Have You Tipped Your Salad Maker Lately?

Last Friday I did the second session of the Essential Employment Law course that I do for the University of Texas School of Law CLE division every fall. On the section on the basics of the FLSA I mention how some of the more arcane areas of wage and hour law can cause serious problems for employers.

For example while a restaurant can pay its waitstaff $2.13 an hour, with the balance that gets them to the minimum wage (and often a lot more) coming from a tip pool, the pool has to comply with all the technical requirements set out by the department of labor.

One of those provisions that has led to litigation has been whether those participating in the pools are regularly tipped employees? One case I mention turns on whether a salad maker was a regularly tipped employee. (True confession -- I never have tipped a salad maker.)

If I had been more current on my reading I could have also mentioned the following story from the Austin Business Journals, Area restaurants served with lawsuits, to show these issues are not just an academic exercise.

I will make sure that I do that for the November 7th session to be held here in Austin, which you can still catch if you are interested. See here for registration.

Employers and Domestic Violence

Two years ago, commenting on an article in a British publication, I suggested that domestic violence and its carryover into the workplace was something employers should have on their radar screen if they didn't already.

I can't say that I have seen a groundswell of attention since then, but this article, Employers'play a role in preventing domestic violence, in the Birmingham Business Journal certainly does nothing to make me think the issue is going to go away.

If for no other reason, the $725 million per year in lost productivity cited in the article from a CDC study might get someone's attention. Probably not as much attention, at least right now as the $146 million spent on first and business class airline tickets by U.S. government officials, see CBS's story Flying High -- On Your Dime, but ultimately it may be a lot bigger story.

Isn't It Time for Basketball Yet?

That's probably what Isiah Thomas was thinking last night as he pondered the impact of the jury's note to the judge in the sexual harassment case brought against him and his employer the NY Knicks.

Unlike the jury which was sent home for the night, Thomas was free to read the papers which were more than happy to help him understand what the note meant: With Defeat Looming, What's Next for Isiah Thomas, Knicks?

According to the ABC news story, the note indicated that there was one question that left the jury divided:

The members of the jury remained divided 6-1 on Question No. 4, which deals with whether Thomas will be held personally liable for punitive damages. And since the verdict form instructed the jury to skip Question No. 4 unless it had found in favor of the plaintiff, it was apparent the New York Knicks were headed for a defeat.

Although this probably isn't the most significant point for Thomas and his counsel, the reporting indicates the difficulty that the press has in covering trials. I know something about employment law jury trials and I am confused about what exactly is left, because according to the various stories it could be:

• that the jury is divided on individual liability for Thomas and once that is divided, the jury will move to the "penalty phase" (not exactly a precise legal term) with the jury deciding punitive damages and the judge deciding compensatory damages;


• according to the Bloomberg story, the jury is divided on whether to award punitive damages and they can't be answering that question unless they have already decided to hold Thomas and his employer liable;


• Newsday seems to side with Bloomberg saying the issue left is "whether they should slap Thomas with punitive damages,"

• and the Detroit Free Press just leaves it open holding that the note makes clear "they have reached decisions against the defense on some of the nine claims," which appears to confuse claims with jury issues.

The good news (for us, not Thomas and the Knicks) is that it should all be a lot clearer later today as the jury returns to deliberation this morning. Of course it is not unheard of to have such notes spark serious settlement discussions.

Even Knicks basketball, bad as it is, has to be better than this for Thomas and company.

Update: Now it offficially makes it into the million dollar club: Jury awards $11.6 million in Knicks harassment case.

Employment and Labor Law Blogs - An Expanding Field

My posting has been light recently. There was a week in Mexico and then a lot of time on the road for the paying part of my job. Four years ago when one of the regular employment law bloggers hit a cold patch it made for a substantial impact, but that is no longer the case.

While many of the "old-timers" like George Lenard, Ross Runkel, Michael Fitzgibbon and the crew at Lynch, Ryan whose Workers Comp' Insider just turned four last week, are still going strong, there fortunately has been a whole new group adding their collective insights. Just to mention a few recent articles from those relatively new, or probably more accurately, new to me (and my apologies to those I miss, although feel free to let me know):

• Alaska Employment Law - has a good post on Resources for Drafting Employment Contracts,

• Connecticut Employment Law - has a local take (for the Nutmeg state that is) on the law of Lactation in the Workplace - What Happens in Connecticut?

• The Union Free Employer - was on top of Congressional action on the RESPECT Act as it was headed for mark-up in the House with this post; and

• Pennsylvania Employment Law - with a cautionary note about reverse discrimination in Strictly Speaking Equal Employment Opportunity Means Neutrality

When I finally get around to updating my blog format and have a better blogroll, I can include all these and the many others that are now getting closer to being old timers as well, that have joined the fun.

FLSA on the Cover of Business Week

Wage Wars is a great title for the October 1st cover story for Business Week, highlighting the surge of collective actions under the venerable wage and hour law, the Fair Labor Standards Act of 1938. The article is a good, not to mention sobering, overview of how these suits are playing out.

What is not mentioned is one of the reasons that the high settlements are being reached -- the structural process. Unlike other class actions governed by Rule 23, which have a relatively high burden for initial class certification, the courts have set a very low standard for the initial quasi-certification for collective actions under § 216(b) of the FLSA, which is sending out notice to potential class members.

Given that low standard, it is not uncommon for an employer to end up facing a class of hundreds or thousands, with very little evidence having been presented and frequently without any sort of hearing. You know it's not a good thing for employers when you read articles indicating that notice should be sought as early as possible in cases for the "settlement leverage" that it provides.

Although there is a procedure for "de-certifying" the class, it comes after the end of a long and potentially very expensive discovery period involving the "class", so there is a great pressure to settle cases rather than slug it out.

Ironically, the Supreme Court recognized the dangers of forcing the settlement of "marginal cases" because of the costs of discovery in anti-trust cases in Bell Atlantic v. Twombly decided just this past May.

In Twombly, the Court was affirming dismissal of a case based on the pleadings, and in explaining its rationale noted, "it is one thing to be cautious before dismissing an antitrust complaint in advance of discovery .... but quite another to forget that proceeding to antitrust discovery can be expensive." An apt description of an FLSA collective action as well.

Justice Souter (the author of the 7-2 decision) went on to perfectly describe the danger of launching the discovery juggernaut when very little is required:

It is no answer to say that a claim just shy of a plausible entitlement to relief can, if groundless, be weeded out early in the discovery process through "careful case management," post at 4, given the common lament that the success of judicial supervision in checking discovery abuse has been on the modest side. See, e.g., Easterbrook, Discovery as Abuse, 69 B. U. L. Rev. 635, 638 (1989) ("Judges can do little about impositional discovery when parties control the legal claims to be presented and conduct the discovery themselves"). And it is self-evident that the problem of discovery abuse cannot be solved by "careful scrutiny of evidence at the summary judgment stage," much less "lucid instructions to juries," post, at 4; the threat of discovery expense will push cost-conscious defendants to settle even anemic cases before reaching those proceedings. (emphasis added).

Another problem is that the first notice is, at least in the circuits that have decided the issue so far, including the 5th Circuit, a non-appealable decision.

In many ways it is a perfect storm -- the current standard is set low and it is difficult to get cases in a position where an appellate court is going to write on changing that standard.

The roots of the easy notice standard lies in another 7-2 Supreme Court decision in an age discrimination case involving a class action based on a 1,200 person lay off by Hoffman La Roche. In a very short opinion, the Court approved the district court's facilitation of notice to the group.

Only Justice Scalia, joined by Chief Justice Rehnquist dissented:

There is more than a little historical irony in the Court's decision today. "Stirring up litigation" was once exclusively the occupation of disreputable lawyers, roundly condemned by this and all American courts. See, e. g., Peck v. Heurich, 167 U.S. 624, 629-630 (1897); Grinnell v. Railroad Company, 103 U.S. 739, 744 (1881). But in the age of the "case managing" judicial bureaucracy, our perceptions have changed. Seeking out and notifying sleeping potential plaintiffs yields such economies of scale that what was once demeaned as a drain on judicial resources is now praised as a cutting-edge tool of efficient judicial administration. Perhaps it is. But that does not justify our taking it in hand when Congress has not authorized it. Even less does it justify our rush to abandon (not only without compulsion but without invitation) what the Court deprecatingly calls the courts' "passive" role in determining which claims come before them, but which I regard as one of the natural components of a system in which courts are not inquisitors of justice but arbiters of adversarial claims.

One wonders if the Supreme Court really meant to start us down the path outlined in the BW article. Given the views expressed in Twombly, it seems highly unlikely that it did, or would do so again. The question now is how to get off that path.

The ENDA May Be in Sight

When the U.S. Chamber of Commerce says:

"We're cautiously optimistic that we can be neutral on it when it goes to the House floor,"

employers who thought that legislation which would prohibit discrimination on the basis of sexual orientation would be a long time coming, should start shortening their time horizon. The bill in question is known as the Employment Non-Discrimination or ENDA (H.R. 2015).

One reason for the change, more than 40 large companies including Coca-Cola and Marriott International are behind the bill. See Odds good for workplace protections for gays in the Atlanta Business Chronicle.

There are still some negotiations going on -- primarily over the specifics of the protection for transgendered employees and the scope of the religious employer exemption. This would seem a certainty for 2009 if it doesn't make it before then.

Discrimination Damages and Remedies in the 5th Circuit - the Palasota Story Continues

Today, a 5th Circuit panel issued the second substantive decision in the case of Palasota v. Haggar Clothing Co. (5th Cir. 9/7/07). Its first decision almost 4 years to the day earlier, overturned the trial court's granting of a judgment notwithstanding the verdict.

On remand after the first decision, the trial court entered a judgment in favor of Palasota for

• $840,000 in economic damages,
• a like amount as liquidated damages,
• ordered reinstatement,
• with interim pay of $14,500 a month until he was offered a position,
• and awarded a lump sum of back pay in the amount of $525,000 for the period of time from the end of trial to the date of the second judgment

The Court found that the issue of liability was foreclosed by its first decision and that there was sufficient evidence (detailed in the opinion) to support a willful finding, and the accompanying $840,000 liquidated damage award.

In what appears to be a throw-away comment and without any citation, the Court added this unhelpful language:

Haggar’s unsuccessful efforts to have Palasota release it from ADEA claims upon his termination tended to show that Haggar had knowingly violated the ADEA or recklessly disregarded whether its conduct toward Palasota was prohibited by the statute.

Given that requesting a release is a standard practice when a severance package is being given, such evidence standing alone is unlikely to be sufficient to sustain a finding of willfulness. It's the sort of thing that if the Court is asked to revisit its opinion should be eliminated as being unnecessary, but not necessary harmless, dicta.

Given the size of the judgment and that liability was already decided, the opinion is the rare case where the Court talks at length about damages and remedies. Among the holdings --

• affirmed the jury's finding of compensatory damages as supported by the evidence, even though it took into account the effect of improper discriminatory actions occurring before the limitations period;
• discussed the shifting burdens of proof on the issue of mitigation, outlining the burden on the defendant when challenging an adverse jury finding;
• reversed the court's order on reinstatement, finding that it would not be the same position he had before, would either displace or harm the income of existing employees and that there likely existed ill will among the parties that made reinstatement not a satisfactory remedy;
• sent the $525,000 front pay award back to the trial court to re-consider, with a strong hint that perhaps the liquidated damages would negate the need for such an award since it might well result in a windfall for Palasota and "ADEA damages are not meant to be punitive."

Although they may not be intended to be "punitive" given that the trial court did not believe that discrimination was proved, my guess is it would be hard to convince the employer of that.