Labor and Employment Update - Spring 2007

THE POTENTIAL DANGERS OF STEREOTYPING PARENT EMPLOYEES

Many employers are not aware of Family Responsibilities Discrimination (“FRD”) claims. But with FRD claims increasing, employers are starting to take notice. So what is FRD? FRD claims are brought by parents and other workers with family responsibilities who feel they have been discriminated against. Such claims have also been called “maternal wall” claims. Last year, the Center for Work Life Law at the University of California Hastings College of Law issued a report entitled “Litigating the Maternal Wall: U.S. Lawsuits Charging Discrimination against Workers with Family Responsibilities” (the “Work Life Law Report”). The Work Life Law Report includes some alarming statistics. Moreover, the Equal Employment Opportunity Commission also recently held a hearing on FRD, bringing the issue further attention.

The Work Life Law Report found that while the number of employment discrimination cases in general has been decreasing, the number of cases alleging FRD has increased dramatically—nearly 400% from 1996 to 2005. Moreover, the success rates for employees bringing FRD cases is greater than the success rates for general discrimination cases. Plus, the majority of those cases where the employee was successful resulted in an award of more than $100,000.00.

Who is bringing these FRD claims? Not surprisingly, the vast majority of plaintiffs are women, although men also bring FRD claims. According to the Work Life Law Report, only 38% of the plaintiffs bringing FRD claims are professionals, with 62% of the plaintiffs being non-professionals. Employers in all industries can be sued for FRD, but the largest number of FRD claims are found in the service industry and public administration industry. In addition, the Work Life Law Report found that small local businesses were more likely to be sued for FRD than large companies. Of those larger companies sued for discriminating against workers with family responsibilities, nearly 30 have been designated as “Best Companies to Work For” by Working Mother magazine or have been included in Fortune magazine’s “Most Admired” list as amongst the best in the nation for their treatment of employees.

FRD claims are extremely fact-specific and can be brought under numerous federal and state statutes and legal theories, including Title VII (the federal statute prohibiting sex discrimination in employment), the Family and Medical Leave Act (“FMLA”), the Americans with Disabilities Act (“ADA”), the Equal Pay Act (“EPA”) and Employee Retirement Income Security Act (“ERISA”). These claims often emanate from comments or remarks that reveal discriminatory stereotypes about the role of careers and motherhood. Claims also arise indirectly from policies, such as last-minute travel and long hours, that have the result of eliminating parents with primary caregiver responsibilities from consideration. In one case, the court ruled that the employer’s assumption that a female employee with small children would not be interested in a promotion because it would require her to travel or relocate was discriminatory. In another case, the denial of tenure to a school psychologist and a mother of young children because it was “not possible for her to be a good mother and have this job” was found to be potentially discriminatory, permitting the case to go to trial.

With the EEOC and others taking notice of FRD, employers must take notice as well. Employers must be aware that it is impermissible to consider an employee’s status as a parent or caregiver in making employment decisions. Employers should also re-examine their policies to make sure they are not based on stereotypes and that they do not have a disparate impact on employees with young children.

PRESERVING HOME COURT ADVANTAGE

Does an employer have a right to sue any of its employees with whom they have an employment agreement in its state of incorporation regardless of where the employee lives and works? The answer is “maybe.” In fact, a business’s contacts with a state, such as where it is incorporated, headquartered or where it has substantial operations, may not be sufficient to ensure the case is litigated in the employer’s choice of forum. Non-resident employees may not have sufficient contacts with Pennsylvania so that jurisdiction and venue over them are proper. Similarly, a Pennsylvania business may not be able to sue any party with whom it contracts if that party does not have the requisite contacts with Pennsylvania. A mandatory forum selection clause, combined with a choice of law clause, inserted in your contracts, will help you, the employer, preserve home court advantage.

Ordinarily, for a court to exercise personal jurisdiction over a non-resident defendant, the U.S. Constitution requires that the defendant have minimum contacts with the forum state. Personal jurisdiction may be asserted over non-resident defendants, even if they are not physically present in the state, if the nature and quality of defendants’ activities (or contacts) are such that it would be fair and reasonable to require them to defend themselves in that state. However, even with the requisite contacts, venue in Pennsylvania may not be appropriate.

Venue is defined as the place in which a particular action is to be brought and determined. Recently, a federal court in Pennsylvania held that although it had jurisdiction over the person, it was not the appropriate venue, and it transferred the case. In Pulse Technologies, Inc. v. Dodrill, the plaintiff, a Pennsylvania business, sued an Oregon-based employee for breach of the non-compete clause in his employment contract. The employee did not execute his employment contract in Pennsylvania, and only on rare occasion worked in Pennsylvania. Nonetheless, the court established jurisdiction over him because he interviewed in Pennsylvania, negotiated terms of his contract in Pennsylvania, visited Pennsylvania to conduct company business and maintained regular contacts with other Pennsylvania employees. The court held that it did not have venue over the employee because Pennsylvania was not the state where the breach of the non-compete clause occurred. The case was transferred to federal district court in Oregon.

Pulse Technologies may have had a different result had the employer taken precautions to ensure that it had jurisdiction and venue in Pennsylvania over its out-of-state employees. With a mandatory forum selection and choice of law clause incorporated into its employment agreement, an employer can substantially increase its odds that its case will be heard in Pennsylvania.

In Pennsylvania, forum selection clauses are presumptively valid, and are only set aside if the party contesting the clause makes a strong showing that the clause is unreasonable, unjust or invalid because of fraud or overreaching. This is a very high burden because the person opposing the clause must prove that if the court enforces the clause he or she effectively would be deprived of his or her day in court. It is extremely difficult to meet this burden because factors of distance, inconvenience and expense have little relevance on the enforceability of the clause. Furthermore, forum selection clauses may be upheld even in contracts that use standard/boiler-plate language.

Mandatory forum selection clauses have several key characteristics. Forum selection clauses must use mandatory language that provides Pennsylvania courts with exclusive jurisdiction for all claims related to the contract. A choice of law clause establishes that a certain jurisdiction’s laws must be used to determine any dispute or ambiguity created in a contract. Including a choice-of-law provision for the same jurisdiction named in the forum selection clause helps establish the party’s intent to have a particular state hear any dispute.

In conclusion, the most comprehensive forum selection and choice of law clause will state that (1) the parties agree that a substantial portion of the negotiations for the contract occurred in Pennsylvania and jurisdiction is appropriate only in Pennsylvania; (2) the parties waive any objection to jurisdiction or venue to any action brought in Pennsylvania; (3) all causes of action must (or shall) be brought in Pennsylvania; (4) venue is appropriate in a particular district within Pennsylvania; and (5) the parties agree that Pennsylvania law governs the agreement between the parties. Combining a mandatory forum selection clause with a choice of law clause will increase your chances of maintaining a suit in Pennsylvania.

OVERTIME CALCULATIONS

The Fair Labor Standards Act (“FLSA”) provides that every non-exempt employee who works over 40 hours in any given week is entitled to overtime payment for each additional hour worked (“Additional Hour(s)”). It requires employers to pay every non-exempt employee one and one-half times an employee’s regular rate for every Additional Hour worked by the employee.

Wal-Mart settled an FLSA suit for $33 million because of its improper treatment of incentives and other premium payments in the calculation of employees’ overtime pay.

In light of the fact that there are employers out there who are miscalculating overtime payments, even though the FLSA method of computations seems relatively easy to follow, we review the computation of overtime payment rules below.

In computing overtime under the FLSA, the rate that is relevant is the “regular rate” of a particular non-exempt employee in any given week. A non-exempt employee’s hourly rate may be completely different from his/her regular rate. The regular rate is calculated based on certain key factors.

The two key factors that are essential to the computation of a non-exempt employee’s regular rate are the total hours worked by that employee in any given week and that employee’s weekly wage. An employee’s weekly wage must also include any non-discretionary payments made by the employer. Discretionary payments are not included in the computation of an employee’s regular rate.

Non-discretionary payments are generally payments that are designed to facilitate productivity of an employee or act as an incentive to stay with the employer. Non-discretionary payments include, but are not limited to attendance/production bonuses, commissions, or shift differentials.

Discretionary payments include discretionary bonuses, gifts, contributions to certain welfare plans, payments made to certain profit sharing and savings plans, and pay for foregoing holidays and vacations.

To illustrate by way of example, a non-exempt employee, Smith, is paid an hourly wage of $15. Additionally, Smith is paid an attendance bonus of $200 per week. This bonus is non-discretionary and is paid to every employee who attends work for all 5 days. Smith is also paid a discretionary bonus based on performance evaluation. In the first week of March, Smith also received a discretionary bonus of $50. In week one of March 2007, Smith works all 5 days of that week for a total of 48 hours. Since Smith has worked for 8 hours above the required 40 hours Smith’s employer will have to pay him overtime for 8 hours.

To calculate Smith’s overtime and total weekly earnings, the employer will use the following calculations:

Regular Rate:

Smith’s weekly wage = total hours worked in the week x hourly rate = 48 x 15 = $720.

Smith’s weekly wage + non-discretionary bonus= $720 + $200 = $920 (“Weekly Total”).

Smith’s regular rate = Weekly Total ¸ total hours worked = $920 ¸ 48 = $19.1.

Overtime rate base on of regular rate:

Smith’s overtime rate = time and one half of the regular rate = $19.1 +(19.1 ¸ 2) = $28.65

Smith’s total over time and total earnings for the week:

Smith’s total earnings for the first 40 hours = 40 x regular rate = 40 x 19.1 = $764

Smith’s total overtime earnings = Additional Hours x overtime rate = 8 x 28.65 = $229.2.

Smith’s total earnings for first week of March =
  total earnings for first 40 hours + total overtime payment = $764 + $229.2 = $993.2.

Note that the discretionary bonus of $50 was not included in the calculation of the regular rate.

To conclude, it is important to keep in mind that an employee’s hourly rate is separate and distinct from an employee’s regular rate. Only the proper computation of the regular rate will lead to the accurate computation of an employee’s total weekly earnings.

The Labor and Employment Group represents and counsels employers in all aspects of the employment relationship, including EEO litigation, union avoidance, negotiations, arbitrations, executive compensation, corporate transactions, and non-competition/non-solicitation agreements, as well as compliance with federal and state laws such as the Family and Medical Leave Act, the Americans with Disabilities Act, the Health Insurance Portability and Accountability Act, the Fair Labor Standards Act and the Occupational Safety and Health Act. This document is published for the purpose of informing clients and friends of Klehr Harrison about developments in the areas of labor, employment and benefits, and should not be construed as providing legal advice on any specific matter. For more information about this publication or Klehr Harrison, contact Charles A. Ercole, Chair of the Labor and Employment Group, at (215) 569-4282 or visit the firm’s Web site at www.klehr.com

 ©Klehr Harrison Harvey Branzburg LLP 2007. All rights reserved.