’s own study, it is not just humans that do this. Mice and rats are apparently sensitive to time invested in something and resisting giving up something after the decision has been made to plow forward without any indication of future success. How do we fix this thinking? According to the BBC article, it is simply to pause, step back and ask yourself the pros/cons with staying the course and the pros/cons with changing the course. In our world, it usually means calling your employment law attorney and having them tell you what you already know should happen, but you need us to tell you. Which is fine by me.  Oh the stories I could tell…

Employers are often surprised to learn that employees may be terminated while on (or after) Family Medical Leave Act (FMLA) or other type of protected leave. The key, however, is that there needs to be some sort of unrelated intervening event such as in the case of Naguib v. Trimark Hotel Corp. On September 12, 2018, the Eighth Circuit Court of Appeals upheld the U.S. District Court for the District of Minnesota’s decision in Trimark, that an employee was not wrongfully terminated while on Family Medical Leave Act (FMLA) protected leave.

In this case, the plaintiff, Isis Naguib, was a long-time (1977-2014) Executive Housekeeper at Millennium Hotel, a Trimark brand hotel. During the past three years of her employment, Naguib essentially testified against the company in an unrelated case, her son filed a discrimination complaint against the hotel, and she took FMLA leave for hypertension. While the FMLA request was approved, she was suspended and terminated soon after her return, as a result of an internal investigation.

While Naguib was on FMLA leave, the fill-in Head of Housekeeping personally observed timekeeping irregularities, and notified management. Notably, it was determined that Naguib told housekeepers to round down their time and not record all overtime hours and Naguib altered time records without the proper company form. In addition, one housekeeper regularly sewed hotel linens at home off the clock. This practice resulted in lower payroll costs, and thus, a bonus for Naguib. Ultimately, Millennium compensated the employees for the docked overtime, disciplined three other managers (who did similar practices on a smaller scale), and terminated Naguib just twelve days after her return from FMLA. The 8th Circuit Court of Appeals agreed with the District of Minnesota (the Honorable Judge Joan N. Ericksen) in its ruling that there were no specific links between her termination any any sort of discrimination, and that the investigation was only conducted as a result of irregularities found in her absence. Thus, the termination proper despite the other recent events.

The U.S. Department of Labor (DOL) was extremely busy with its announcements on August 28, 2018. Along with issuing 6 opinion letters, a directive, and launching a new web page (all of which I previously wrote about), it also announced the creation of not one, but two new websites, as well as the new Office of Compliance Initiatives. The new websites, worker.gov and employer.gov provide one location for information for federal worker protections (worker.gov) and information for employers about their responsibilities for federal worker protections (employer.gov).

The employer.gov website provides information regarding pay and benefits; workplace safety and health; small business resources; required posters; nondiscrimination; federal contractor requirements; and veteran and service member employment. It has frequently asked employer questions as well. In theory, the Office of Compliance Initiatives will work to promote greater understanding of federal labor laws and regulations, and will work with enforcement agencies to ensure compliance with the law.

What does that mean for the average employer? I have no idea. It seems to me to be yet another pair of government websites designed to provide consolidated information and links. But as always, nothing is as easy as it seems, and thus, it’s just one more set of data to review. In any event, Minnesota employers should also keep in mind that our laws cannot be ignored and so just because something is allowed under federal law, does not necessarily mean it is under state law. Thus, while this may be handy from a federal perspective, don’t forget about the Minnesota Department of Labor and Industry agency regulations and our Minnesota state wage and hour laws.

This update is short and sweet. On August 28, 2018, the U.S. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP) launched a new web page titled “Contracting Officer Corner“. The OFCCP’s new web page is designed to be a one-stop shopping, if you will, for federal contractors. It includes a new Pre-Award Process Guide, links to the Pre-Award Registry, Notification, Federal Acquisition Regulations, debarred contractors search, regional office staff contacts, and downloadable EEO workplace posters. That’s it!

For those of you who are federal contractors, and have had the pleasure of being audited by the U.D. Department of Labor’s (DOL) Office of Federal Contract Compliance Programs (OFCCP), you know how close to the vest the OFCCP has historically kept their formulas, pay analysis groupings theories, and statistical modeling theories/backup, making early settlement frustrating if not impossible. Effective August 24, 2018, the DOL issued a new directive, DIR 2018-05, that outlines their procedures for conducting their compliance evaluation (audit) with the priority of eliminating pay discrimination. I am encouraged by this directive, insofar as the OFCCP appears to be taking measures to improve transparency and working more on correcting true pay disparities versus paying a game of “gotcha”.

DIR 2018-05 notably nods to this history, stating that upon review “OFCCP is concerned that contractors lack the clear guidance Directive 307 [2013] intended to give”. The OFCCP hopes the new directive will allow federal contractors to better conduct meaningful self-audits to proactively identify and address any pay disparity issues. I’d bore you all to death if I set forth a summary of the directive, but wanted to at least point out what the directive contains (the link to DIR 2018-15 is above).

The directive explains how it uses statistical and other evidence to evaluate pay practices, as well as data requests via a Scheduling Letter, which is used to request data such as the employers Affirmative Action Program (AAP). The directive further notes how it determines its similarly-situated analysis groupings by developing pay analysis groupings (PAGs) that mirror a contractor’s compensation system (this has been a fight for contractors in the past). Finally, the directive discusses how the OFCCP applies statistical methodology and modeling in a desk audit and during the compliance evaluation, which control variables are used and how, and how it will facilitate transparency, consistency, and resolution through conciliation.

On July 13, 2018, the Department of Labor Wage and Hour Division (WHD) released Field Assistance Bulletin No. 2018-4 providing guidance on when caregiver registries are an “employer” of caregivers under the Fair Labor Standards Act (FLSA). Rather than providing in home care services directly, registries provide individuals, such as seniors and those with disabilities, support for finding in-home care by offering referrals of qualified pre-screened caregivers from their database. This may be nurses, home health aids, personal care attendants, or home care workers, however titled. For the past four decades, the WHD’s position has been that generally a registry, even one that performs payroll services, is not an employer under the FLSA; however, if the registry directs and controls the caregivers work and sets the rate of pay, it is an employer. However, regulation changes and requests for additional guidance promoted the WHD to pen the bulletin.

To determine whether a registry is an employer, the WHD engages in a fact-specific assessment of the relationship between the registry and the caregiver, known as the “economic reality” test. Field Assistance Bulletin 2018-4 identifies common practices of registry business practices and operations that the WHD may analyze when determining if an employment relationship exists. While the individual factors identified in the Field Assistance Bulletin are not dispositive, the factors are helpful for employers to identify business practices that may establish an employment relationship, therefore triggering obligations under the FLSA:

  • Conducting Background and Reference Checks
  • Hiring and Firing
  • Scheduling and Assigning Work
  • Controlling the Caregiver’s Work
  • Setting the Pay Rate
  • Receiving Payments of Caregiver Services
  • Paying Wages
  • Tracking Caregiver Hours
  • Purchasing Equipment and Supplies
  • Receiving EINs or 1099s

Notably, the WHD does not focus on a single factor, but rather looks at the “totality of the circumstances,” including the control and influence the registry has on the caregiver’s terms and conditions of employment.

According to Donate Life America, every 10 minutes another person is added to the waiting list for an organ. Twenty-two (22) people die each day waiting, and yet one organ/eye/tissue donor can save and heal more than 75 lives. According to the United Network for Organ Sharing, 114,370 people are currently waiting for a lifesaving transplant; in Minnesota, there are 3,155 people waiting (62 under the age or 18). While many may “check the box” when obtaining/renewing a drivers’ license, few think about making a living donation (approximately 6,000 per year). In Minnesota, we are fortunate to have the Gift of Life Transplant House, a place for immune-suppressed transplant patients (only) and their caregivers to stay while receiving medical treatment in Rochester. The Gift of Life Transplant House was founded in 1973 by Edward Pompeian, who then received a donated kidney, the “gift of life”, from his mother.

For those like Mr. Pompeian’s mother that decide to make a living organ donation, the U.S. Department of Labor (DOL) has made it a little less burdensome to donate life to another. On August 28, 2018, the DOL opined in FMLA2018-2-A, that organ donation surgery is a “serious health condition” under the Family Medical Leave Act (FMLA), so long as the individual requires overnight hospitalization (as it commonly requires) and/or post-surgery recovery. Again, the employer must be subject to the FMLA, the employee must be FMLA eligible, and the employee must present acceptable medical certification supporting the need for leave.

When a local movie theater started serving food during the movie, I was quite excited (until I realized how loud it would be while watching the movie). Yet, not once did I think about whether my server fell under the “motion picture theater” (movie theater) exemption to the Fair Labor Standards Act (FLSA)…nor had I heard of such a thing, frankly. On August 28, 2018, the U.S. Department of Labor (DOL) addressed the question of what constitutes an “establishment” for purposes of the overtime exemption in opinion letter FLSA2018-23. While the question was asked in the context of a restaurant within a movie theater, the DOL’s opinion provides insight to all employers.

When determining what constitutes an “establishment” for purposes of the FLSA, the DOL looks at the nature of the business, not the work performed by the employee. The DOL also notes that an “establishment” is a “distinct physical place of business” not “an entire business or enterprise”. Thus, so long as business units or portions of a business located on the same premises share bookeeping, records, taxes, invoices, banks, and employees, etc. they are one “establishment” for the exemption. Thus, in this case, the DOL opined that the movie theater and restaurant constituted one “establishment” for purposes of the motion picture theater exemption, and thus employees who work both in theater as an usher, and in the theater’s full-service restaurant as a server are not entitled to overtime. However, don’t forget – just because the FLSA does not apply, does not mean that state law does not (overtime after 48 hours per workweek).

I’m a big fan of volunteering, and am highly involved in several community groups.  In one of them that I’m involved in, we frequently joke about being “voluntold” to do something (go ahead and suggest a good idea…dare you!). Yet, when is volunteering truly volunteering and not compensable work? In another of the U.S. Department of Labor’s (DOL) August 28, 2018 opinion letters, the DOL clarified when a volunteer need not be paid in FLSA2018-22. While this particular opinion letter talks about professional exam graders for a nonprofit organization, the opinion can help other employers who provide volunteer opportunities for employees. In the facts presented, these graders (typically high-level multi-national executives) used to get a fee for taking a week or two to travel overseas to grade professional exams. It was considered an honor to be asked and they are at the top of their profession. The nonprofit wanted to clarify if they could be classified as “volunteers,” even though their travel, room and board, etc. was paid for. The DOL said, “yes”.

The DOL noted that the FLSA does not require payment to an employee who “volunteers without contemplation or receipt of compensation”, as the FLSA, “recognizes the generosity and public benefits of volunteering and allows people to freely volunteer time to religious, charitable, civic, humanitarian, or similar nonprofit organizations as a public service.” However, the volunteer service must be “freely without coercion or undue pressure” (direct or implied). In other words, employees cannot “volunteer” to perform their job, and cannot be pressured to do so (i.e. everyone is expected to volunteer). Seems simple enough, but of course there is always grey – for example, the opinion notes that this is related to a nonprofit. But what about employees that “volunteer” to run or organize a fundraising campaign through work? What if the company has a relationship with the nonprofit and benefits from it (i.e. employee morale, jeans days, etc.). That is where hairs start getting split and the facts should be carefully considered.

On August 28, 2018, in FLSA2018-20, the US Department of Labor (DOL) issued another opinion letter stating that the Fair Labor Standards Act (FLSA) does not require that employers pay employees to attend voluntary wellness activities, biometric screenings, and benefits fairs held during (or outside of) work hours – if some conditions are met. First, they must be voluntary. Second, it must not be related to the employee’s job. Third, they must not be a part of new employee orientation and open to all employees. Fourth, the employer must not receive direct financial benefit as a result of employee participation.  And Lastly, they must be outside of normal work breaks.  In short, the activities must be “predominantly for the benefit of the employee”.

In this instance, “wellness activities” are offered by the employer as a way for employees to potentially decrease monthly insurance premiums through health education classes, gym classes, phone health coaching, participating in Weight Watchers, and engaging in voluntary fitness activities. The biometric screenings measures things such as cholesterol, blood pressure, and nicotine usage. The benefits fairs allow employees to learn about financial planning, college opportunities, and employer benefits.

The DOL concluded that the FLSA does not require payment for such time, as it is “off duty” time per 29 C.F.R. § 785.16. One footnote (literally in the opinion) – this analysis is based on such events taking more than a standard 20 minute break time.  For example, if these events are offered during a break of up to 20 minutes, then they would be compensable (paid) under 29 C.F.R. 785.18, because so long as an employer provides a paid break, it does not matter how the employee spends that time for his or her own benefit.