Last month, El Azteca, a Wisconsin business which owns four restaurants, reached a consent judgment in U.S. District Court to resolve a lawsuit filed by the U.S. Department of Labor. The U.S. Department of Labor’s Wage and Hour Division conducted an investigation and discovered numerous violations of the Fair Labor Standards Act.  The violations included:

–          Failing to keep records of daily and weekly hours worked.

–          Failing to pay employees the federal minimum wage for all hours worked.

–          Failing to pay overtime.

–          Paying kitchen staff, a flat salary without regard to numbers of hours they worked.

–          Making illegal deductions from servers’ pay for uniform shifts, nametags and aprons.

Under the consent judgment, the restaurant will pay 129 current and former employees $350,000 in back wages, and $350,000 in liquidated damages.  The defendants will also be paying $25,000 in civil penalties.  Additionally, the restaurants are now required to provide to employees:

1)      Several wage and hour division publications in both Spanish and English;

2)      The Wage and Hour division’s phone number; and

3)      Each pay day, a pay stub showing the pay period, hours worked, rate of pay, overtime hours worked, overtime rate and all deductions.

The FLSA provides that employers who violate the law are generally liable to employees for any back pay, and an equal amount of liquidated damages. The law also prohibits employers from retaliating against employees who exercise their rights under the law.

I have blogged in the past about FLSA issues in the food service industry. The Department of Labor has targeted their investigative efforts on FLSA violations.  Take this opportunity to:

1) confirm your business is accurately tracking hours worked and maintaining records of hours worked;

2) all employees are being compensated correctly; and

3) all your required posters are up to date.

Norfolk Southern Corp. is a federal contractor that has reached an agreement with the U.S. Department of Labor to pay almost $500,000 to 2,086 African-American job applicants in order to resolve claims of race-based hiring discrimination.

The U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) conducted a routine compliance evaluation, and found over a two-year period a division of Norfolk Southern engaged in hiring practices which discriminated against African-American applicants.  These actions were in direct violation of Executive Order 11246 which prohibits federal contactors from discriminating in employment practices.

Norfolk Southern has not admitted liability.  But the Company has agreed to discontinue use of its current selection procedures, as well as to review and modify its employment practices for recruiting, screening, selecting, interviewing, rejecting and hiring candidates.  These changes resolve all the violations found by the OFCCP.

I recently blogged about the importance of not discriminating against job applicants.  This case shows how expensive it can be for employers who fail to review their hiring processes for potential discrimination.    Before making your next hires, review your policies and procedures to make sure you are not discriminating against job applicants.  

During the past legislative session, the legislature passed several significant changes to the Minnesota Veteran’s Preference Act, including reducing the 60 day notice period to 30 days, eliminating the three-person panel and replacing it with a single arbitrator, providing for the termination of a Veteran during probation without the protection of a Veteran’s hearing, and providing for the possibility the employer may be responsible for a discharged Veteran’s reasonable attorneys fees.

Minn. Stat. § 197.455 now allows, counties, cities, towns, school districts and other municipalities to require a veteran to complete an initial hiring probation period.  After the initial probation period is completed, a veteran may not be removed from a position except for incompetency or misconduct shown after a hearing.

The legislature also made changes to Minn. Stat. § 197.46.  After a veteran receives notice of the government’s intent to discharge him/her from employment, the veteran now has only 30 days to request a hearing, instead of the previously allowed 60 days.  The failure of the veteran to request a hearing within 30 days constitutes a waiver of the right to a hearing and all other legal remedies for reinstatement.  Additionally, the option to have the hearing before a “three-person panel” has now been changed to “an arbitrator.” In cases where the hearing will be before an arbitrator, the employer is to request a list of seven possible arbitrators from the Bureau of Mediation Services.  The legislature also stated the employer is required to strike first from the list of seven arbitrators, giving the Veteran the final selection.

The last significant change involves the costs associated with the hearing.  The statute will now read, “For disputes heard by a civil service board, commission or merit system authority, or an arbitrator, the governmental subdivisions shall bear all costs associated with the hearing, but not including attorney fees for attorneys representing the veteran.  If the veteran prevails in a dispute heard by a civil service board, commission or merit system authority, or an arbitrator and the hearing reverses the level of the alleged incompetency or misconduct requiring discharge, the governmental subdivision shall pay the veteran’s reasonable attorney fees.”

The most significant change for employers is the exposure to liability for the Veteran’s reasonable attorney’s fees in the event a discharge is reversed.

job-applicationIf you are an employer you are aware you may not discriminate against your employees, but it is important to know the law also applies to job applicants.  Most employers include an equal employment opportunity (EEO) statement in their employee handbooks or policy manuals.  If you don’t, then you definitely need to update those documents.  The EEO statement will typically read, “This Company will comply with all applicable laws governing equal employment opportunity. This policy extends to all applicants and employees and to all aspects of the employment relationship including, but not limited to, recruiting, hiring, promotion, transfer, and compensation…”

Last year, the Minnesota Court of Appeals remanded a case back to district court for determination of damages, after holding the employer discriminated against a job applicant on the basis of her pregnancy.

In LaPoint v. Family Orthodontics, P.A., A15-0396 (Minn. Ct. App. 2015), Dr. Ross with Family Orthodontics, a small business with only 9 employees, rescinded a job offer made to Ms. LaPoint after learning she was pregnant and wanted to take 12 weeks of maternity leave.  Family Orthodontics had a policy allowing for six weeks of maternity leave.  When notifying Ms. LaPoint the job offer was rescinded, Dr. Ross identified two concerns: 1) why Ms. LaPoint didn’t tell her about the pregnancy when she was interviewed and 2) that a three-month maternity leave would be too disruptive to the business.

The Minnesota Human Rights Act (MHRA) prohibits employers from discriminating against a person with respect to hiring on the basis of sex.  Sex includes “pregnancy, childbirth, and disabilities related to pregnancy or childbirth.”  See Minn. Stat. §363A.03. Employers are also prohibited from asking for information from a job applicant that pertains to sex.

In LaPoint, the court determined there was substantial direct “evidence in the record that Family Orthodontics discriminated against LaPoint on the basis of her pregnancy in a purposeful, intentional, and overt manner.”  The court stated the first reason Dr. Ross gave for rescinding the job offer, was substantially based upon the pregnancy and illegitimate because it punished Ms. LaPoint for failing to disclose a fact which Family Orthodontics could not lawfully inquire about.  The court held the second reason, anticipated maternity leave, was also related to the pregnancy.  Additionally, there was evidence presented that Family Orthodontics reposted the ad for the orthodontic assistant shortly after learning about Ms. LaPoint’s pregnancy.

Employers be cautious when interviewing job applicants and do not ask questions that can lead to you learning information about a protected class status.  As my law partner has blogged about in the past, hiring decisions are some of the most important ones an employer makes.  The last thing you want to do is open your business up to litigation because of a job applicant you didn’t hire.

Line of people taking notesEarlier this year the Court of Appeals overturned the district court’s dismissal of a case regarding the negligent retention of an employee.  In Hartfiel v. Allison, unpublished Court File # A15-1149 (Minn. Ct. App. 2016) Mr. Hartfiel, the plaintiff, drove truck for T.J. Potter Trucking Inc. as an independent owner-operator.  Mr. Allison drove truck for Potter Trucking as an employee.  In June 2010, Mr. Allison attacked Mr. Hartfiel at the workplace.  Mr. Hartfiel sued Potter Trucking for negligent hiring, negligent retention and negligent supervision of Mr. Allison.  The district court dismissed all of Mr. Hartfiel’s claims, and Mr. Hartfiel appealed.

The Court of Appeals reviewed the negligent hiring and negligent retention claims stating, “Negligent hiring is the failure of an employer to use reasonable care in hiring individuals who, through the employment, may pose a threat of injury to members of the public…. An employer will not be held liable for failure to discover information about the employee’s incompetence that could not have been discovered by reasonable investigation…”

Plaintiff Hartfiel claimed because Potter Trucking did not do a background check on Allison when it hired him, it did not conduct a reasonable investigation.  Mr. Allison had previously been arrested for assault on two occasions.  Generally, there is no legal duty that employers investigate an applicant’s criminal record.  Potter Trucking does check applicants’ driving records but does not conduct criminal background checks.  The Court of Appeals stated, “In determining whether an employer conducted a reasonable investigation, …is directly related to the severity of risk third parties are subjected to by an incompetent employee.”  The Court of Appeals found there was no evidence to suggest that Potter Trucking knew or should have known of Allison’s violent propensities when it hired him as a truck driver.  Therefore, the district court did not err when it granted summary judgment to Potter Trucking on the negligent hiring claim.

The argument of negligent retention has very different considerations.  The Court indicated, “The difference between negligent hiring and negligent retention focuses on when the employer was on notice that an employee posed a threat and failed to take steps to insure the safety of third parties.”

Plaintiff Hartfiel testified he had heard about Mr. Allison “working over” a subcontractor while off-duty out at a bar.  Mr. Allison admitted to smacking the subcontractor because he thought the subcontractor was going to hit him.  The incident was not reported to Potter Trucking because it was off-duty and off-site, but the owner of Potter Trucking acknowledged the altercation had been brought to his attention via the gossip mill.  He did not address the issue because it was not work related and he stated, “boys are boys”. The Court of Appeals held there were genuine issues of material fact regarding Mr. Hartfiel’s negligent retention claim, and overturned the district court’s granting of summary judgment.

My law partner has previously blogged about the importance of the hiring process.  Many employers many not realize that they can be sued for negligent hiring and/or negligent retention.  Take an opportunity to make sure you have a good hiring process in place.  Also, don’t ignore issues between employees just because they don’t occur at work.

Last Friday, the Minneapolis City Council passed a new ordinance requiring employers who employ six (6) or more employees to provide a maximum of forty-eight (48) hours of paid sick and safe time.  Under the ordinance, employees accrue a minimum of one hour of sick and safe time for every thirty (30) hours worked.  Additionally, employers must permit an employee to carry-over up to eighty (80) hours of accrued but unused sick and safe time to the following calendar year.  Employers with less than six (6) employees are required to provide unpaid sick and safe time.

This ordinance not only affects Minneapolis businesses, but also any business who has employees working within the geographic boundaries of the City for at least eight (80) hours in a calendar year.  For example, my husband works for a large engineering firm in St. Paul, which routinely has projects in Minneapolis, including the new Vikings Stadium currently under construction. According to the new ordinance temporary employees who work with my husband, and are assigned to work on projects in Minneapolis for more than 80 hours will accrue paid sick/safe leave, even though the other temporary employees who do not work in Minneapolis will not accrue paid leave.  This sounds like an administrative headache to track and document.  Additionally, it results in employees not being treated equally.

The ordinance also states that employers who provide an employee handbook to its employees must include in the handbook notices of an employee’s rights and remedies under the ordinance.  If your company is located in Minneapolis or does significant work in Minneapolis, you may need to update your employee handbook.

It is too soon to know the impact this ordinance will have on businesses in Minneapolis or companies who routinely do business in Minneapolis.  The ordinance is scheduled to go into effect July 1, 2017.  Violations during the twelve months following the effective date will be mediated, and employers issued warnings or notices to correct any problems.  After July 1, 2018, monetary penalties and other relief may be imposed for violations.

I agree providing paid time off for sick employees is an important workplace benefit.  However, this is not something that should be dictated by City government.  Businesses should be free to determine employee benefits in line with their business model and the market.  The new ordinance smells like an anti-business move by a local City government.  Paid time off is something Unions typically work to negotiate for their membership.  Isn’t that what union organizing is all about?  

US%20Department%20of%20Labor%20logoThe final overtime regulations on exempt employees were issued by the Department of Labor last week, raising the salary test from $23,660 annually to $47,476.  It is estimated this will result in an additional 4.2 million more employees qualifying for overtime.

The new salary threshold has sparked controversy and claims by both labor and management suggesting the sky was falling.  Others have predicted the true impact has yet to be determined.  No one seems to dispute the changes were long overdue.  The previous salary test has not changed in over 10 years.  The good news is they built in an automatic update to occur every three years based on wage growth in the lowest-income census region, which is currently in the south.

The DOL has provided guidance for non-profits, public sector, and private sector employers to assist in applying the new salary test.  In general the DOL suggested options for addressing the new regulation including: 1) limit exempt employee hours to 40 hours per week, 2) pay the employees time and one half for work over 40 hours, or 3) raise the employee’s salary to exceed the new salary threshold..

All employers should review the salaries of their exempt employees and determine the impact of the new DOL regulations now, so they can be ready for implementation December 1, 2016.  

Earlier this year, the Minnesota Court of Appeals held a per diem payment does not fall within the definition of wages under Minnesota Statute § 181.13, resulting in the reversal of a penalty against the employer issued for non-payment of wages.

In Schreader v. D, C & D Enterprises, LLC, Case #: A15-1140 (Minn. Ct. App. 2016), Ms. Schreader was terminated from her employment.  On the day of her termination she e-mailed DC & D Enterprises LLC and notified them she had forgotten to add five days of per diem to her last time sheet.  She received a per diem rate of $30 for each day she was out of town for work.  She also requested payment of ten hours of paid time off and her full wages to the date of her termination.  She received payment for her full wages, but was not paid the per diem rate for 5 days or the ten hours of paid time off.  Ms. Schreader sued and was awarded judgment of $3,109.62.  $2,884.62 of the $3,109.62 was the penalty for failure to make the per diem payments.  DC & D Enterprises appealed the Court’s imposition of the 15 day wage penalty.

Minnesota Statute § 181.13 provides, “…If the employee’s earned wages and commissions are not paid within 24 hours after demand… the employer is in default. In addition to recovering the wages and commissions actually earned and unpaid, the discharged employee may charge and collect a penalty equal to the amount of the employee’s average daily earnings at the employee’s regular rate of pay or the rate required by law, whichever rate is greater, for each day up to 15 days, that the employer is in default, until full payment or other settlement…”

According to the Court of Appeals when a statute provides for a penalty, it must be strictly construed.  Therefore, the plain meaning of the words “per diem” and “wages” prevail.  The common definition of “per diem” is a daily allowance used to cover expenses.  The Court relied on the common definition of wages when it determined the per diem payments are not considered wages within the meaning of Minn. Stat. 181.13.

Minnesota employers should refer to Minnesota Statute 181.13 so they don’t run the risk of having to pay penalties in regards to compensating a terminated employee.  Don’t forget to pay them within 24 hours of a request from the terminated employee.

Last week I spoke at the “Professional E.D.G.E” morning business event co-sponsored by the White Bear Area Chamber of Commerce and the Vadnais Heights Economic Development Corporation.  I spoke on the importance of good hiring practices and in particular, hiring employees for character.

I have blogged about the importance of hiring for character in the past and routinely talk to clients about the importance of good hiring practices.  In fact, I see good hiring as a gift that will keep paying off in rewards to any workplace for years and years.   A poor hiring decision can be costly in terms of potential litigation, morale, low-productivity, and may even lead to retention problems with the exit of many great employees.

If you are still relying on the old standard interview questions “What are your strengths?” and “What are your weaknesses?” STOP immediately!    The Internet is full of websites and blogs that provide answers to these and other standard questions.  You are not gaining any insights about the candidates and most likely are just getting rehashed Google search responses for the most commonly asked interview questions.  Instead, go deeper.  Check out my blog for character questions that will be helpful in vetting candidates.

As always, interview questions should be focused on the skill set necessary for the position being filled.  Employers should keep the focus on the job, and not attempt a fishing expedition into protected waters. 

In Minnesota the long-standing rule is that continuation of employment by itself, is insufficient consideration for a non-compete agreement entered into after employment has commenced.  Minnesota employers have always been able to require new employees to enter into non-compete agreements in exchange for starting a job.

The Wisconsin Supreme Court ruled the continuation of at-will employment is lawful consideration for a non-compete agreement entered into with existing employees.  No additional payments, training, promotions or other benefit is necessary.  In Runzheimer International, Ltd. v. Friedlen, 862 N.W.2d 879 (Wis. 2015), the Court only evaluated the existence of consideration, not the adequacy of it.

In that case, the employee, Mr. Friedlen had worked for the company for more than 15 years without a non-compete agreement.  In 2009, as part of a corporate initiative all employees were required to sign agreements containing provisions against disclosure of confidential information, solicitation of customers or competing against Runzheimer after their employment ended for any reason.  Mr. Friedlen was given two weeks to review and consider the agreement.  He was told he would be fired if he didn’t sign it.  Mr. Friedlen eventually signed the agreement and continued working for Runzheimer for over 2 years.  Mr. Friedlen subsequently was hired by a competitor and Runzheimer sought to enforce the non-compete agreement.  The Wisconsin Supreme Court stated, “Runzheimer’s promise was that it would not fire Friedlen at that time and for that reason.  Thus, Runzheimer performed immediately when it forbore its legal right to fire Friedlen at that time.”

The courts in Minnesota have taken the opposite stance, instead ruling that a current employee lacks bargaining power when presented with a non-compete agreement and told to sign it or be terminated.  Under Minnesota law a current employee must receive a real benefit that is directly related to the signing of the non-compete agreement.

If you are a Minnesota-based employer who has employees who live or work in Wisconsin you may want to consider selecting Wisconsin as the governing law for employment agreements with non-compete provisions.