iPhone4.jpg

On May 9, 2011, the U.S. Department of Labor issued a news release announcing the launch of its first application for smartphones – a timesheet to help employees independently track the hours they work and determine the wages they are owed.  The App, called “DOL – Timesheet,” is available to download for free on iTunes.

Since the DOL’s announcement, blogs and tweets have been flying about this new tool developed by the DOL Wage & Hour Division (WHD) as part of its ongoing efforts to “achieve compliance with labor standards to protect and enhance the welfare of the Nation’s workforce.”  In other words, the DOL WHD has been cracking down on employers who are not in compliance with the Fair Labor Standards Act (FLSA) with respect to the proper payment of wages (minimum wage, overtime), classification of employees (exempt vs. non-exempt), and recordkeeping, and many are viewing this new iPhone App as just another tool in the DOL WHD’s arsenal in the war against employers (the App contains a link to the DOL WHD and information on how to make a complaint).

Amidst the naysaying, there just may be some potentially positive aspects of the new App for employers (who, by law, are responsible for maintaining accurate and complete time and pay records):

  1. Employees Now Have More Electronic Discovery Obligations.  Employees who install and use the “DOL – Timesheet” App now have their own electronic data and information that they must maintain and preserve in the event a claim arises.  Most cases involving the preservation (or improper destruction) of electronic data involve employers getting sanctioned for failing to put proper litigation holds in place and/or destroying relevant information.  But now, with employee-maintained programs and Apps, the balance of the electronic discovery playing field may be becoming a little more even.  Where employees fail to preserve and not destroy any relevant electronic time and wage records in their possession, employers may be in a position to move for sanctions up to dismissal of a claim depending on the circumstances and level of spoliation.  One can also only hope that with the new electronic tools available to employees, courts will begin to crack down on Plaintiff’s lawyers for not properly counseling their clients on “litigation holds” to ensure that the individuals preserve relevant electronic information, including personal emails, text messages, Facebook information, and now, iPhone data.
  2. We May See Less ‘Cocktail Hour’ Stories About Hours Worked.  Documented time records are far better than relying on an employee’s memory or guesswork at the amount of work actually performed.  Everyone knows that guy at the cocktail party who says he “works like a dog…80 hours a week!” is exaggerating a bit.  Still, when the DOL WHD investigates wage and hour complaints, and there is a lack of complete records for whatever reason (e.g., the employee is claiming off-the-clock work or it’s a case involving misclassification of an exempt employee), they rely on these very types of ‘cocktail hour’ statements by employees, which generally operate to provide windfalls to employees.  Now, where employees may be tracking hours and wages on their iPhones, here’s hoping that employers will be dealing with fewer verbal statements describing an actual 48-hour week as an 80-hour one.

It remains to be seen how much use this new DOL – Timesheet App will get and how it may play into wage and hour claims and/or lawsuits.  But, it will be interesting to follow and see if employers can make lemonade out of lemons by effectively utilizing this new tool as an additional discovery device to possibly find and use key information that could make or break a case.

Healthcare Debate.jpgAs the first anniversary of the Patient Protection and Affordable Care Act approaches (it was signed into law March 23, 2010), 5 district courts across the nation have addressed the constitutionality of this controversial piece of legislation (U.S. District Court, Northern District of Florida (PDF); U.S. District Court, Eastern District of Michigan (PDF); U.S. District Court, District of New Jersey (PDF); U.S. District Court, Eastern District of Virginia (PDF); and U.S. District Court, Western District of Virginia (PDF)).  The score is 3-2 in the federal government’s favor, but all 5 cases are on appeal.  The principal issue in these cases is the constitutionality of the Act’s “individual mandate,” which requires most individuals to purchase health insurance beginning in 2014 or face a penalty of up to $2,085 per year.  

Does Congress Have Authority Under the Commerce Clause to Penalize Individuals for Not Having Health Insurance?

This is the question for the Courts of Appeals.  The Justice Department says YES, because the Commerce Clause gives Congress the authority “to regulate commerce . . . among the several States.”  This authority has been interpreted broadly over the years, and there is a consensus that the Commerce Clause allows Congress to regulate economic activities that substantially affect interstate commerce, even if the activities take place entirely within a single state. 

District Courts Split on Whether Being Uninsured Is An “Activity” or “Inactivity”

The district courts disagree as to whether being uninsured is an “activity” under the Commerce Clause, or merely “inactivity.”  For the “inactivity” argument, the reasoning is that being uninsured is the result of not buying insurance, which is a failure to act, and therefore, falls outside Congress’s Commerce Clause power.  Opponents of the act use the “inactivity” argument to show the Act is unconstitutional.  However, the 3 district courts that ruled in the federal government’s favor reached the opposite conclusion.  In their view, everyone will need medical care eventually, and therefore, failing to have health insurance is the product of a decision to pay for future medical treatment out of pocket instead of through insurance.  Those courts ruled that making that decision is an “activity” which affects interstate commerce. 

But, What About State Sovereignty?

As the Commerce Clause “activity versus inactivity” issue wends its way through the federal Courts of Appeals on its way to the United States Supreme Court, a colleague of mine, Tom Christina (shareholder in Ogletree Deakins’ Greenville, South Carolina office) explained to me that there are additional constitutional issues, beyond just the “individual mandate,” that courts should be considering:

  • Tom’s argument involves whether the Act offers States a meaningful choice about whether to establish “American Health Insurance Exchanges,” which will be the marketplaces for coverage being in 2014.  Section 1311 of the Act provides that each state “shall” establish such an Exchange, but Section 1322 of the Act allows the Department of Health and Human Services (HHS) to establish an Exchange in a state if the state fails or refuses to do so, or if it is not moving forward quickly enough.  By tracing through hundreds of pages of the Act, Tom noticed that there is an important difference between Exchanges established by the states under Section 1311 and those established by HHS under Section 1322.  Under the Act, a tax credit becomes available beginning in 2014 to help taxpayers pay for coverage, but the amount of the credit is zero unless the taxpayer buys insurance coverage from a Section 1311 Exchange.  Thus, taxpayers in states that failed or refused to establish an Exchange are punished by being ineligible for a federal tax credit available to voters in states that established Exchanges. 

Hadley Health of the Independent Women’s Forum blogged about the above alternative argument that State plaintiffs could make to go beyond the “individual mandate” question.  She noted that Tom developed this “sovereignty-based” argument at a presentation at the American Enterprise Institute in December 2010.  Hadley wrote: 

No external entity is allowed to influence a state’s political process.  And the federal government is external of the state.  The health reform law provides income tax credits to individuals in exchanges established by states, but not to individuals in exchanges established by the federal government (in non-electing states).  How will voters react to this, if understood correctly?  The choice of their state to establish or not to establish an exchange will impact the tax credits that citizens receive. 

The sovereignty of states is undermined, because the adoption of this law is hardly “voluntary.”  States have been put in a bad position, and I hope that the discussion of these health care exchanges will resurface in another case.

Tom’s experience as a former Associate Deputy Attorney General during the Reagan Administration enabled him to immediately recognize the potential federalism concerns raised by a statutory program that brings outside pressure to bear on a state’s decision to establish Exchanges.  Based on the different treatment of taxpayers in cooperating states compared with taxpayers in non-cooperating states, Tom advanced an argument for the unconstitutionality of the Act based on federal interference with state legislative and executive processes.

For those who are interested in the details of Tom’s argument, his PowerPoint Slides (PDF) lay out the statutory provisions in issue and U.S. Supreme Court cases involving federal-state relations that the states could rely on.  You also can see or hear the AEI presentation at AEI’s website (Tom’s portion of the panel discussion begins approximately 56 minutes into the program).

iStock_000000879475XSmall.jpgOpening day for the Colorado Rockies at Coors Field is Friday, April 1, 2011.  It is a day of excitement, anticipation, feigned illnesses, and sell out crowds. Not only does baseball season start on a Friday this year (it has been Mondays since 1905), but it also falls on April Fools Day. Given these oddities, I can’t help but wonder if there is the slightest chance that the U.S. Supreme Court may say “April Fools!” when it comes to the first two major employment law decisions of 2011. Rather than create bright line tests, these cases seem to create more confusion than clarity – and most certainly, feel like the Court is throwing employers some major curve balls.

Court Finds Third Party Title VII Retaliation Claims Are Viable

In Thomspon v. North American Stainless, L.P. (PDF), Eric Thompson and his fiance, Miriam Regalado, both worked for North American Stainless.  Ms. Regalado filed a charge of sex discrimination against the company with the Equal Employment Opportunity Commission.  Mr. Thompson was fired three weeks later. Mr. Thompson claimed he was fired because of his fiance’s complaint.  North American Stainless said his termination was based on performance problems.  The district court granted summary judgment in favor of North American Stainless, finding that third party retaliation claims were not permitted by Title VII.  On appeal, the 6th Circuit Court of Appeals affirmed.  Certiorari was granted and oral argument took place on December 7, 2010.  On January 24, 2011, the U.S. Supreme Court, in a unanimous decision, held:

Title VII’s antiretaliation provision must be construed to cover a broad range of employer conduct. Burlington N. & S. F. R. Co. v. White, 548 U. S. 53 (2006). It prohibits any employer action that well might have dissuaded a reasonable worker from making or supporting a discrimination charge.  We think it obvious that a reasonable worker might be dissuaded from engaging in protected activity if she knew that her fiance would be fired.

The Court went on to state:

We must also decline to identify a fixed class of relationships for which third-party reprisals are unlawful. We expect that firing a close family member will almost always meet the Burlington standard, and inflicting a milder reprisal on a mere acquaintance will almost never do so, but beyond that we are reluctant to generalize.  As we explained in Burlington, 548 U.S. at 69, “the significance of any given act of retaliation will often depend upon the particular circumstances.”  Given the broad statutory text and the variety of workplace contexts in which retaliation may occur, Title VII’s antiretaliation provision is simply not reducible to a comprehensive set of clear rules.

Not only do retaliation claims generally pose the greatest risk to employers because of their amorphous nature, but now, companies are facing a brand new type of retaliation – one that arises from an employee who has a mere relationship with another employee who engaged in protected activity.  Prior to this case, the anti-retaliaton provisions of Title VII were simply held not to apply to third parties.  Now, the U.S. Supreme Court says that third party retaliation claims are viable, but provides little guidance as to the class of individuals that fall under protection.  As a result, expect more litigation on this issue to define just how far the anti-retaliation provisions may stretch.

‘Cat’s Paw’ Liability in Discrimination Cases Turns on Proximate Cause

There were high hopes that the Court’s decision in Staub v. Proctor Hospital (PDF) would resolve the split in circuits regarding the ‘cat’s paw’ theory of liability in employment discrimination cases.  I wrote about ‘cat’s paw’ liability generally, the oral argument that took place on November 2, 2010, and the various tests that have been applied by the circuit courts for the American Bar Association Labor and Employment Flash.  Although Staub involves the Uniformed Services Employment and Reemployment Rights Act (USERRA), its language is “very similar to Title VII,” in that employers are prohibited from engaging in certain actions if the employee’s protected status is a “motivating factor in the employer’s action.”  As such, this case has ramifications far beyond military service discrimination.  

On March 1, 2011, in an 8-0 decision written by Justice Scalia, the Court seemingly rejects the prior tests applied by the various circuit courts and instead, adopts a new formula for ‘cat’s paw’ liability based on the tort theory of proximate cause.  The Court held:

“if a supervisor performs an act motivated by antimilitary animus that is intended by the supervisor to cause an adverse employment action, and if that act is a proximate cause of the ultimate employment action, then the employer is liable under USERRA.”

As Jon Hyman points out in his blog, this case hinges on a new test involving fact-based inquiries regarding “intent” and “proximate cause,” which nearly guarantees that any case involving ‘cat’s paw’ liability will be difficult, if not impossible, to be resolved on summary judgment and will go to trial – an expensive proposition for employers.  My sense is that, had this case involved any other form of discrimination other than related to military service, we may have seen an entirely different result.          

Colorado, like many other states, has both a state employment discrimination agency, the Colorado Civil Rights Division (CCRD), and the federal Equal Employment Opportunity Commission (EEOC).  The state and federal agencies have a worksharing agreement in place that authorizes shared responsibilities in reviewing and investigating charges of discrimination. Practically speaking, this means that an employee may file a charge with either the CCRD or EEOC in Colorado, and often times, depending on the workloads, a charge may be passed from one agency to the other for investigation.

However, even though both agencies are empowered to investigate charges, on April 26, 2010, in Rodriquez v. Wet Ink LLC, the Tenth Circuit held that the EEOC must independently terminate its own jurisdiction before an employee has a right to sue in federal court.  

Case Facts:  Patricia Rodriguez filed charges of discrimination with the CCRD and EEOC, alleging that her supervisor discriminated against her based on her national origin, ancestry and gender, and that she was fired in retaliation for complaining about the discrimination. The CCRD investigated and found no cause for the national origin and retaliation claims, but found merit with the gender discrimination claim and referred the claim to mediation. Following an unsuccessful mediation, Ms. Rodriguez requested a right to sue notice from both the CCRD and EEOC. The CCRD issued its right to sue notice on November 25, 2007. The EEOC then issued its right to sue notice on January 29, 2008. Thereafter, Ms. Rodriguez filed suit in federal district court on April 25, 2008.

Because Ms. Rodriguez filed suit on April 25, 2008 – 5 months after receiving her CCRD right to sue notice, her employer moved to dismiss the case as being time barred. The district court agreed and dismissed the lawsuit. On appeal, the Tenth Circuit Court of Appeals reversed and let her Title VII claims proceed, holding that the state agency right to sue notice did not trigger the federal filing period because: (1) the worksharing agreement does not authorize the CCRD to issue right to sue notices on behalf of the EEOC; and (2) the CCRD notice did not trigger Title VII’s 90-day limitations period.  

Important Takeaway:  Employers should carefully scrutinize right to sue notices to ensure that the federal and/or state agencies have terminated their respective jurisdiction.  The deadline to file federal claims is triggered only when the EEOC expressly terminates its jurisdiction via an EEOC right to sue notice.  Likewise, an employee who receives a CCRD right to sue notice only has a right to file a lawsuit alleging state law claims (unless and until the EEOC issues its right to sue notice or its jurisdiction is otherwise terminated), and must do so within 90 days of receiving the notice.  

SnowDay.jpgI have received quite a few requests for inclement weather policies of late, and since the topic of “snow days” frequently arises this time of year, I wanted to provide some (hopefully) useful information for employers.  The question of whether an employer is obligated to pay employees for “snow days” depends largely on two questions:

  1. Is the employee exempt (salaried) or non-exempt (hourly)?
  2. Is the office open or closed? 

Is the Employee Exempt (Salaried) or Non-Exempt (Hourly)?

If an employee is exempt (i.e., employed in a bona fide executive, administrative, or professional capacity and paid on a salary basis of not less than $455 per week), then the general rule of thumb is that the employee must be paid his or her full salary for any week in which he or she performs any work, regardless of the number of days or hours worked.  Of course, there are certain exceptions to this general rule, including FMLA leave, the first or last weeks of employment, where no work is performed for an entire workweek, or, as discussed below, if the office is open and the exempt employee elects to not report to work for a full work day. 

If an employee is non-exempt (i.e., employed on an hourly basis and subject to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA)), the employee need not be paid for time not worked regardless of whether the office is open or closed. (Keep in mind that whether an employer is obligated under the law to pay and whether it should pay hourly employees to keep employees happy are separate issues).

Is the Office Open or Closed?

Next, the answer to the question of whether the office is open or closed, affects only exempt, salaried employees, as non-exempt, hourly employees need not be paid for time not worked.  If the office is open, but there is transportation difficulty, fear of driving in weather conditions, etc., causing an exempt employee to voluntarily elect not to come in at all, then the employer may deduct a “full day” absence from the employee’s salary. 

In the event the office is closed, meaning that the employer officially shut down operations due to inclement weather or other emergency and told folks to go home or not come in at all, the employer is still obligated to pay all exempt, salaried employees their full salary.  Simply put, no deductions can be made if exempt employees are “ready, willing and able to work,” but there just happens to be no work available. 

Finally, a couple of caveats:

  • Employers must always be mindful of the “full day” rule.  If an exempt, salaried employee is voluntarily absent from work for a partial day or for 1 1/2 days, the employer cannot deduct for any partial day absence and can only deduct for an actual “full day” missed.  Again, a “full day” deduction, however, is only permissible if the office is open and the employee voluntarily elects to stay home.  It is not proper to make a “full day” deduction if the office is officially closed, as the employee has no choice in the matter.
  • Likewise, while there is no prohibition on employers asking both exempt and non-exempt employees to use personal, sick or vacation time for missed hours or days due to a “snow day,” in no event should an exempt, salaried employee’s time be treated as unpaid when the office is officially closed (even if an employee has no accrued time off benefits). 

Example: Jane is a salaried employee.  ABC Company decides to officially close the office due to a blizzard and notifies all employees to either not come in at all or to leave early.  ABC Company’s policy is that employees must apply PTO time to the time missed, but Jane took a trip to Aruba recently and is currently out of accrued PTO time.  Even though she has no accrued time off, ABC Company still must pay Jane for the “snow day.”

The information above is in line with two opinion letters issued by the Department of Labor on the proper payment of wages under the FLSA when inclement weather occurs: Opinion Letter FLSA2005-41, October 24, 2005 and Opinion Letter FLSA2005-46, October 28, 2005.  Note that the DOL has announced that it will no longer issue Opinion Letters; however, existing Opinion Letters still serve as interpretative guidance absent a subsequent Administrative Interpretation providing otherwise.

Inclement Weather Policy

Lastly, should employers have an inclement weather policy in place?  YES.  Employees and management alike are well-served with a clearly drafted policy on how the company will compensate its employees for “snow days.”  Here is a sample inclement weather policy: Sample Policy.pdf with the footnote that it should be used as an example only.  Given the various nuances discussed above and with the FLSA generally, any inclement weather policy should be carefully drafted according to a company’s specific needs and reviewed by competent employment counsel before being adopted and distributed to employees.

ADAAA Image.jpgHR.BLR.com reported today that the Equal Employment Opportunity Commission (EEOC) has privately approved its final draft regulations under the ADA Amendments Act (ADAAA).  So, where does that leave us?  First, the Office of Management and Budget (OMB), a federal agency that must clear rules and regulations before they are published, will have 90 days to review the final regulations.  After OMB approval, the regulations will go public and be published in the Federal Register.  For employers, this means that the era of much uncertaintly surrounding the new ADAAA may soon be over.  

The ADAAA became effective on January 1, 2009.  It contains the first significant changes to the Americans with Disabilities Act (ADA) since 1990.  Information on the key changes under the new Act is detailed in the EEOC’s ADAAA Notice.  We have seen some key court decisions interpreting the new ADAAA (for example, Hoffman v. CareFirst of Fort Wayne, Inc., in which the U.S. District Court for the Northern District of Indiana found cancer in remission to be an ADAAA disability).  But, we’ve been awaiting the final regulations to help clarify many open questions as to the EEOC’s enforcement of the new ADAAA and to provide interpretative guidance.

Still, the proposed regulations have not been free of controversy.  One of the most controversial issues is the EEOC’s attempt to impose a list of ‘per se’ disabilities, that neither the ADAAA provides, nor was expressly authorized by Congress for the EEOC to create, including: 

  1. Deafness
  2. Blindness
  3. Intellectual disability (formerly known as mental retardation)
  4. Partially or completely missing limbs
  5. Mobility impairments requiring use of a wheelchair (a mitigating measure)
  6. Autism
  7. Cancer
  8. Cerebral palsy
  9. Diabetes
  10. Epilepsy
  11. HIV/AIDS
  12. Multiple sclerosis
  13. Muscular dystrophy
  14. Major depression
  15. Bipolar disorder
  16. Post-traumatic stress disorder
  17. Obsessive-compulsive disorder
  18. Schizophrenia

Does this non-exhaustive list of ‘categorical’ disabilities remain in the final regulations?  What about the other issues of controversy (e.g., elimination of ‘condition, manner or duration’ analysis)?  Check back on my blog for updates – I will keep you posted on new developments with the ADAAA. 

Happy New Year!  I know I am more than happy to say goodbye to 2010, am looking forward to all the possibilities of 2011, and hope that anyone taking the time to read my blog is also off to a good start this new year.

On this First Monday of 2011, Colorado employers take note:

  1. The new Colorado minimum wage increased to $7.36 per hour effective January 1, 2011 (with tipped employees at $4.34/hour) – a $0.12 increase from the last change to Colorado’s minimum wage as of January 1, 2010 ($7.24) and $0.11 more than the federal minimum wage effective July 24, 2009 ($7.25).  When both the federal Fair Labor Standards Act and a state law apply, the higher standard must be observed.  Ergo, Colorado employers must ensure all non-exempt, hourly employees are making at least $7.36 per hour as of the start of 2011. 
  2. The Payroll Tax Holiday of 2011 begins.  This is part of the new tax deal that Congress and President Obama put through in December to extend Bush-era tax cuts through 2012.  In addition to extending unemployment benefits, the new deal provides that employee side payroll tax contributions for Social Security taxes will be reduced by 2% (up to $106,800).  So, instead of seeing withholdings of 6.2% of wages for Social Security, employees should see more money in their paychecks with a lesser withholding of only 4.2% (employers still have to pay their 6.2%).  TaxGirl explains this change nicely on her blog.
  3. The Colorado Supreme Court did not issue any opinions this First Monday of 2011, but denied certioriari in 29 cases (PDF). 
  4. Ellen Golombek is named the new Executive Director of the Colorado Department of Labor and Employment under Governor-Elect John Hickenlooper.  Golomobek is the former (and first woman to serve as) President of the Colorado AFL-CIO, a former Government Affairs Assistant with the Service Employees International Union, and most recently, served as the Colorado State Director for America Votes, a voter-rights organization.  As exemplified by Senate Minority Leader Mike Kopp’s comments:

“Governor-elect Hickenlooper’s appointment to the Department of Labor may certainly take some of the air out of the bipartisan atmosphere he has promised to promote as Governor. His selection of a noted progressive activist and union boss in Ms. Golombek certainly will raise plenty of eyebrows in Colorado’s business community. And for good reason.”

this appointment is proving to be rather controversial.

On November 17, 2010, the Cloture Motion to proceed with the Paycheck Fairness Act in the Senate failed 58-41.  In other words, a petition for cloture (or, a request to proceed with limited debate on the legislation) was before the Senate regarding the Paycheck Fairness Act.  To proceed, a petition for cloture requires a 2/3 majority, or 60 senators voting in favor.  With a vote of 58-41, the motion failed.

The St. Louis Post was one of the first news agencies to report the failure of the vote this morning.  The results of the roll call vote have also been posted on the U.S. Senate website.

The Paycheck Fairness Act is a significant piece of employment legislation that, if passed, would allow for the unlimited recovery of compensatory and punitive damages under the Equal Pay Act, increase the likelihood of class action lawsuits by making workers automatically part of a class unless they opt out, and would amend the “any factor other than sex” affirmative defense for employers.  The Act has garnered support from civil rights groups and the Obama admininstration, and opposition by the business community. 

On October 28, 2010, in Carruthers v. Carrier Access Corporation, the Colorado Court of Appeals affirmed a district court’s discretionary award of attorney fees in favor of a prevailing employer in a Colorado Wage Act case.  This is a significant ruling interpreting the 2007 amendments to the Colorado Wage Act, C.R.S. 8-4-101 et seq. (PDF).

When the Colorado Wage Act was amended in 2007, it imposed greater penalties against employers for the non-payment of wages and provided that attorney fee awards were to be discretionary when they were previously mandatory.  Many (myself included) believed that the attorney fee amendments would be interpreted similar to the standard for attorney fee awards under Title VII of the Civil Rights Act of 1964, such that prevailing employees would generally be awarded attorney fees, but prevailing employers could only get them if the employee’s claim was frivolous.  This belief was due, in large part, to the legislative declaration for the amendments which provides:

Section 1. Legislative declaration. (1) The General Assembly hereby finds, determines, and declares that the wage claim statute should be amended to create greater incentives for employers to promptly pay wages and other compensation owed to current and former employees.

(2) The General Assembly intends the change to a discretionary standard for awards of attorney fees and costs to be interpreted consistently with the courts’ interpretation of the attorney fee provisions in the federal Civil Rights Act of 1964, 42 U.S.C. sec. 2000e…

However, the Colorado Court of Appeals in Carruthers first noted that the statute is clear and unambiguous as it states that a court “may” award costs and attorney fees to a prevailing employer or employee.  As such, no review of extrinsic evidence is required to find that an attorney fee award under the Colorado Wage Act is discretionary as to both parties.  Nonetheless, the Court of Appeals performed a legislative history analysis, and noted the revisions to another section of the declaration, Section 3:

(3) Attorney fees awarded against an employee are not intended to impose an excessive financial hardship.

According to the Court of Appeals, the revisions to Section 3 helped to clarify that while there is an intent to treat prevailing employees as presumptively entitled to attorney fee awards and that awards of fees against unsuccessful employees should not impose excessive financial hardship, there is no intent to limit attorney fee awards to prevailing employers only in cases involving frivolous claims.  The Colorado Court of Appeals also noted that no witness at the legislative hearings testified that an employer could only be awarded attorney fees if the employee’s claim was frivolous, and further distinguished wage claims from discrimination claims by explaining that an employee in a discrimination case is acting as a “private attorney general” versus an employee in a wage case who is seeking to recover earned wages or compensation similar to a private contractual claim.

Finally, the Colorado Court of Appeals provided a guideline of factors for courts to consider when awarding discretionary attorney fees to prevailing employers under the Colorado Wage Act:

  1. The scope and history of the litigation;
  2. The ability of the employee to pay an award of fees;
  3. The relative hardship to the employee of an award of fees;
  4. The ability of the employee to absorb the fees it incurred;
  5. Whether an award of fees will deter others from acting in similar circumstances;
  6. The relative merits of the parties’ respective positions in the litigation;
  7. Whether the employee’s claim was frivolous, objectively unreasonable, or groundless;
  8. Whether the employee acted in bad faith;
  9. Whether the unsuccessful claim was based on a good faith attempt to resolve a significant legal question under the Wage Act; and
  10. The significance of the claim under the Wage Act in relation to the entire litigation.

The underlying facts for this case involve the plaintiff, Philip Carruthers, who sued his former employer, Carrier Access Corporation, for $210,000 in unpaid commissions that neither the judge nor the jury found to be supported by the evidence.  After a hearing on attorneys’ fees, the trial court awarded Carrier $94,798.92 in defense fees, which was later reduced to $34,000.  Although the Court of Appeals affirmed an attorneys’ fee award in favor of Carrier, it vacated the $34,000 award and remanded the case back to the district court to issue factual findings in support of a reasonable amount of Carrier’s fees incurred in defending the wage claim.

Bottom Line: This is a favorable case for companies defending wage claims greater than $7,500 as it allows a discretionary attorney fee award under the Colorado Wage Act – a law that otherwise carries with it a big hammer against employers.

Earlier this year, the Obama Administration was heavily criticized for its rush to judgment against Shirley Sherrod, the then-Secretary of Agriculture.  After allegations of racist remarks at an NAACP meeting in Georgia, the Administration demanded her immediate resignation.  Only problem — the video showing the alleged racist statements had been edited.  If only the decisionmakers had paused, took a breath, and put in motion an investigation before pulling the trigger.  This knee-jerk reaction by employers in the wake of allegations of wrongdoing is not uncommon.  But, a recent case out of the Third Circuit exemplifies just how the right amount of patience and dedication to conducting a full and fair investigation can lead to an employer victory in court. 

University of Pittsburgh.jpgIn Wood v. University of Pittsburgh (PDF), Deborah Wood was employed as a systems analyst in the University of Pittsburgh’s National Surgical Adjuvant Breast & Bowel Project Biostatistical Center.  Ms. Wood was the only female employee and the only African American employee out of the 6 employees in her group.  After she was laid off as part of a reduction in force, she sued for gender discrimination, hostile work environment and retaliation, based not only on the loss of her job, but also her belief that she was being targeted in the workplace due to her race and gender.  Her allegations are somewhat unbelievable – Ms. Wood claimed that someone was tampering with her computer (icons were removed, she “lost control” of her mouse and keyboard, the number “666” appeared “thousands of times,” etc.) and her office had been broken into over and over again.  Still, each time she complained, the University took her complaints seriously and investigated.  Over a 2 year period, the University:

  • Put a lock on her office;
  • Purchased and installed software to monitor her computer;
  • Reviewed computer logs;
  • Provided her with a new computer;
  • Conducted a forensic inspection of her computer; and
  • Had the university police investigate.

At the end of the day, no evidence of inappropriate or unlawful activity was unearthed and Ms. Wood was eventually terminated as part of a RIF.  On appeal, the Third Circuit Court of Appeals affirmed the District Court’s grant of summary judgment in favor of the University, stating that the “University employees went to extraordinary lengths of investigate Wood’s tampering allegations and there is simply no evidence to suggest that any aspect of their inquiry was influenced by [unlawful] bias.” 

Unfortunately, too often employers either rush to call foul on the complaining employee or, as in the case of Sherrod, take immediate adverse action against the accused wrongdoer without having all the facts.  The University of Pittsburgh could have easily disregarded Ms. Wood’s complaints as incredulous, but it took allegations of wrongdoing in the workplace seriously and exemplified extreme patience through many investigative steps.  This case is a good example of how not to rush to judgment, and how patience and a full and fair investigation can prevail in the end.