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.

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 .

DOL-Technology Witch Hunt?

July 2012
By: Walter J. Liszka, Esq.

As technology improves and more of the workforce becomes conversant with Smart Phones, iPhones, and Touch Pads, the chance of the ever-expanding litigation dealing with Wage and Hour claims becomes greater. In an article that appeared in our June 2011 entitled "A Bridge to Justice - A Bridge Too Far?" the author discussed the unprecedented collaboration between a Federal Government Agency [Department of Labor (DOL) - Wage and Hour Division] and the American Bar Association (ABA) Standing Committee on Lawyer Referrals and Information Systems. That article detailed the fact that the DOL and the ABA had entered into an approved attorney referral system that would allow the DOL to refer cases that they could not handle to "qualified counsel." It is now becoming quite clear that the DOL - Wage and Hour Division is expanding its ability to interface with both employees and the consuming public.

The DOL recently created a Smart Phone app "Eat, Shop and Sleep" which allegedly allows users to search for places to eat, shop, and sleep, and also to review customer reviews of the entities providing those services. However, this Smart Phone app goes a little bit further in that it provides to its users (consumers) information with regard to DOL enforcement issues (i.e. health issues, safety issues, and labor law violations). It permits the user to report a company name, any health or labor law violations, and furthermore, permits the user to find out if a "company name" indicates previous Fair Labor Standards Act (FLSA) violations.

By hitting the "take action" button that permits a user to report violations to the DOL, the user is also directed to DOL contact information such as the phone numbers and office locations; a link to an online complaint form; a link to online workers' rights; and the Occupational Safety and Health Administration (OSHA) data. Obviously, the DOL thinks its Smart Phone app of "Eat, Shop and Sleep" can lead to the discovery of Wage and Hour issues.

As well, the DOL has also developed a free time sheet app that allows employees a simple way to track their hours worked and wages owed. According to DOL Secretary Hilda Solis, this application will not only "empower workers" to protect their interests but also will be "an invaluable source of information that the Wage and Hour Division can use in investigating employers who have failed to maintain accurate records." This app is compatible with iPhone, iPad, iPod Touch, and is available as a free download at the DOL site. As any employer who has become embroiled in an FLSA litigation matter clearly knows, it is the responsibility of the employer to maintain, keep, track, and provide accurate and complete information with regard to an employee's hours of work and compensation. A failure to keep and provide this type of information is, in and of itself, a violation of the FLSA.

In any FLSA litigation, it is the employee's initial burden to prove that the employer had committed a violation. An employee may satisfy this burden by proving that he/she has performed work for which he/she was not compensated by producing sufficient evidence to show the amount and extent of that work as a matter of reasonable inference. Once the employee has established their initial burden, which, based on case review, is not very difficult, the burden of persuasion shifts to the employer to dispel or disprove the employee's position. Assuming, solely for purposes of discussion, that the employer's records are inaccurate or inadequate, the reasonable inferences of the employee will be accepted. One must wonder if this new DOL time sheet app may bolster an FLSA claim by an employee for a wage claim. Will a court find this type of evidence "more compelling" than records kept in a notebook? As Director Solis stated at the American Society of Safety Engineers Conference in 2009, "make no mistake, the DOL is back in the enforcement business." Certainly, the enhanced use of technology by the DOL is proof of that fact.

Obviously, the technological age provides great advances for dissemination of business information. As suggested in this article, it may also provide the DOL with a chance to further intensify their "enforcement" for FLSA violations.

 

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

2012 Business Resolutions

March 2012
By: Walter J. Liszka, Esq.

As we enter and proceed through Calendar Year 2012, it may be time for some business resolutions for the success of your organization.

Very recently, I had the privilege of working with a client on a very complicated legal matter. One of the things that became very clear to both of us was that if there had been a little (or a lot) of planning prior to the legal dispute we now found ourselves faced with, both of us would have been much better off (and the client would have saved some money). Here are some areas of concern (and possibly for advance planning) for your business for 2012.

• The United States Department of Labor has ramped up enforcement and compliance proceedings with the Fair Labor Standards Act. They have increased the numbers of their field agents and are beginning to train them extensively with regard to the continuing conflict regarding the job classification issue of "employee and independent contractor." It is absolutely necessary that you review your business records to clearly establish that when you are employing an independent contractor that you can make this stand up. If your business does not take the appropriate steps to establish independent contractor status before an investigation, it may (will) cost your business a lot of money. In addition, review all of your job classifications and verify once more that they are exempt/non-exempt and make appropriate adjustments.
• Review and audit your employee personnel records filing system making absolutely certain that medical information is protected and filed separately from the rest of your personnel records. Also, make absolutely certain that all I-9 forms are properly filled out and readily available. The author strongly recommends that photocopies are made of all documents presented by employees to justify the information put on an I-9. If, in fact, you are making copies of the documents presented for I-9s, make absolutely certain that you use this procedure for all employees and not just a selected few. It is also strongly recommended that appropriate measures are taken to protect the information on the I-9 forms and your other employee records given the rapid increase of identity theft issues.
• Make absolutely certain that your policies and handbooks are current and in compliance with federal and/or state law. For example, make sure your policy on harassment includes harassment on all levels - sexual, racial, national origin, religious, age and any other areas protected by federal and/or state and/or local discrimination laws. Conduct employee training and make absolutely certain that you have a current signed form acknowledging receipt of the company's policies and handbook.
• Work on becoming and requiring your management team to become better managers of your employees. Good practices should include treating people as adults.
• Have minimum rules and guidelines and make sure that those rules are clear and consistently applied.
• Provide excellent training. Make sure employees have the necessary tools and training to perform their jobs and to improve job performance on a continuous basis. Do not assume that employees know what to do or how to do it.
• Encourage open communication. Share the goals of your company and how your employees can help you achieve those goals.

Make 2012 a successful year for both you and your employees.

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

Family Medical Leave Expansion

June 2012
By: Walter J. Liszka

As most employers know, the Department of Labor Family Medical Leave Act (FMLA) forms which were initially issued in the early 1990s expired as of December 31, 2011. The Department of Labor (DOL) has been working with the Office of Management and Budget to extend the life of these forms and received approval that their model forms will be extended through February 28, 2015. Unfortunately, the DOL has made very few changes to those forms to incorporate any required modifications with regard to the expansion of Military Family Leave and the provisions of the Genetic Information Non-Discrimination Act of 2008 (GINA).

It should be noted that as of 2010, many amendments were passed with regard to Military Family Leave and related exigency leave. The proposed regulations allow employees to take up to 12 weeks of FMLA leave for a "qualifying exigency" due to a family member's call to active duty in a foreign country. The qualifying ranges of the exigency leave normally encompass a wide range of activities dealing with that service member's deployment such as attending to legal, financial, family, child care, school, and other related matters. The FMLA has also been revised to allow employees up to 26 weeks of job protected leave in a single "12 month period" to care for a service member with a "serious injury or illness related to his/her military service." Note that that prior to the National Defense Authorization Act of 2010, exigency leave was only available to family members of Reserve and National Guard units and not regular service members. However, with the passage of the National Defense Authorization Act of 2010 and the proposed regulations, FMLA leave is now available to family members of regular service members, as well as Reserve and Guard units. Efforts should be made to modify all FMLA leave documentation to reflect these changes. Further information regarding these issues can be obtained from the Department of Labor website, Fact Sheet 28 and 28A.

As well, the Genetic Information Non-Discrimination Act of 2008 (GINA), prohibits discrimination and harassment based on genetic information and prohibits employers from acquiring genetic information except in very narrow circumstances. Genetic information includes:

• Information about an individual's genetic tests.
• Information about genetic tests of an individual's family.
• Information about the manifestation of a disease or disorder in an individual's family.
• Genetic information dealing with a fetus carried by an individual or by some pregnant woman who is a family member of the individual.

It is strongly suggested that for both FMLA leave documentation dealing with an individual and an individual's family, the following be added to all required FMLA forms:

The Genetic Information Non-Discrimination Act of 2008 prohibits employers and other entities covered by Title 2 of the Act from requesting or requiring genetic information of an individual or family member of that individual except as specifically allowed by the Genetic Information Non-Discrimination Act. To comply with this law, we request that you not provide any genetic information when responding to this request for medical information. Genetic information, as defined by the Genetic Information Non-Discrimination Act of 2008, includes an individual's family medical history; the result of an individual's or family member's genetic testing; the fact that an individual or an individual's family member sought or received genetic services; any genetic information regarding a fetus carried by that individual or an individual's family member or an embryo lawfully held by an individual or family member receiving reproductive services.

The use of the suggested Department of Labor Forms was based on alleviating any possible "technical violations" that might have occurred through the use of employer-created forms. The author suggests that the genetic information referred above be merely added to the Department of Labor Forms dealing with the Certification of Health Care Provider by attaching as an amendment.

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