Top 5 HR Legal Issues Facing Dealerships in 2010

by Kathryn Carlson, HR Product Manager at KPA

1. Wage-and-hour class action suits

Wage-and-hour class-action lawsuits are the most common cause of employment litigation. Claims resulting in multimillion-dollar verdicts and settlements originally focused on employee misclassification and unpaid overtime. There is a new focus however on claims for missed meal and rest periods, as well as for the recovery of business expenses:

Break periods.

In California, employers are required to provide hourly employees with a 30-minute (either paid or unpaid) uninterrupted meal break for every five hours worked and a 10-minute rest break for every four hours. The meal break must begin prior to the end of the fifth hour and may not be waived unless the shift does not exceed six hours, and provided there is a mutual agreement, preferably in writing. An employer incurs an hour of pay as liability for every meal or rest period that it fails to timely provide an employee. The courts have also extended the statute of limitations. Outside of California claims have been filed on the bases that nationally on that interrupted unpaid meal periods violate the Fair Labor Standards Act.

Business expenses.

Employees are often required to incur expenses to do their job. The most common examples involve travel expenses, mileage, laptops and mobile phones. There has also been a significant rise in cases involving uniforms and wardrobe requirements.

The courts have upheld in case after case that an employer cannot place an arbitrary cap or limit on expenses, and any waiver by an employee is void. Additionally the FLSA (Fair Labor Standards Act) does not allow uniforms, tools or other items that are considered to be primarily for the benefit or convenience of the employer to be included as wages. Employers may not take credit for such items in meeting their obligations toward paying the minimum wage. .

What to do:

Adopt explicit written policies regarding rest breaks and mandatory meal breaks and require that employees acknowledge in writing or electronically that they have read and understood them.
Adopt unambiguous policies regarding expenses and make sure employees have read and understood them.
Be very clear about job duties and instructions that may cause an employee to incur expenses.
Reimburse employees for all expenses incurred that are necessary for them to perform their duties.

Most importantly, review each employee’s job duties and pay plans to ensure all employees are classified appropriately.

2. Retaliation arising out of discrimination

The most recent type of employment claim is not one based on race, religion, sex, disability or even age discrimination. It is one alleging that the claimant was treated differently for exercising rights under one or more of the various discrimination statutes. This different treatment can include any negative job action including demotion, discipline, firing, salary reduction or job or shift reassignment. According to EEOC data, retaliation claims now constitute 40 percent of the total EEOC charges filed.

Retaliation claimants, in general, are more likely to succeed at trial and recover significant damages. Instead of showing that the employer engaged in conduct that materially adversely affected the employee, the U.S. Supreme Court lowered the standard, ruling in Burlington Northern v. White that any action by an employer that “well might have dissuaded a reasonable worker from making or supporting a charge of discrimination” could be deemed retaliatory.

What to do:

The burden is on employers. They must be diligent and able to establish that the employment action at issue was contemplated prior to the alleged discrimination claim and carefully document prior performance problems and/or warnings. The paper trail is crucial in these instances.

3. The Employee Free Choice Act

The Employee Free Choice Act, as originally proposed in 2007, included major changes to union organizing law including “card check” certification of unions, faster timelines for required mediation and arbitration and increasing punitive measures for employers found in violation of the National Labor Relations Act. Most experts predict that the Employee Free Choice Act is likely to eventually pass in some form, with the focus in the coming months being the mandatory arbitration provision. The revised bill for 2010, would require shorter unionization campaigns and faster NLRB elections to determine whether employees wish to be represented by a union. While the card-check provisions will likely be removed, it seems that the arbitration and punitive penalty provisions will be included.

What to do:

Conduct a review of wage and benefit programs to ensure that no item lags far behind the norm in the area.
Train supervisors to be alert for indications of union organizing (specifically, the soliciting of cards).
Address such activity in a way that does not violate the NLRA.

4. Increasing challenges to retirement plan administration

Employee benefits are one of the most important parts of the compensation package offered by employers. Moreover, with $3 trillion-plus invested, ERISA pension plans remain the largest single source of private capital in the United States.

In the last few years, class-action plaintiffs’ firms have found that targeting these plans, using the Internet to attract plaintiffs and develop claims, has been highly profitable. In the wake of the economic downturn, the trend is likely to accelerate, with particular focus on cases brought over “stock drop” complaints, in which ERISA plan members challenge the investment in an employer’s equities, and “plan administration” cases, involving claims over “excessive” advisory fees and other elements of plan administration.

What to do:

Prepare for an employer stock-drop case. Employers that have company stock in their plans should take steps to protect themselves.
Plan documents should make it absolutely clear that including the employer stock in the plan is mandatory and not a matter of discretion for the plan fiduciaries.
Administrators must be diligent in monitoring and evaluating plan fees and the plan’s investments.

Social networking and electronic media

Just as e-mail caused much workplace controversy in the 1990s, social networking sites and applications are causing similar anxiety among employers today. How to access the wealth of information legally and limit employee access are key concerns for employers.

For employers that face liability for negligent hiring and retention, accessing information available on networking sites is becoming very common and could be considered prudent by some in order to satisfy due-diligence obligations that could stave off a negligent hiring or negligent retention case. The flip side is that social networking technologies to screen applicants or check on employees may expose employers to potential legal risks. Social networking profiles often contain off-limits information such as photographs and personal data relating to age, sexual orientation, political beliefs or religious affiliations. Use of information contained on these sites has subjected employers to claims of discrimination, violations of privacy rights, and violations of the federal Fair Credit Reporting Act and the National Labor Relations Act.

If employers access employees’ sites prior to taking adverse employment action, it will be much more difficult to defend against discrimination claims. The Fair Credit Reporting Act and state laws generally allow social networking sites to be accessed, but the laws require an applicant’s or employee’s prior consent to conduct background checks- review of social networking sites is considered a background check in most cases. Employers must disclose if information obtained in the background check was the basis for an adverse employment decision.

Some states—including California, Colorado and New York—recently have enacted “off-duty conduct statutes,” restricting an employer’s ability to use lawful off-duty behavior for employment decisions. Privacy issues have also arisen when employers have used covert means to collect employee information posted on sites that are accessible only to authorized users.

What to do:

Employers should never seek to gain access to private postings by covert means. Applicants and employees must be clearly informed that these sites may be accessed and give permission for access.
Employers should implement company policies and guidelines that clearly state what types of social media are allowed during work hours and what types are prohibited.
Users should be required to differentiate between their personal and business identities.
Employers should emphasize that company policies, such as those related to discrimination and harassment, apply when employees use social media.
If employers decide to monitor employees’ online activities (assuming that the law in their state permits it), they should advise employees that their social media use may be monitored, whether such use is conducted during work or at home.

Additional Resources:

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A Look Back at 2009 and What 2010 May Hold For Employers provides detailed information on changes in the HR regulatory and compliance environment.