Labor and Employment Update - Fall 2012

CAN COMPANIES AGREE NOT TO POACH EACH OTHER’S EMPLOYEES?

The Department of Justice’s position is that anti-poaching agreements can expose companies to antitrust liability. Whether such agreements also violate certain states’ laws is less clear. In mid-November, the Justice Department and the State of California filed a civil antitrust lawsuit against eBay, alleging that eBay and Intuit entered into an illegal “handshake” agreement whereby eBay would not recruit Intuit’s employees.           

The Justice Department alleges that the agreement was in effect from 2006 to 2009 and arose when Scott Cook, Intuit’s founder, was serving on eBay’s board and complained to eBay’s then-CEO, Meg Whitman, that eBay was recruiting Intuit employees. In order to avoid a potentially awkward situation where eBay might recruit employees away from Intuit while Cook was serving on eBay’s board, eBay’s recruiting staff was instructed to discard résumés from Intuit employees. The policy applied to all positions, from marketing to engineering. 

The Justice Department and the California Attorney General claim that the agreement deprived workers access to better job opportunities by eliminating competition. eBay’s stance is that the policy was applied so broadly that applicants had abundant opportunity to seek employment elsewhere. However, while the Justice Department used to focus on whether these “anti-poaching” policies actually impacted the market, the Justice Department changed its position in 2009 to assume that all such policies automatically impact the market and are thus illegal.        

This is not the first time the DOJ has filed an anti-trust suit against a high-profile Silicon Valley company arising out of anti-poaching agreements. In 2010, the Justice Department settled its suit against Adobe, Apple, Google, Intel, Intuit, and Pixar. However, in that case, the concern was over individuals in the high technology sector with advanced or specialized skills, given the high demand for those employees. There, the companies had agreements not to recruit employees from each other. Generally, the companies agreed not to “cold-call” each other’s employees. Cold-calling is a common method of recruitment in the technology industry. The suit was settled in September 2010 and the six defendant companies signed settlement agreements with the federal government not to enter into such agreements in the future. 

Interestingly, the agreement between Apple and Google at issue in the 2010 case also arose from a potentially awkward situation on the board of directors. There, Apple’s Steve Jobs asked Eric Schmidt, then Google’s CEO, to cease efforts to recruit an Apple engineer in 2007. At the time, Schmidt was serving on Apple’s board. 

“Anti-poaching” agreements not only expose a company to suit brought by the federal government, but also to potential lawsuits brought by employees. In January 2012, employees of Adobe, Apple, Google, Intel, Intuit, Pixar, and Lucasfilm filed suit in federal court in California alleging that the agreements kept the employees’ salaries low by stifling competition in the market. The basis of many of the allegations arise from emails obtained by the Justice Department in the 2010 suit.

At this point it is unclear what impact these cases have outside of the fiercely competitive and specialized Silicon Valley companies. However, the Justice Department’s position that all anti-poaching agreements impact the market and are therefore illegal indicates that the Justice Department intends to use its powers to protect employees. Furthermore, these agreements could expose employers to civil liability to employees for depressing salaries through anti-competitive practices. Before entering into such an agreement with a competitor, employers should consult counsel and consider all the potential ramifications.

THE EEOC’S STRATEGIC ENFORCEMENT PLAN: WHAT IT MEANS FOR EMPLOYERS DURING THE NEXT FOUR YEARS 

Who is the EEOC?

The U.S. Equal Employment Opportunity Commission (“EEOC”) is a bipartisan agency composed of five members who are appointed by the President and confirmed by the Senate. It is responsible for enforcing Title VII of the Civil Rights Act of 1964 (“Title VII”), the Age Discrimination in Employment Act of 1967 (“ADEA”), the Equal Pay Act of 1963 (“EPA”), Section 501 of the Rehabilitation Act of 1973, Titles I and V of the Americans with Disabilities Act of 1990 (“ADA”), and Title II of the Genetic Information Nondiscrimination Act of 2008 (“GINA”). The EEOC has jurisdiction to enforce such laws in both the private and public sectors, and Congress has granted it the power to “prevent any person from engaging in any unlawful employment practice.” The EEOC’s General Counsel (also appointed by the President and confirmed by the Senate) is responsible for the conduct of litigation pursuant to the agency’s statutory authority and has authority to litigate cases against private and public employers to enforce the federal equal employment opportunity laws.

What is the EEOC’s Strategic Enforcement Plan?

On September 4, 2012, the EEOC issued a draft of its Strategic Enforcement Plan (“SEP”) for fiscal years 2012-2016. While the final Plan won’t be released until sometime in November or December, this draft, which was approved for public release, gives employers a “heads up” as to what enforcement areas the EEOC will focus on during the next four years. 

According to the SEP, the EEOC is reaffirming the approach and principles of the Systemic Task Force, which it unanimously adopted in 2006 and which established a nationwide systemic program as a top priority. The EEOC defines “systemic” cases as pattern or practice, policy, and/or class cases where the alleged discrimination has a broad impact on an industry, occupation, business, or geographic area.

The SEP identified five nationwide priorities that the EEOC will focus on during the next four years:

Eliminating Systemic Barriers in Recruitment and Hiring – exclusionary policies and practices; the channeling/steering of individuals into specific jobs due to their status in a particular group; restrictive application processes; and the use of screening tools (e.g., pre-employment tests, background screens, date of birth screens, use of arrest and conviction records) that adversely impact protected groups.

Protecting Immigrant, Migrant and Other Vulnerable Workers – disparate pay, job segregation, harassment, trafficking and discriminatory language policies affecting such vulnerable workers who may be unaware of their rights under the equal employment laws, or who may be reluctant or unable to exercise such rights.

Addressing Emerging Issues – ADA Amendments Act issues (including coverage and proper application of defenses); LGBT coverage under Title VII sex discrimination provisions; and accommodating pregnancy (women who have been forced into unpaid leave after being denied accommodations provided to similarly situated employees).

Preserving Access to the Legal System – policies and practices intended to discourage or prohibit individuals from exercising their rights under employment discrimination statutes, or which impeded the EEOC’s investigative or enforcement efforts (e.g. retaliatory actions; overly broad waivers; settlement provisions that prohibit filing charges with the EEOC or providing information in EEOC or other legal proceedings; failure to retain records required by EEOC regulations)

Combating Harassment –workplace harassment on the basis of race, color, sex, ethnicity, age, disability and religion. 

The EEOC plans to give “priority” status to charges which raise any of the above identified issues. Charges that are deemed meritorious and which raise such priority issues will receive increased investigatory attention and resources. Furthermore, such charges will be given priority with regard to litigation recommendations and selection over non-priority issue cases. 

How will the SEP impact Employers?

Based on the SEP, it is clear that the EEOC will continue its aggressive enforcement and that it will focus its investigations and litigation efforts on cases involving discrimination in the areas of recruitment/hiring as well as policies and procedures that negatively impact classes such as immigrant/migrant workers and women. Employers can expect to see more requests from the EEOC for additional information and documentation pertaining to overall recruitment and hiring practices. Furthermore, based on the EEOC’s continued focus on systemic discrimination, employers can expect to see requests for statistical information which are far broader than would be expected for a single employee case.  

In addition to the impacts of such “systemic” investigation, the EEOC has also clearly identified the enforcement areas that it intends to focus on during the next four years. As a practical matter, human resources personnel should immediately educate themselves on the enforcement areas outlined by the SEP, and begin reviewing company policies and procedures to ensure compliance with the relevant federal equal employment laws. Specifically, hiring policies and procedures should be examined to ensure that any testing or background screening is valid and relevant to the position. Additionally, leave policies and procedures should be examined to ensure that there is no disparate impact on pregnant women as compared to other similarly situated employees. Finally, employers should consult counsel to ensure all company policies and procedures are up to date and conform with the federal equal employment laws and EEOC guidelines.

ARE EMPLOYERS REQUIRED TO PAY EMPLOYEES FOR TIME NOT WORKED DUE TO AN OFFICE CLOSURE?

In the aftermath of Hurricane Sandy and with predictions for a harsh winter on the East Coast, employers are asking if they must pay employees for time the employees are not able to work because the office is closed. A company’s obligations to pay an employee in this situation depend upon whether the employee is exempt or nonexempt under the Fair Labor Standards Act.

Typically, exempt employees earn their salaries without regard to the number of hours worked in a workweek. Under the FLSA, if an exempt employee works any portion of a workweek and does not work the remainder because the office is closed, the employer may not deduct from his/her pay for the hours/days not worked as a result. While this may be so, the employer legally can count the days not worked as vacation days. Also, if an exempt employee does not work at all in a workweek, the employer is not required to pay him/her for that entire week. 

An employer’s obligations with its nonexempt employees are different. Nonexempt employees, generally, are paid an hourly rate only for the hours they work. Accordingly, an employer is not obligated to pay those employees for hours when the office has been closed and they have not worked.

While the above describes an employer’s obligations under the FLSA, each employer should consider more than the legal ramifications of a decision not to pay employees. Docking the pay of an employee who is dealing with a power outage at his/her home or damage from a devastating storm or who is willing to but cannot work because the office is closed may adversely and materially impact employee morale and may not be worth the monetary savings. Whether a company pays such an employee for time it need not pay under the FLSA is a business decision that should be made only after evaluating both the tangible and intangible impacts. 

Lee D. Moylan
lmoylan@klehr.com

LESSONS LEARNED BY THE TIP POOLING PRACTICE AT STARBUCKS

Recently, the United States Court of Appeals in the First Circuit (a Massachusetts appellate court), affirmed a $7.5 million damages award to a class of Starbucks baristas. Starbucks was found liable for having violated the Massachusetts Tips Act. Matamoros, et al.v. Starbucks Corp.  The Tips Act provides that employers in the restaurant industry may not require “wait staff” employees to share their tips with anyone who is not a “wait staff employee.” Plaintiffs sued Starbucks under this provision because Starbucks had required its wait staff employees to share their tips with not only other wait staff employees, but also shift supervisors. At issue in this case was whether the “shift supervisors” at Starbucks are “wait staff” employees. In light of the statutory wording and the duties and responsibilities the shift supervisors had, the court held that, unequivocally, the shift supervisors are not. Notably, the Tips Act defined “wait staff employees” as those who have no managerial responsibility. Even though Starbucks’ shift supervisors performed “wait staff employee duties” up to 90 percent of the time they worked, those supervisors were in charge of opening and closing the stores, handling and accounting for cash, and generally “run[ning] the shifts” of the baristas. These duties, the court found, are managerial, however slight. 

While the Starbucks case pertained to and turned on the provisions of one particular state’s statute, employers in the restaurant industry in states other than in Massachusetts should take note of it. First, states like New York and California have similar statutes restricting who may participate in tip pooling. Second, even when a state in which an employer operates does not have a similar statute, there are still other federal and state laws and regulations with which that employer must comply with regards to its tipping policies. For example, the FLSA allows employers to require the pooling of tips only when they are shared with fellow “tipped employees” (as that term is defined by the FLSA) and only in an amount that is “customary and reasonable.” Finally, the Starbucks case demonstrates that noncompliance with these laws can lead to massive damage awards. Employers in the restaurant industry should periodically ensure that their tip sharing and pooling policies still comply with all applicable state and federal laws.      

Lee D. Moylan
lmoylan@klehr.com