Finally - A Little Good News From the Supreme
Court for Employers
Daniel A. Kaplan
The decisions from the United States Supreme Court have
been less than friendly to employers during the past several years. The
expansion of retaliation claims and what may support such claims are a prime
example. However, this past week, the Supreme Court issued a decision in Fox
v. Vice, U.S. No. 10-114 (June 6, 2011) recognizing a defendant's
right to recover fees and costs for a frivolous claim even where the plaintiff
also has asserted a non-frivolous claim.
The Court resolved a split among the federal appellate
courts on how (and whether) to allocate attorneys' fee awards when a civil
rights case involves claims with arguable merit and claims with absolutely no
merit whatsoever. The latter claims are commonly known as "frivolous claims."
Most employers recognize that even when they are
successful in defending against civil rights litigation (claims of
discrimination), they have had to expend a great deal of money for that
"honor." They also recognize that this money is rarely, if ever, recoverable -
it becomes a cost of doing business - and sometimes a very hefty cost. This is
because in most discrimination cases, attorneys' fees and costs are recoverable
only by a successful employee. Successful employers cannot recover their fees
and costs unless the claim is frivolous, and even then, when an employee made
both a frivolous and a non-frivolous claim, the employer could not recover in
some courts. That is no longer the case.
Court Justice Elena Kagan wrote for a unanimous Court that when an
employee's suit involves both frivolous and non-frivolous claims, a court may
award the employer the costs and fees incurred in defending against the
frivolous claim. This is great news, but it is not without some limitations.
According to the Court, the amount of fees and costs recoverable cannot extend
beyond those that are reasonable and were otherwise incurred because of the
frivolous claim - that is, only those reasonable fees and costs that would not
have been incurred but for the frivolous claim are recoverable.
In an age when victories for employers in an increasingly
litigious society come at large costs, even a small return is better than none
New Regulations Could Put an End to
Bonus Payments for Fixed-Salary, Fluctuating Workweek Employees
The fixed-salary, fluctuating workweek method of payment
has become an attractive option to many employers. The model permits employers
to pay non-exempt employees at one-half of their regular rate of pay for any
hours worked over 40 in a week, instead of at time and one-half that they would
otherwise would have to pay. The "regular rate" is determined by dividing the
employee's weekly salary by the total number of hours worked in the week.
Because an employee's hours vary from week to week, so does the "regular rate."
Although an employee's overtime rate decreases with each hour worked, the
fluctuating workweek provides predictability for both the employer and
However, recent action by the Wage and Hour Division of the
U.S. Department of Labor (Division) calls into question whether this model
can work for employers who also pay their employees bonuses. In comments to the
final rule issued by the Division clearing up issues in the
regulations relating to various wage-hour issues, the Division rejected
language regarding the fluctuating workweek method of payment that would have
stated that, in addition to the fixed salary, an employee also could be paid
bonuses without invalidating the fluctuating workweek pay method.
The Division stated that "bonus and premium payments ...
are incompatible with the fluctuating workweek method of computing overtime"
and, while it acknowledged that bonus payments benefit employees, the Division
concluded that the proposed clarifying language "could have had the unintended
effect of permitting employers to pay a greatly reduced fixed salary and shift
a large portion of the employees' compensation into bonus and premium
payments." This unintended effect, according to the Division, could have
resulted in a "wide disparity in weekly pay that the fluctuating workweek
method was intended to avoid."
Division's position may render the fluctuating workweek model invalid for
employers who also pay bonuses or other premiums. Under the Division's
interpretation, payment of such bonus or premium amounts would eliminate an
employer's ability to use the fluctuating workweek method, meaning the employer
will have to calculate the overtime rate based on 40 hours and a
time-and-one-half overtime rate. The revised regulations took effect on May 5,
2011. Until this issue is clarified by the courts or by the Division, employers
should refrain from paying bonuses to employees paid according to the
fluctuating workweek model.