Employment Law Blog

Marc J. Smith Has Second Appearance on "Law School For the Public" To Discuss Worker Misclassification

2012-05-09T20:18:37Z

Recently, I was invited for my second appearance on "Law School for the Public" -- a television series produced by Montgomery Community Television/Montgomery Community Media that runs on cable channel 19/21 on Comcast, Verizon and RCN in Montgomery County. We filmed on May 8, 2012. At some point in the near future, the show will be televised and also available online.

We had a great time filming the show, which was hosted by Lauri Cleary, a partner with Lerch, Early & Brewer in Bethesda. Rick Vernon, Lauri's partner, was also a guest. The topic of discussion concerned the widespread problem of misclassifying workers as independent contractors and the impact of such misclassification on both the workforce and employers. During the show we also discussed the factors used by various agencies and courts to identify whether a worker is an employee, independent contractor or intern, why correctly classifying workers is so important and the penalties associated with misclassification.

Department of Labor Creates App That Allows Employees to Track Work Hours

2011-10-19T22:23:27Z

This past spring, the U.S. Department of Labor announced the launch of its first application for smartphones, a time sheet to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break time and any overtime hours for one or more employers. Glossary, contact information and materials about wage laws are easily accessible through links to the Web pages of the department's Wage and Hour Division.

Additionally, through the app, users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly and monthly format; and email the summary of work hours and gross pay as an attachment.

This new technology highlights the importance of accurate time keeping for employers who typically bear the burden of proof in wage and hour cases. Without accurate time records, employers may be very vulnerable in wage and hour litigation and during DOL investigations.

The app can be found here.

IRS Creates Incentive to Fix Worker Classification Errors

2011-10-19T21:58:19Z

As we have written elsewhere in this blog, when an employer misclassifies a worker as an independent contractor, the employer exposes itself to a host of potential claims and liabilities, including but not limited to payroll taxes, income tax withholding, workers compensation, unemployment insurance, overtime pay, and benefits.

To encourage employers to voluntarily fix worker classification errors, the IRS has created a new program known as the Voluntary Classification Settlement Program ("VCSP") pursuant to which eligible employers can significantly decrease their exposure as a result of misclassifying employees as independent contractors.

With the creation of the VCSP, employers that use independent contractors should re-evaluate their independent contractor relationships and confirm whether the facts support the independent contractor label. If an eligible employer determines that one or more independent contractors should have been classified as employees, it may apply for relief under the VCSP.

An employer participating under the VCSP: (i) agrees to prospectively treat a class of workers as employees; and (ii) pays to the IRS an amount equal to 10% of the employment tax liability that would have been due on compensation paid to the misclassified workers for the most recent tax year and will not be liable for any interest or penalties. In exchange, the employer becomes exempt from an employment tax audit with respect to the worker classification for the group of workers reclassified under the VCSP.

While the relief offered under the VCSP is potentially significant, employers must keep in mind that the VCSP provides relief only from federal payroll tax liabilities. The program does not reduce the exposure relating to other potential claims and liabilities, such as state taxes, workers compensation, overtime pay, and benefits. Accordingly, employers should ensure that they understand and weigh both the benefits and the potential risks of participating in the program. For more about the program, the IRS website contains useful information.

Firm Settles Large Sales Commission Case Against Public Tech Company

2011-08-10T22:57:00Z

Late last year, we began representing a sales executive of a publicly traded technology company with unpaid commission claims exceeding $1 million dollars. Our client had greatly exceeded his assigned sales goals that triggered accelerators under his compensation plan that significantly enhanced his commissions. The unique legal issue in the case involved the employer's attempt to retroactively amend our client's compensation plan in an effort to offset the huge commission that had accrued. In fact, after the plan was "amended," the company claimed our client actually had obligation to repay thousands of dollars in commissions that had been paid to him when the original compensation plan was in effect. It was our position that such retroactive changes were permissible only with respect to future commissions, but were unenforceable for commissions that had already been earned.

Recognizing its tenuous legal position, the company agreed to settle just prior to the initiation of binding arbitration. After months of negotiations, the company agreed to pay a substantial portion of the commissions we claimed were owed.

New Maryland Law Prohibits Employer Use of Applicant and Employee Credit Information

2011-05-16T22:13:06Z

Many employers require applicants to sign forms providing authorization for the employer to access an employee's credit report -- particularly in the banking and financial services fields. When negative information is uncovered, such as poor credit or bankruptcy, that information is often used as the basis for denying employment.

However, effective October 1, 2011, a new law will severely constrain the ability of Maryland employers to request or use an applicant's or employee's credit report or credit information to make employment decisions. The Job Applicant Fairness Act applies to all employers (with several exceptions outlined below) and allows an employer to request or use an applicant's credit information only after an offer of employment has been made. Even then, credit information cannot be used: (i) to deny employment; (ii) as the basis for terminating the employee; or (iii) to determine the terms, conditions or privileges of employment, such as the employee's salary level.

Although most employers will be required to comply with this new law, the Job Applicant Fairness Act does not apply to various financial institutions, as well as employers who are required to inquire into an applicant’s or employee’s credit history under federal or state law.

The Act does not provide a private right of action -- i.e. individuals cannot sue for violations. Rather, a complaint must be filed with the Commissioner of Labor and Industry who can assess a civil penalty of up to $500 for an initial violation and up to $2500 for repeat violation.

For more information, see House Bill 87.

Court Issues Judgment of $70,000 To Client In Wage Payment And Collection Law Case

2011-04-05T20:16:48Z

Last year, we began representing an employee of a local business in an unpaid wage case involving rather extraordinary facts -- the employer had issued an astounding total of 57 paychecks to our client which the bank would not honor due to insufficient funds. We filed suit in the Circuit Court for Montgomery County seeking treble (triple) damages and attorney's fees under Maryland's Wage Payment and Collection law which requires employers to promptly pay their employees wages or face severe penalties.

On March 31, 2011, the Court entered judgment in favor of our client and against the defendant employer for $70,000. Unfortunately, the individual defendant than proceeded to file a Chapter 7 bankruptcy seeking to avoid her obligation to our client. For the short term, the defendant's bankruptcy filing stays any effort on our part to collect the judgment entered in favor of our client; however, we anticipate challenging the defendant's ability to discharge her obligation to our client on the grounds of fraud.

Maryland Agency Suspends Policy Of Requiring Applicants To Provide Usernames and Passwords To Facebook and Other Social Media Accounts

2011-03-30T19:38:52Z

Not long ago, I wrote about the unfortunate waitress who was fired after posting posting derogatory information about her employer's customers on her Facebook account. In this day and age, workers should understand that employers routinely scour social media sites in conjunction with hiring decisions, when confronted with troubled employees and in a myriad of other circumstances. Putting aside the legal pitfalls associated with this practice, employees and job applicants have discovered the brutal consequences of posting information, pictures or videos that employers may take a dim view of. Think about it -- if two qualified candidates with equal credentials apply for the same position but one had explicit and inappropriate information plastered all over his "wall," which would you hire?

Recently, a large Maryland employer decided to push the envelope on this issue and demanded that applicants and some employees provide their usernames and passwords to their social media accounts as a condition of employment. According to the ACLU, the Maryland Division of Corrections ("MDOC") “has a blanket requirement that applicants for employment with the division, as well as current employees undergoing recertification, provide the government with their social media account usernames and personal passwords for use in employee background checks.” According the ACLU’s blog, an employee of MDOC was required to provide his Facebook login and password during a recertification interview. Once he provided it, the interviewer logged on to his account and reviewed the content. The ACLU’s letter to Maryland’s Public Safety Secretary and a video of the employee telling his story can be found on the ACLU Blog.

An NBC report states that the MDOC simply wanted to make sure that their employees are not engaged in any illicit activities. The MDOC has issued their own statement, defending and explaining their actions: “DPSCS reserves the right to inquire about a possible candidate's Facebook account during the hiring or re-certification process. However, it does not require/demand it as stated in the ACLU release. A candidate's refusal is not grounds for disqualification.”

Not surprisingly, MDOC recently suspended its Facebook-password policy for job applicants following the negative publicity resulting from the ACLU blog post in opposition to the practice. Maryland Public Safety Secretary Gary Maynard notified the ACLU that he had suspended the social-media password requirement for 45 days pending a review of the policy.

"Working" Tavern Owner Not Entitled to Share in Tip Pool

2011-03-21T23:54:23Z

In a recent case of first impression in the Fourth Circuit, the Court ruled that the owner of a restaurant/tavern, who is also a bartender, may not lawfully participate in his employee bartenders tip pool under the Fair Labor Standards Act. In Gionfriddo v. Zink, the court observed that [e]very court that has considered the issue has unequivocally held that the FLSA expressly prohibits employers from participation in employee tip pools.

While the general rule is that employees must be paid minimum wage, i.e., $7.25 per hour under the FLSA, an exception exists for tipped employees such as bartenders and waitstaff. Tipped employees are those who customarily and regularly receive more than $30 a month in tips. For employees who can legitimately be classified as tipped employees, an employer satisfies the FLSA if it pays tipped employees at least $2.13 per hour, and that wage, combined with tips, equals or exceeds $7.25 per hour.

In its ruling, the Court held that it would be an anathema to the purpose behind the FLSA to simultaneously allow [an owner] to take tips from a collective tip pool that was set up to allow him to pay his employees at a rate substantially below the minimum wage and that a contrary finding would broaden the FLSA s tip credit provisions to a point where they would become meaningless.

Court Enters $1.3 Million Dollar Judgment In Favor Of 2 Employees For Unpaid Wages

2011-02-18T20:45:10Z

On February 18, 2011, Judge John McDowell, a Washington County Circuit Court Judge, entered judgment in favor of two clients who were former employees of Defendant IOT Systems. As described in our Complaint (a copy of which can be found here), during the course of our clients' employment, IOT missed its weekly payroll on a number of occasions. Indeed, by the time our clients resigned last year, one client was owed over $250,000 in unpaid wages and the other was owed over $180,000.

At a hearing conducted this morning, Judge McDowell awarded both clients all of their back pay and awarded nearly treble (triple) damages under Maryland's Wage Payment and Collection law. One client was awarded over $700,000 in back pay and additional damages under the Wage Payment and Collection law, and the other client was awarded over $500,000.

The Court also imposed personal liability on the president and owner of the company for violating the provisions of the Fair Labor Standards Act. In this regard, the Court accepted our argument that for the weeks our clients were not paid, IOT Systems violated the provisions of the Fair Labor Standards Act ("FLSA") by not providing our clients with at least minimum wage. Accordingly, Judge McDowell imposed personal liability and entered judgement against the president and owner of IOT Systems (as authorized by the FLSA) for nearly $90,000 of the unpaid wages sought in the lawsuit.

Using Employer's Email To Communicate With Attorney May Lead To Loss Of Attorney-Client Privilege

2011-01-22T22:59:41Z

In an interesting recent case, an employee who had sued her employer claiming discrimination was not entitled to assert the attorney-client privilege with respect to her email communications with her attorney in the litigation because they were sent from her work email account, a California appeals court has ruled.

According to the court, the email was not a protected confidential communication because the employer, the Petrovich Development Co., had warned that employee emails were not confidential and were subject to monitoring. According to the court, "the emails sent via company computer under the circumstances of this case were akin to consulting her lawyer in her employer's conference room, in a loud voice, with the door open, so that any reasonable person would expect that their discussion of her complaints about her employer would be overheard by him,” the court said.

Not all courts have agreed with the California court. Last March, the New Jersey Supreme Court protected emails sent from a personal account on a work computer to a lawyer. The court noted that the emails weren’t clearly covered by the employer’s policy, and they contained the standard warning that they were confidential attorney communications.

The lesson here is avoid communicating with your attorney while using your employer's email. Employes should be aware that employers can and often do monitor their employee's emails. Some employers even have the capability of monitoring emails sent/received by employees on private email accounts like Yahoo and Hotmail if they access those emails using company computers.