Employee Debt - The Bane of Employers

November 2014

While most of us believe that the “Great Recession” is finally at an end, millions of Americans are still experiencing the pressures of employee debt.  Every state in the United States has legislation creating the opportunity for an organization to “legally collect the financial obligations owed by an employee through our legal system” (for example, in the State of Illinois, Collection of Child Support – 750 ILCS 28/50, et seq.; Wage Assignment Act – 740 ILCS 170/01, et seq.; and Wage Garnishment – 735 ILCS 5/12-701, et seq.).  In point of fact, there is a tremendous increase in the number of garnishments (legal recovery of a debt through the seizure of an employee’s pay) that has been on a drastic increase.  It is estimated that in calendar 2013, close to 10% of the workers in the continental United States have had their wages garnished and the highest rate of garnishment covers employees between the ages of 30-50, the peak years of child rearing, divorce, and debt load.  Garnishments are filed for all possible debts, the two (2) highest being child support and student debt and “other debt” (i.e., credit cards, mortgages, etc.).

Employers are caught in the middle with their obligations to ensure that employees are paid correctly under all wage payment laws (i.e., Fair Labor Standards Act, Illinois Wage Payment and Collection Act, etc.) and the employer’s obligations to creditors under garnishment proceedings/requirements.  Every employer must be aware of garnishment proceedings/requirements and take appropriate action to protect itself from being enmeshed in these problems.  Here are a few of the very important things every employer must do:

1.    If an employer receives a garnishment, that garnishment is issued through a court proceeding.  Even if an employer believes that it has no obligation to collect on the garnishment (i.e., the involved employee no longer works for the employer), the employer must still file an answer to that garnishment and explain the reason or circumstances as to why the garnishment will not be processed by the employer and no moneys deducted and sent to the Court. If an employer does not file an answer to each and every garnishment, it is possible that the employee’s debt will become the debt of the employer through the entry of a default judgment.

2.    Garnishments come in all types of varieties – single payment or continuing payment.  Learn what the garnishment is – single payment or continuing payment. For a single payment, the employer is responsible to deduct the amount indicated in the court order and that is the end of the employer’s responsibility.  For a continuing garnishment, these can run for a period of time, in some cases, for 180 calendar days, and require continuing multiple deductions from pay and multiple court filings.

3.    The Consumer Credit Protection Act and many other state laws prohibit employers from discharging an employee based on a single garnishment or from multiple garnishments for a single indebtedness.  It is an absolute necessity for the involved employer to know the state law requirements and comply with them.

4.    For certain indebtedness that is the underlying basis for the garnishment, the “disposable earnings” (wages minus legally required withholdings) may be subject to a different deduction limitation.  In most garnishments, the “disposable earnings” subject to deduction in a work week or pay period will be the lesser of 25% of the “disposable earnings” or the amount by which “disposable earnings” exceed thirty (30) times of the required minimum wage.  On the other hand, for cases of child support or alimony back payments, 50% of the employee’s “disposable earnings” may be garnished.  It is extremely important to know what the indebtedness is to determine the percentage of “disposable earnings” subject to garnishment.

5.    Have a specific procedure handled by specific people who are responsible for dealing with the garnishments and are knowledgeable as to how to deal with them. Have a specific procedure and training in place to notify managers or supervisors that garnishments should be sent to an identified person. Do not allow garnishments to linger in someone’s inbox – that type of action will cause a lot of unnecessary problems, including the possibility that the “employee’s debt” will become the “debt of the employer!”

Questions?  Contact Managing Shareholder Walter J. Liszka of Wessels Sherman’s Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

NLRB-At it Again!

September 2015

Since the “packing of the NLRB” by President Obama, long established precedents of the National Labor Relations Board have been falling like flies as President Obama’s union protection agenda runs full force (joint employer standards; representation issues; etc.). There is no doubt in the author’s mind that President Obama deserves his union card!!

In a recent decision issued by the NLRB (June 26, 2015) in the case of American Baptist Homes of the West d/b/a Piedmont Gardens and Service Employees International Union, United Healthcare Workers-West, 32 NLRB No. 139 (32-CA-063475) the Board has rent asunder a thirty-eight (38) year precedent that established a bright line rule that allowed employers not to provide to a union copies of witness statements taken by an employer during an investigation regarding employee workplace misconduct. The Democratic NLRB has seen fit to invalidate this bright line standard established in Anheuser-Busch Inc., 237 NLRB 982 (1978) and replace it with a “balancing test” that would balance the needs of the union for the alleged requested information (actual employee statements) against any “legitimate and substantial confidentiality interests” established by the involved employer. Based on the overly “pro union bent” of the NLRB, how many cases will find “legitimate and substantial confidentiality interest” in favor of an Employer? In the opinion of the author, not very many!!

It is indeed interesting to note that this decision in June 2015 is, in reality, the second decision of the NLRB in this case. In point of fact, the exact same decision was made by the “Obama packed NLRB” in December of 2012 that was later overturned by the United States Supreme Court in NLRB v. Noel Canning, 134 S. Ct. 2550 (2014) which held that this decision, as well as approximately three hundred (300) other NLRB decisions, were illegal predicated on the fact that certain Obama appointments to the NLRB were unconstitutional. Unfortunately, in this case, the time from 2012 to 2015 has not been a sufficient time passage to allow the “Obama NLRB” to come to a better decision.

What this decision basically means is that it is going to be difficult, if not impossible, for an employer to investigate workplace misconduct and procure from its employees information and written statements detailing what they observed. The employer will not be able to promise “confidentiality of the statement” to any employee! Which employee, in his/her right mind, would present a statement identifying workplace misconduct by another employee if, in fact, that statement must be given to the union for their review? Again, the NLRB’s lack of business sense comes to the fore.

Simply stated, this decision goes a long way of making a thorough employer investigation of work place misconduct (think sexual harassment or intentional destruction of product) impossible!

Questions? Contact Walter J. Liszka, Managing Shareholder of the Chicago office of Wessels Sherman at waliszka@wesselssherman.com or (312) 629-9300.

Employee Wage Deductions

November 2014

          In a rare and somewhat unexpected action, the Illinois Department of Labor, which is not perceived as an “employer-friendly agency,” recently amended the requirements that are imposed on employers when making deductions from employee wages.

            Under the prior requirements of the Illinois Wage Payment and Collection Act, there were extremely limited circumstances under which unilateral deductions from employee wages or final compensation could be made.  Under the provisions of Section 9 of that Act (820 ILCS 115/9), employers were permitted to deduct from wages or final compensation only the following:

1.     As required by law (i.e., Federal and/or State Taxes or Medicare/Medicaid requirements).

2.     Deductions for the benefit of an employee (i.e., 401(k) contributions or healthcare contributions).

3.     Deductions made in response to a valid wage assignment or wage deduction order.

4.     Deductions made from an employee’s check with written consent by the employee given freely at the time a deduction is made.

Simply stated, under the above requirements, if the employer and employee had agreed to a payroll advance, the employer was legally entitled to make a deduction from the employee’s pay only if the employee gave their written consent at the time of each and every deduction even if these were to reoccur over several pay periods.

            Under the new rule, which became effective August 22, 2014, employee consent requirements have been modified to recognize that employers and employees may enter into a written agreement in advance of making the deduction, permitting that deductions will occur over a period of time.

            To take advantage of this new rule, the following must be followed:

1.     The employer and employee must be entered into a written agreement authorizing the deduction over a recurring series of deductions over time.

2.     The written document must provide, over the period of time during which the deductions will be made, very specific dates (time frame in which the deductions will occur).

3.     The periodic deduction must be for the same amount for each pay period.

4.     The written authorization must contain a statement that the individual employee may voluntarily withdraw his or her authorization to make the deduction and that this withdrawal should be in writing.

Although not required, it is the suggestion of the author that this written agreement authorizing the deductions be executed in duplicate original copies with one (1) original to be retained by the employer and the other original to be retained by the individual employee.

            Employers should also take note that even with this new rule authorizing a written document permitting this type of deduction, no deduction can take place if the deduction would allow an employee’s actual received wages to be less than the minimum wage for a particular pay period and, in addition, employers should ensure that deductions do not exceed fifteen percent (15%) of the employee’s gross wages for the pay period or final compensation because this would create a potential conflict with the Federal Consumer Credit Protection Act.

            Surprising as it may seem, the Illinois Department of Labor has finally “scored one” on behalf of the employer!

            Questions?  Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman’s Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Illinois Prevailing Wage Act - Extended Coverage???

October 2014
By: Walter J. Liszka, Esq.

With the recent amendments of the Illinois Prevailing Wage Act (IPWA) and the decision of the Third District of the Illinois Appellate Court in the case of Department of Labor v. Sackville Construction Inc., 402 Ill.App.3d 195 (3 rd District 2010), all companies who are receiving public funds, and not just those in the construction industry, need to be cognizant of how the Illinois Department of Labor (IDOL) is proceeding to enforce the IPWA.
 

The IPWA was initially enacted more than seventy (70) years ago and has mainly been applied in the construction trades to establish that no one working in the construction trades is paid less than the "general prevailing rate of wages" (including hourly cash wages and fringe benefits) for construction work in a designated county where that construction work is being performed for public bodies on public projects. In point of fact, the IPWA pay provisions are established by the IDOL on a county-by-county basis and on a monthly basis. The IDOL provides the "rates to be paid" that are primarily set based on "union contracts" in that county for similar work. This law has again primarily been applied for construction work done directly for public bodies on public projects. However, as a result of the various amendments to the IPWA and recent court decisions, the IDOL is significantly extending the reach of the IPWA in a way that can affect private companies working on private projects.

As previously stated, the IPWA requires that "public bodies" (such as the State of Illinois, city governments, school districts, county governments, etc.) pay the prevailing wage rate to all laborers, workers, and mechanics who are engaged in "public works." The term "public body" is defined to include "any institution supported in whole or in part by public funds," and the term "public works" is defined as "all projects financed in whole or in part through bonds, grants, loans, or other funds that may be made available by or through the state or any of its political subdivisions." While many companies assume that the term "public bodies" and "public works" only applies to projects that are for the benefit of the public and performed only on behalf of a government entity, this is an incorrect assumption.

In the case of Department of Labor v. Sackville Construction Inc., 402 Ill.App.3d 195 (3 rd District 2010), the Appellate Court reversed a trial court decision in favor of the construction company, Sackville Construction Inc., and held that, when looking at the language of the statute, the phrase "an institution supported in whole or in part by public funds" was broad enough to cover a private developer as a "public body" under the statute. In that case, a private developer (Rock Island Industrial Partners) entered into a contract with a general contractor (Hy-Brand Contractors) to construct a 45,000 square foot industrial complex on a vacant lot in Rock Island, IL. After entering into the contract, the developer (Rock Island Industrial Partners) entered into an agreement with the City of Rock Island to construct the building. As part of that agreement, the developer (Rock Island Industrial Partners) agreed to invest $1.5 million into the project and the City of Rock Island conveyed the property via title to the developer for $1.00 and also agreed to contribute $150,000 for "use in the project" and also agreed to pay up to $57,000 for "site clearance and demolition." The general contractor (Hy-Brand Contractors) entered into a contract with Sackville Construction Inc. to provide laborers on the project and the laborers were not paid the prevailing wage.

Also, Hy-Brand Contractors did not inform Sackville Construction Inc. that the City of Rock Island had contributed funds to the project or that the project was covered by the IWPA. After receiving a complaint, the IDOL filed suit against Sackville Construction Inc. for violations of the IPWA. Rock Island Industrial Partners was found to be a "public body" and the private development project was found to be a "public works" because the developer had, in fact, received public funds for the development from the City of Rock Island. Remember, the $150,000 contributed by the City of Rock Island for the site construction and the $57,000 for "site work"!

While the general contractor (Hy-Brand Contractors) was not sued by the IDOL for violations of the IPWA in the Sackville case, this does not mean that the general contractor would not potentially be liable as well. Under the IPWA, any contract that is issued on a public works project must state and inform the subcontractor that the provisions of the IPWA apply to the construction at hand. If this notice is not given, it is possible under the IPWA that the general contractor or, in fact, the public body issuing a contract, would be liable for any interest, penalties, or fines but not wage differential, that might be owed by the subcontractor to the employees if the notice that the project is subject to the IPWA was not in the contract. Simply stated, the subcontractor could "sue the general contractor" and potentially collect the "interest, fines, and penalties" but the subcontractor must pay the "wage differential." How this would affect the "subcontractor" getting future work from the "general contractor" would be the subject of another article - probably a very short one!

Because of these developments and the new approach by the IDOL in aggressively pursuing matters arising under the IPWA, every contractor and/or subcontractor on a project must clearly ask the question, "Is this project funded in whole or in part by 'public funds'? And if it is funded in part by 'public funds,' is it subject to the IPWA?"

 
Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Who Is That Knocking On My Door???

December 2013
By: Walter J. Liszka, Esq. 

For those of us over 50, "Who's that knocking on my door?" reminds us of the three little pigs and the wolf who would huff and puff and blow your house down. Unfortunately, the child-like tale of the three little pigs and the wolf has had a difficult time transferring to the Internet, but is now being replaced - you guessed it - by our big brother, the United States Government. There are more and more investigations being conducted on a daily basis by the various agencies of the United States Government and one of the most active is the United States Department of Labor (USDOL).

Over the last few years, investigations by the USDOL primarily dealing with enforcement of Wage and Hour Laws have greatly increased due to "enhanced budgets" ($117 billion allocation in 2011/2012) and adding 250 additional investigators. It should be very clear to any employer that has been the recipient of a USDOL investigation that this has become a very protracted process and usually results in serious financial issues. The author suggests five (5) tips for dealing with a USDOL investigation.

1. Never underestimate the possible breadth of an investigation and understand that there may be problems with payroll practices. In today's complicated economy, problems have developed dealing with various facets of Wage and Hour Law (failure to pay overtime pay; tip credits; failure to pay an intern; failure to keep competent records). The findings of a Wage and Hour investigation may often result in a requirement that an employer pay additional wages to its employees, interest and/or liquidated damages, and, if serious enough, the potential of possible criminal liability. If an employer has the possibility of violating Wage and Hour Laws, it should engage in straightforward and honest discussions to resolve the investigation before it heads for an administrative hearing or court proceeding. Administrative Law Judges and the Courts will generally give deference to the USDOL findings against an employer with regard to any "alleged violation" unless there is actual proof of arbitrary behavior/investigative techniques; capriciousness; or lack of proof to substantiate the USDOL findings. An employer can achieve a much better and less costly result by working with the investigator directly and not letting the matter proceed to litigation. If a problem is found, work with the investigator to solve it, not fight about it!
2.  Cooperate fully. USDOL investigators have a great amount of discretion as to how they proceed through the investigative process. An employer who is uncooperative or attempts to aggravate and forestall the investigation will find itself in a costly nightmare if the investigator feels that the business is failing or refusing to cooperate. Consequences may be severe - subpoenas may be issued requiring the production of documents or subpoenas for actual questioning; court action may occur which will cost the employer substantially, and, as a last alternative, if an employer is truly refusing to cooperate, the USDOL may just accept the Complainant's allegations at their face value and assess costs to the employer. Be cooperative, not just on liability issues, but also on a willingness to provide to the USDOL information that may lead to limiting the scope of the investigation and documents required.
3. Have competent counsel. I am suggesting that an employer retain competent and able counsel to represent their interests in an investigation. Competent counsel can help in clarifying the investigation and in limiting the extent of the investigation. Competent counsel may be able to "short circuit" the process and get it over quickly. Competent counsel may also provide an ability to substantiate Tip No. 2: cooperation in the investigation. Please make absolutely certain that counsel has the right to speak to and get accurate information from accountants and/or other individuals who are typically entrusted with preparing or maintaining payroll records in the first place. This may help in providing counsel a basis to control or limit the investigation.
4. Make the investigation a positive - an opportunity to come to compliance. Rather than resisting the investigation or continuing to deny that there is a problem, employers may use the efforts of the investigator to come into compliance and mitigate their damages - the day that an investigator concludes that an employer is in compliance, the liability is cut off. From a practical standpoint, using the investigation to come into compliance will condition the USDOL personnel to establish that the employer is trying to work with them rather than against them.
5. Control the process.  If an employer can gain control over an investigation, it will have the ability to limit the scope of records that will be provided and, therefore, limit its potential exposure. Treating the investigator with respect and dignity will help the employer gain control. Also, dependent on the case at hand, a self-assessment of the employer predicated on the initial scope of the investigation submitted to the USDOL based on its payroll records may not only limit the extent of the investigation, but the financial penalty.

Following the aforementioned five (5) tips may position the employer to have "no reason to be concerned as to who is knocking on the door."

Questions? Contact Managing Shareholder Walter J. Liszka at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Unpaid Intern - The Next Growth of Wage Litigation?

July 2013
By: Walter J. Liszka, Esq.

Recently, there have been three (3) separate and distinct lawsuits filed in New York dealing with unpaid interns and a company's obligation to "pay them for their work" (Eric Glatt, et al. v. Fox Searchlight Pictures, Inc., et al.; Lauren Ballinger, et al. v. Conde Nast; Xuedan Wang, et al. v. Hearst Corp.). In all of these cases, interns are claiming that they are entitled to compensation from their employer because the employer "suffered and/or permitted the intern to work," and perform duties that were performed by "other regular employees" (i.e. doing office work; delivering documents to customers; reconciling purchase orders and invoices; etc.). In essence, the "interns" did not work in a "learning environment" but were merely "manual labor."

In 1947, the United States Supreme Court in the case of Walling v. Portland Terminal Company, 330 U.S. 148, established the fact that "trainees" are not employees under the Fair Labor Standards Act (FLSA) and established certain required standards to meet the trainee definition (i.e. the trainees did not displace any regular employees; the trainee's work did not provide an immediate advantage to the employer; the trainee's work was not primarily "manual labor"; and the work performed was for the benefit of the trainee, not the employer). After the Supreme Court Decision, the United States Department of Labor (DOL) put together a list of six (6) criteria for determining whether a trainee or intern may be unpaid:

• The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment; and
• The internship experience is for the benefit of the intern, not the employer; and
• The intern does not displace regular employees, but may work under the close supervision of existing staff; and
• The employer that provides the training (internship) derives no immediate advantage from the activities of the intern and, on occasion, its (employer's) operations may be impeded; and
• Intern is not necessarily entitled to a job at the conclusion of the internship; and
• The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

Based on DOL rules and regulations, all six (6) of the above standards must be met.

Any company that is employing an intern should clearly establish the "rules of the road" with regard to the internship and make absolutely certain that the primary purpose of the internship is the fulfillment of an educational opportunity. The closer the intern gets to working like an employee (i.e. doing manual office tasks; delivering employer product to customers; doing photocopying or addressing envelopes to customers; etc.), the more probable is the fact that the individual is no longer acting as an intern but is merely acting as an employee and thereby is entitled under the provisions of the FLSA and in almost every state's Wage Payment Act, at least pay on the basis of the minimum wage for hours worked.

There is little doubt that because of the state of the economy and the rapid growth of "internships," these types of cases will greatly expand. Plaintiffs' attorneys get their fees paid by employers if they can win a portion of their case. "Put your house in order now" based on the DOL standards; do not wait for a court or the DOL to do it! As an aside, maybe providing an internship is not a good idea unless it is sanctioned by a college/university with a well-defined program.

Questions? Call Managing Shareholder Walter J. Liszka of Wessels Sherman's Chicago, IL office at (312) 629-9300 or email him at waliszka@wesselssherman.com.

Payment Cards as Wage Payments?

June 2014
By: Walter J. Liszka, Esq. 

The brilliant Illinois legislature has recently recognized payroll cards as an approved method of wage payment in the State of Illinois. This measure has passed the House (House Bill 5622) after receiving prior approval from the Senate and now awaits Governor Pat Quinn's signature. The author believes that this group is the reincarnation of Nero "who fiddled while Rome burned." As presently written, the Illinois Wage Payment and Collection Act expressly provides only for the payment of wages via Cash or via Check or via Direct Deposit and makes no mention whatsoever of payroll payment cards. Obviously, this dichotomy as to what the Illinois Wage Payment and Collection Act states and what the Illinois legislature has recently done, creates a quandary.

Based on recent guidance from the Illinois Department of Labor as of last year, the DOL attempted to clarify this confusion by establishing certain "rules and regulations" for the use of payment of wages by payroll cards, one of which clearly established that the employee must voluntarily agree to the payment of wages via a payroll card and, furthermore, that the full balance of an employee's compensation must be able to be withdrawn without the payment of any fee.

Once Governor Quinn signs House Bill 5622 into law, the recognition of payroll cards as wage payment will no longer be subject to interpretation. The Bill amends the Illinois Wage Payment and Collection Act by expressly providing for the payment of wages via payroll cards and also establishes, under Section 14.5, very specific requirements that must be met in order to pay wages via

1. Employers must not make payment of wages via a payroll card as a condition of employment of any employee. The employee must be able to voluntarily choose this resource.
2. Employers must offer employees the option of receiving their wages via Cash and/or via Check and/or via Direct Deposit and if the employee voluntarily consents, wages can be paid via the payroll card.
3. Employers must provide disclosure of terms and conditions of the payroll card option prior to initiating payment of wages via a payroll card.
4. Employees must be able to receive at least one (1) full withdrawal of their wages every two (2) weeks without incurring any fee.
5. Employees must be able to receive their transaction history once a month as well as access their balance without a fee.

There are other additional provisions that are incumbent upon an Employer who wishes to pay wages via a payroll card. It should be noted that this law, once signed by Governor Quinn, will become effective on January 1, 2015.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago, IL office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Employee Wage Deductions

November 2014
By: Walter J. Liszka, Esq.

In a rare and somewhat unexpected action, the Illinois Department of Labor, which is not perceived as an “employer-friendly agency,” recently amended the requirements that are imposed on employers when making deductions from employee wages.

Under the prior requirements of the Illinois Wage Payment and Collection Act, there were extremely limited circumstances under which unilateral deductions from employee wages or final compensation could be made. Under the provisions of Section 9 of that Act (820 ILCS 115/9), employers were permitted to deduct from wages or final compensation only the following:

1. As required by law (i.e., Federal and/or State Taxes or Medicare/Medicaid requirements).
2. Deductions for the benefit of an employee (i.e., 401(k) contributions or healthcare contributions).
3. Deductions made in response to a valid wage assignment or wage deduction order.
4. Deductions made from an employee’s check with written consent by the employee given freely at the time a deduction is made.

Simply stated, under the above requirements, if the employer and employee had agreed to a payroll advance, the employer was legally entitled to make a deduction from the employee’s pay only if the employee gave their written consent at the time of each and every deduction even if these were to reoccur over several pay periods.

 Under the new rule, which became effective August 22, 2014, employee consent requirements have been modified to recognize that employers and employees may enter into a written agreement in advance of making the deduction, permitting that deductions will occur over a period of time.

To take advantage of this new rule, the following must be followed:

1. The employer and employee must be entered into a written agreement authorizing the deduction over a recurring series of deductions over time.
2. The written document must provide, over the period of time during which the deductions will be made, very specific dates (time frame in which the deductions will occur).
3. The periodic deduction must be for the same amount for each pay period.
4. The written authorization must contain a statement that the individual employee may voluntarily withdraw his or her authorization to make the deduction and that this withdrawal should be in writing.

Although not required, it is the suggestion of the author that this written agreement authorizing the deductions be executed in duplicate original copies with one (1) original to be retained by the employer and the other original to be retained by the individual employee.

Employers should also take note that even with this new rule authorizing a written document permitting this type of deduction, no deduction can take place if the deduction would allow an employee’s actual received wages to be less than the minimum wage for a particular pay period and, in addition, employers should ensure that deductions do not exceed fifteen percent (15%) of the employee’s gross wages for the pay period or final compensation because this would create a potential conflict with the Federal Consumer Credit Protection Act.

Surprising as it may seem, the Illinois Department of Labor has finally “scored one” on behalf of the employer!

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman’s Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com.

Avoid Paying Excessive Plaintiff Legal Fees

July 2014
By: Walter J. Liskza, Esq.

Over the last five (5) years, there has been a drastic increase in the number of lawsuits filed alleging violation of the Fair Labor Standards Act (FLSA) in an attempt to procure back wages and liquidated damages for affected employees. A vast number of these lawsuits have turned into large class action litigations. Any employer who has been involved in this type of scenario is well aware that the "actual bottom line cost" of these cases is not just the alleged back wages and liquidated damages due to the affected employees, but by statute, will include substantial payments to Plaintiff's counsel for "reasonable attorneys' fees incurred by the successful Plaintiff in pursing their claim."

It should be noted that the "reasonable attorneys' fees" may have no relationship whatsoever to the recovery of "actual damages to the affected employees." The writer is well aware of a case where the recovery of "actual Plaintiff's damages" totaled $7,000.00 yet the demand for "reasonable attorneys' fees" was in the range of $175,000.00. How should an employer faced with this type of litigation deal with this scenario? There are three (3) steps or courses of action which may help the employer:

• Make a reasonable and fair settlement offer. The Plaintiff's counsel has clearly evaluated their case prior to institution of the lawsuit and they have evaluated the potential recovery both in actual damages and "reasonable attorneys' fees." The employer must make an honest and fair judgment in assessing the extent of its liability. The FLSA provides compensation for all minimum wage and overtime violations. The employer must assess its exposure to "actual damages" and, as well, make a fair assessment of what would be the potential of "reasonable attorneys' fees" to which Plaintiff's counsel may be entitled. Any "reasonable settlement offer" must take cognizance of both the actual damages and the potential of attorneys' fees.
  
• Make an Offer of Judgment. If settlement talks are not successful, the Defendant employer should consider making an "Offer of Judgment." The Federal Rules of Civil Procedure establish the fact that a Defendant may make a Rule 68 Offer of Judgment at least fourteen (14) days before the date set for trial. The Offer of Judgment must allow the judgment on specific terms with payment of costs that are then accrued. If the Offer of Judgment is rejected and the judgment obtained by the Plaintiff through litigation is not more than the Offer of Judgment, the Plaintiff must then pay to the Defendant all costs incurred after that offer was made. In essence, the Offer of Judgment defines the benchmark that the Plaintiff must meet at trial to avoid payment of costs. It is the hope that the Offer of Judgment may discourage the Plaintiff from unnecessarily prolonging the case and thereby freeing up the court's calendar.
  
• Question the reasonableness of fees. It is extremely important for the Defendant employers to communicate to Plaintiff's counsel that they will not pay a "hostage fee" to Plaintiff's counsel to resolve a case. While the Defendant employer must fairly assess what are "reasonable attorneys' fees," the Defendant employer is not required to roll over and play dead. If the employer has honestly assessed the case, it can point to potentially unsuccessful portions of the claim or claims filed by the Plaintiff that will be defeated through litigation and may impact the attorneys' fees. It should clearly be understood that the success of Plaintiff's counsel in litigation is a direct correlation to attorneys' fees - there are no rights to recover attorneys' fees for unsuccessful portions of a claim.

Through the use of the above three (3) steps of assessment of a case, the Defendant employer may be in a much better position to avoid costly and prolonged litigation and, as well, paying not only its own fees for legal counsel, but the Plaintiff's fees as well.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Unions Still on the Prowl

February 2015

By: Walter J. Liszka, Esq.

While it has not been a topic for a great amount of discussion, unions won more representational elections in NLRB monitored elections in the first half of calendar 2014 when compared to the same period in 2013. Unions have won a little over eight (8%) percent more elections in the first half of calendar 2014 when compared to the same period for 2013 (465 wins in 2014 versus 428 wins in 2013) and have also improved their “win rate” at approximately three point seven (3.7%) percent (428 wins out of 653 total elections in the first half of 2013 versus 465 wins out of a total of 671 elections in the first half of 2014).

While the unions have “improved” their number of representational election wins and their win rates, they have not drastically increased the number of new members unions have added to “union polls” through these elections. In fact, in the first half of 2013, approximately 65,860 new workers were added to the union roles arising out of these elections, but in the first half of 2014 only 25,750 new workers were unionized or a rather substantial decrease in “new members (i.e. a decrease of over sixty (60%) percent). This small number of organized employees, in the opinion of the author, is directly related to the increase in the number of “micro unions” sought by unions (i.e. small numbers of employees contained within a larger unit of employees employed by the same employer at the same locations). It is obvious that micro units are much easier to organize because there are a fewer number of employees from whom the unions need authorization cards and the peer group pressure that is excreted within “micro units” seems to be greater. All is not lost for the employer!

Unions have also substantially lost a greater number of decertification elections (elections in which employees voted on whether to remove the union as their representative) in the first half of 2014 when compared to the same period in 2013. In the first half of 2013, unions lost fifty nine point six (59.6%) percent of the decertification elections while in the first half of 2014, unions lost seventy point one (70.1%) percent of the elections.

Employers who are concerned about unionization must realize that over the next few years, the National Labor Relations Board, heavily staffed in appointed positions by the extremely liberal Obama administration (read this as very liberal Democrats) has made it easier for unions to organize a workforce. Regardless of this fact, every employer who wishes to remain union-free must take action to protect its employment venue. Here are a few suggestions: 

1. Know who you want to be the supervisors and make absolutely certain that the supervisors know they are supervisors and meet the new board tests;
2. Have legal no solicitation, no distribution, no access rules posted and enforced;
3. Train your supervisors, not just lecture, on what you expect of them because they are the most important persons in winning a union election;
4. Have and publish a clear union-free statement establishing that in your day to day operations unions are unnecessary;
5. Clearly explain to employees your “union-free policy” and the use and meaning of union authorization cards;
6. Have a credible dispute resolution system in effect and make sure that it works – you might want to make sure that the “employee gossip time” is aware of successful employee wins; and
7. Have and pay competitive wages and benefits for your business!

While the demise of unions in the private sector has been talked about extensively (in calendar 2013, less than seven (7%) percent of the total private sector workforce was unionized), this does not mean that you, as an employer, are protected from unionization in the future. The wise employer prepares for the fight well prior to when union organizing is under way!  

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Union Membership Statistics

September 2014
By: Walter J. Liszka, Esq.

There is a very old adage that "numbers can't lie, but liars can figure" and that adage may be applicable to the most recent statistics issued by the United States Bureau of Labor Statistics with regard to union membership. Those "union statistics" indicate that the union membership rate - the percentage of wage and salary workers who were members of the union for 2013 - remains at 11.3%, the same percentage as existed in 2012. The number of wage and salary workers belonging to unions remains at 14.5% but is substantially down from 1983, the first year in which comparable union data was available which established the figure in 1983 at 20.1%.

There are some interesting highlights with regard to the 2013 data:

• Public sector workers have a union membership rate of 35.3% which is five times higher than that of private sector workers at 6.7%.
• Workers in education, training, and library occupations and in protective service occupations have the highest unionized rate at 35.3%.
• Men have a higher union membership rate of 11.9% than women at 10.5% even though this gap has considerably narrowed since 1983 when the rates for men were 24.7% and women were 14.6%.
• Among major race and ethnicity groups, African American workers had the highest union membership rate at 13.6% while Caucasians are 11%, Asian 9.4%, and Hispanic 9.4%.
• Union membership rates are the highest among workers between the ages of 45-64, at 14% for those ages between 45-54 and between the ages of 55-64, 14.3%.
• State union membership levels are also an interesting statistic. Over half of the 14.5 million union members residing in the United States lived in seven states (California - 2.4 million; New York - 2 million; Illinois - 0.9 million; Pennsylvania - 0.7 million; and Michigan, New Jersey, and Ohio - 0.6 million each). Texas has approximately one-fourth (¼) as many union members as in New York despite having a larger number of wage and salary employees, 4.7 million in Texas versus 2 million in New York.

In 2013, 7.2 million employees in the public sector belonged to unions with the highest percentage in the public sector being for local government employees (40.8%) which include employees employed as teachers, police officers, and firefighters. In the private sector, industries with the highest unionization rate include utilities (25.6%); transportation and warehousing (19.6%); telecommunications (14.4%); and construction (14.1%). The lowest unionization rates occur in agriculture and related industries (1%); finance (1%); and food service and related industries (1.3%). Among occupational groups, the highest unionized rates are in education, training, and library operations and protective service (35.3% in each). Farming, fishing, and forestry occupations (2.1%) in sales and related occupations (2.9%) were the lowest unionization rates.

Obviously, unions continue to be in a difficult situation in selling their product, especially in the private sector with the unionization rate of 6.7% but, based on developments in the Obama administration, this may be coming to a radical halt and change. For more information with regard to the "potential changes in the future," please see the article, Obama is Labor's Winning Hand .

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Obama is Labor's Winning Hand

April 2014
By: Walter J. Liszka, Esq.

Since the election of Barack Obama, employers who have maintained a union-free environment have had to deal with a number of bizarre new decisions and rules by agencies in the Obama administration that have been attempting to make union organizing easier for employees and much more difficult for employers to resist. All of us remember the failed attempt with the Employee Free Choice Act (EFCA) but, employers cannot rely on the fact that the failure to pass the EFCA will continue to provide positive benefits in 2014. Employers that fail to act and reinvent their union-free strategies to meet the game changing challenges on the horizon will face serious problems.
It is expected in 2014 that the Department of Labor will have reissued its new interpretations of the Labor Management Reporting and Disclosure Act (LMRDA) that will redefine the public reporting requirements for employers that use third-party consultants or attorneys to help them establish and implement union-free strategies or to combat organizing. This will change the lay of the land and will probably negatively impact what attorneys and/or consultants can do in providing guidance for employers.

In 2012, the National Labor Relations Board (NLRB) published a series of rule changes to force speedy representation elections and to restrict - in the opinion of the writer of this article, eliminate - the ability of employers to affect litigation of issues with regard to the appropriateness of a requested bargaining unit and voter eligibility. Many of us recall that these proposed rule changes were enjoined by a court in May 2012 but, that may be short lived. The Chairman of the NLRB, Mark Pearce, has recently signaled that he wants to reissue these rules and, with the pro-union majority on the current NLRB, this will probably be done quickly. These rules will change the "rules of the game" by shortening the time between the filing of a petition and an election and, in fact, may change the time between the filing of a petition in an election to only fourteen (14) calendar days. Currently, the NLRB's goal is to have an election within forty-two (42) calendar days of petition filing. Another series of these changes could eliminate the ability of employers to litigate the appropriateness of the bargaining unit as requested by union and voter eligibility in any hearing on the union petition. The employer would be unable to stop an election in a unit as small as a single classification within its operation and potentially could be limited in determining who is and who is not a supervisor and, therefore, would not know who could be required to participate on behalf of an employer in a campaign as a spokesperson or provide information to an employer with regard to voters' concerns and attitudes. This type of upheaval will make it almost impossible for an employer to get its message out to the voting group.

There are three current NLRB cases that can also have a great impact on future union organizing:

• Specialty Healthcare (357 NLRB No. 83 (2011)) rejected the NLRB's longstanding presumption in favor of wall-to-wall or large units by establishing that employee voting units, perhaps as small as a single job classification, would be found appropriate in the future. It is significant that this NLRB decision placed a very strenuous burden of proof on an employer to prove that a requested unit by the union was inappropriate. Going forward, the employer's burden would not just be "persuasion" but the employer would be required to establish by "overwhelming evidence" that the requested unit would be inappropriate if it included or excluded certain other employees. This may be a burden that is very difficult to achieve. One can only speculate as to how multiple individual units within a single workforce would impact an employer's ability to deal with such a situation - it could be a situation of constant bargaining on multiple contracts; loss of job flexibility with regard to cross training and movement among classifications and a host of other potential operational difficulties that would make it either impossible to run a day-to-day operation. It should be noted that since the decision in Specialty Healthcare, Regional Directors have directed the election in units of cosmetic and scent employees at Macy's and, for example, women's shoes at Bergdorf Goodman, certainly not the traditional "wall-to-wall" store units.
  
• Two cases, Oakwood Healthcare (348 NLRB No. 37 (2006)) and Croft Metals, Inc. (348 NLRB No. 38 (2006)), are now being applied vigorously to define who is and who is not a "supervisor." Under the National Labor Relations Act (NLRA), supervisors are not considered employees and therefore are not entitled to its protections. More importantly, supervisors are the front line communicators and, in the opinion of the writer, the best representatives of an employer in a union election scenario. If they are not able to be clearly identified, an employer has a vexing problem. Employers would be left uncertain as to whether a specific individual is a supervisor until after an election occurred. Actions taken with regard to that individual might be the basis of an Unfair Labor Practice Charge because the employer interfered with "an employee that it included in its supervisory strategy sessions regarding union activity." Perish the thought that an employer who determined an individual was a supervisor and told that person to take certain actions which the individual refused to do with regard to communicating the employer's position and the employer then fired that person. This "unidentified supervisor" is an untenable situation and places an employer in a "damned if you do and damned if you don't" dilemma with regard to how it treats individuals and uses them as advocates or sources of information.

While this article is not intended as an all is lost pictorial, it is intended to alert employers that the future may be changing with regard to an onslaught of union organizing and that every employer who wants to maintain their non-union status should take precautions to deal with that issue now rather than face these issues with the union organizer at the door.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com .

Department of Labor Still Very Active

December 2014

By: Walter J. Liszka, Esq.

In October, 2014, the United States Department of Labor issued its fiscal year statistics, covering numerous Fiscal Years, in various areas of its responsibility and enforcement (Fair Labor Standards Act; Child Labor; Family Medical and Leave Act Enforcement). It is very interesting to note that these statistics clearly confirm a major increase in wage and hour activities as conducted by the Department of Labor with increases in both the amount of recovered back wages and the time spent by agents on enforcement. These increased enforcement efforts have reached “record high levels” in 2013-2014 with more than 8,000 Federal Labor Standards Act cases being filed between April 1, 2013 and March 31, 2014, which is a five (5%) percent jump from the previous year. As well, since Fiscal 2000, there has been a 438% increase in federal wage and hour lawsuits. These enforcement and trend statistics are a clear indication to employers that they must use great care and their best practices to ensure compliance with wage and hour laws.

As part of this paper, you will find the actual statistics below for the wage and hour divisions identified fiscal years for all acts, Family Medical and Leave Act Enforcement and Child Labor Enforcement. These statistics, in and of themselves, are extremely telling:

All Acts:

WHD Enforcement Statistics – All Acts	FY 2013	FY 2012	FY 2011	FY 2010	FY 2009	FY 2008	FY 2007	FY 2006
Back Wages	$249,954,412	$280,697,546	$224,844,870	$176,005,043	$172,615,125	$185,287,827	$220,613,703	$171,955,533
Employees Receiving Back Wages	269,250	308,846	275,472	209,814	219,759	228,645	341,624	246,874
Complaints Registered	25,628	25,420	27,112	31,824	26,311	23,845	24,950	26,256
Enforcement Hours	1,339,029	1,377,441	1,213,182	1,066,188	879,626	882,419	899,406	951,971
Average Days to Resolve Complaint	110	145	177	142	101	97	97	93
Concluded Cases	33,146	34,139	33,295	26,486	24,922	28,242	30,467	31,987

WHD Continues Strong Child Labor Enforcement

Child Labor Enforcement Statistics	FY 2013	FY 2012	FY 2011	FY 2010	FY 2009	FY 2008	FY 2007	FY 2006	FY 2005	FY 2004	FY 2003	FY 2002	FY 2001
Directed Child Labor Cases	233	317	464	591	1,063	1,269	1,285	952	1,406	2,155	2,031	2,105	2,021
Cases With Child Labor Violations	704	749	729	684	887	1,129	1,249	1,083	1,129	1,616	1,648	1,936	2,103
Minors Employed In Violation	1,393	1,614	1,873	3,333	3,448	4,734	4,672	3,723	3,703	5,840	7,228	9,690	9,918
Minors Per Case	2.0	2.2	2.6	4.9	3.9	4.2	3.7	3.4	3.3	3.6	4.4	5	4.7
Cases With HO Violations	276	334	366	308	394	466	410	361	396	459	654	747	876
Minors Employed In Violation of HOs	520	682	949	863	1,183	1,617	1,000	994	1,091	1,087	1,449	1,710	2,060

           

Family And Medical Leave Act Enforcement

FMLA Enforcement Statistics	FY 2013	FY 2012	FY 2011	FY 2010	FY 2009	FY 2008	FY 2007	FY 2006	FY 2005	FY 2004	FY 2003	FY 2002	FY 2001	FY 2000	FY 1999	FY 1998	FY 1997
Number of Complaint Cases	1,634	1,723	2,132	2,094	1,841	1,889	1,983	2,161	2,784	3,350	3,565	3,501	2,790	2,833	2,912	3,795	2,670
Percent of No-Violation Cases	54%	55%	58%	58%	49%	47%	45%	49%	51%	55%	54%	50%	48%	44%	39%	38%	44%

Nature of Complaint

FMLA Enforcement Statistics	FY 2013	FY 2012	FY 2011	FY 2010	FY 2009	FY 2008	FY 2007	FY 2006	FY 2005	FY 2004	FY 2003	FY 2002	FY 2001	FY 2000	FY 1999	FY 1998	FY 1997
Refusal to Grant FMLA Leave	319	340	484	468	412	416	459	522	647	697	815	741	629	575	589	716	699
Refusal to Restore to Equivalent Position	212	212	233	230	239	220	242	261	328	369	370	400	360	402	1,505	1,841	1,276
Termination	673	749	890	913	763	757	764	870	1,132	1,473	1,567	1,503	1,123	1,159	n/a	n/a	n/a
Failure to Maintain Health Benefits	20	33	40	36	33	39	29	31	50	48	46	71	62	45	49	91	77
Discrimination	410	389	485	447	394	457	489	477	627	763	767	786	616	652	642	849	468

*Site source: http://www.dol.gov/whd/statistics/.

During Fiscal Year 2013, the recovery of approximately 250 million dollars is approximately 78 million dollars more than recovered in Fiscal Year 2006 ($249, 954,412 dollars – Fiscal Year 2013 versus $171,955,533 dollars – Fiscal Year 2006).

• With the addition of approximately 300 new investigators over the last two (2) years, the hours spent by wage and hour investigators on enforcement totaled 1.339 million in Fiscal 2013 as compared to 880,000 hours in 2009 and 970 hour when compared to Fiscal 2006 – a fairly substantial increase.

It is also interesting to take note that the Department of Labor Wage and Hour Division has published the Final Rule establishing the standards and procedures necessary to implement Executive Order 13658 – establishing a Minimum Wage for Federal Contractors. This Executive Order requires the implementation of a minimum wage of $10.10 per hour for all Federal Contractors performing works on contracts agreed to on or after January 1, 2015. Also for any federal contractors, the Department of Labor will play a major role in preparing the regulation and guidance for the implementation of Executive Order 13673 – Fair Pay and Safe Work Places. Of note, this new Executive Order calls for the Department of Labor to create and impose arbitration limits for claims arising out of Title VII Civil Rights Act of 1964 and sexual harassment tort claims for federal contractors. This order also will require greater transparency in pay information and disclosure of labor law violations for the past three (3) years for any Federal Contractor.

Going forward, whether federal contractors or not, all employers should do the following:

1. Maintain proper pay records and post appropriate notices for compliance with the Fair Labor Standards Act and any requirements under Executive Orders/Federal Contractor requirements.
2. Be clear and consistent with regards to determining who is an “employee” and who is an “independent contractor”. Make absolutely certain that if you are employing “independent contractors” that you clearly define them in any written documents as “independent contractors” and do not use the term “employee” in any of these agreements. Provide “independent contractors” with written vendor agreements that clearly establish an independent contractor relationship.
3. Train personnel and management to understand the different requirements of various labor laws and specifically train with regard to overtime regulations and pay.
4. Conduct internal audits to establish that all labor laws and pay requirements are being observed.
5. Keep an update of any and all changes in laws in how they impact your business.

Questions? Contact Walter J. Liszka, Managing Shareholder of Wessels Sherman's Chicago office at (312) 629-9300 or by email at waliszka@wesselssherman.com