Foley & Lardner Labor and Employment Law Weekly Update (Week of July 18, 2011)

Foley & Lardner Labor and Employment Law Weekly Update (Week of July 18, 2011)

Serving Two Masters Can Trigger Overtime Claims

By Gregory W. McClune

While it has been said that "no one can serve two masters," in our modern society many people work for two or more employers at the same time. This multiple employment can have significant consequences under state and federal wage and hour laws and other areas. Thus, without realizing it, under the Fair Labor Standards Act (http://tinyurl.com/kvq99x), an employer may become liable financially for the unpaid or underpaid wages of an employee, or for a discrimination claim brought by an employee under Title VII (http://tinyurl.com/yl7jjbb) because of the employee's connections to a second or third employer.

In managing their employment risks, employers should be aware of the joint employment doctrine, which says that two or more related companies may - independently and together - be liable for the total hours of an employee who works for both of them. Thus, the hours of an employee who works at multiple, related employers may be aggregated and, thereby, exceed daily or weekly overtime thresholds. This can mean not only that the companies have joint liability for employment claims, but also that liability could be created that would not exist at all if they were wholly separate entities.

There is no "magic formula" for determining when joint employment has arisen. Instead, the courts or the governmental agencies will examine the facts in each case and apply one of more of the commonly used factors, often focusing on the "economic realities" of the relationship between the multiple employers. Here are some of the commonly used factors:

  • Do the employers have an arrangement to share the employee? Does the employee work for both employers at different times during the same workweek? Does the employee perform work that simultaneously benefits both employers?
  • Do the employers act directly or indirectly in the interest of the other with respect to the employee?
  • Do the employers share or together decide terms and conditions of employment, such as the hiring and firing, supervision and control of work performance, work schedules, the rate and method of payment, and the maintenance of employee records?
  • Do the two entities use a common hire date for any purposes?
  • Do the employers share common management or ownership? Does one employer control, or is controlled by, or is under common control with, the other employer?
  • Do the employers share HR administration or policies?
  • Do the employers share the same location?

Employers should be aware that the precise factors may differ from state to state, and from agency to agency. Unfortunately for employers, they cannot use labels - such as an employee's job title - or the terms of the contract to protect themselves against such statutory claims.

Employers who have direct or indirect relationships with other employers, or who are planning changes that will result in such relationships, should keep these factors in mind to avoid facing unanticipated, and unbudgeted, liability for employment claims.

Will Your Separation Agreement Pass Legal Scrutiny?

By Kristy Kunisaki Marino

While separation agreements are one way that an employer can effectively manage its post-employment litigation risks, the validity of a poorly drafted agreement could be contested in court. A recent decision serves as a reminder of the importance of drafting separation agreements in a clear manner that will survive legal scrutiny.

In Ridinger v. Dow Jones & Co. [an enhanced version of this opinion is available to lexis.com subscribers / unenhanced version available from lexisONE Free Case Law] , a 62-year-old magazine photo editor was terminated and sued his former employer, Dow Jones, for age discrimination. At the time of his termination, Mr. Ridinger accepted a severance package that included 20 weeks' salary and other benefits in exchange for a separation agreement waiving any claims under the federal Age Discrimination in Employment Act (ADEA) (http://tinyurl.com/2uam6yl). Specifically, in one section of the document titled, "Waiver of Claims Against Employer," the separation agreement stated, "This waiver and release does not apply to any claim that may arise under the ADEA after the date that Employee signs this Agreement." Another section of the agreement, "Limitation on Promise Not to Sue" stated, "Therefore, the financial obligations of paragraph 4(b) would not apply to a suit filed solely under the ADEA, but Employee nevertheless understands that the waivers and releases contained in paragraph 4(a) still apply to ADEA claims and that he has waived all ADEA claims as part of this Agreement..."

Although he had signed a separation agreement, Mr. Ridinger sued Dow Jones for age discrimination and argued that the waiver provision concerning ADEA claims was unclear in violation of the Older Workers Benefit Protection Act (OWBPA) (http://tinyurl.com/3kes6ek), which requires that an employee waive his or her ADEA claim in a "knowing and voluntary" way and that a separation agreement be "written in a manner calculated to be understood." (29 U.S.C. § 626(f)(1).) Mr. Ridinger also argued that the waiver provision violated Equal Employment Opportunity Commission (EEOC) regulations (http://tinyurl.com/my79u4), which require a waiver to be drafted in plain language, not using "technical jargon" or "long, complex sentences," and "geared to the level of understanding" of the employee, taking into consideration the typical employee's education level. (29 C.F.R. § 1625.22(b))

The Second Circuit Court of Appeals rejected Mr. Ridinger's arguments and agreed with Dow Jones that it had written the separation agreement in a way so that it could be understood by its employees. The court looked at other cases that invalidated the company's separation agreements because they contained technical legal terms that were not easily understood or parsed by a layperson and in combinations that could easily be misunderstood. In those cases, the companies required an employee to release all ADEA claims, but also stated that the employee's "covenant not to sue" did not apply to actions "based solely under the ADEA." Those courts found that it would not be easy for a layperson to distinguish between a release and a covenant not to sue, and thus, reasonable persons could conclude that they had not waived their right to bring forth an ADEA claim. However, in this case, the court found that Dow Jones' terms in its separation agreement were sufficiently clear.

The bottom line is that courts will protect employers who take care to draft their separation agreements in plain English. Accordingly, employers should periodically review their separation agreements, especially if they include provisions related to age discrimination.

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