Unpaid Internships – Turning up the heat

The summer of 2013 is likely to be remembered as the year the unpaid interns pushed back. For years, eager students and recent graduates have taken unpaid positions. However, with companies’ bottom lines tightening, workloads burgeoning and more experienced workers looking for a way to open doors, the line between unpaid intern and entry level employee have begun to blur. This summer, some of those interns have fought back — and won. In June, interns who worked on the movie Black Swan won a verdict against Fox Starlight Pictures that has sent shockwaves around the business community. Cases have also recently been filed by interns against Conde Nast Publications and Sony Records, and two interns who lost their case before the Court of Appeals have asked the Supreme Court to rule on when an intern has a legal right to minimum wage.

The fact is that, regardless of whether they are called employees or interns, workers are entitled to minimum wage and overtime unless they can properly be classified as “trainees” or “non-employees.” And contrary to popular opinion, the fact that an intern is receiving credit for their internship doesn’t automatically exempt them from wage and hour requirements. Companies that improperly fail to pay interns face damages under state and federal law.

We have been talking about the risk of unpaid interns for years, but the cases this summer have turned up the heat. As you begin putting together 2014 budgets, take a closer look at what – if anything – interns are set to be paid to confirm that your company is in compliance.

Tide Continues in Favor of Class Action Waivers in Arbitration Agreements

On Friday, the U.S. Court of Appeals sitting in New York handed down its decision in Sutherland v. Ernst & Young, giving employers yet another leg up in enforcing requirements that their employees forego class actions and pursue their claims individually in arbitration.

Since the Supreme Court’s decision two years ago that a class action waiver in an arbitration agreement was enforceable (which, practically, means that a party can avoid class actions if it’s agreed to in advance in an arbitration agreement), plaintiffs’ attorneys and government agencies have been trying to find exceptions to the Court’s holding in the employment context. The three primary arguments have been (1) that the National Labor Relations Act gives employees an unwaiveable right to participate in collective litigation, (2) that the Fair Labor Standards Act’s special provisions for collective (opt-in) actions trump the Federal Arbitration Act, and (3) that plaintiffs can’t be required to arbitrate individually if their claims are so small that individual actions are impractical. The third of these arguments was rejected by the Supreme Court this June in the Amex decision. In the Sutherland decision last week, the Second Circuit Court of Appeals joined the majority of courts in rejecting the first and second arguments as well.

What does this mean for your business? It means that you should seriously consider implementing a mandatory arbitration policy that requires individual arbitration of employee claims. Arbitration isn’t perfect – and a requirement that cases be arbitrated individually could be turned against an employer if a large group of employees each files an individual claim – but in many cases the downsides of arbitration are far outweighed by the ability to avoid class actions.

EEOC Suffers Setback in Efforts to Clamp Down on Use of Background Checks

The EEOC’s efforts to clamp down on the use of criminal record information were dealt a significant setback on August 9, 2013 when the U.S. District Court of the District of Maryland threw out a case that had been brought against Freeman, a service provider for corporate events with offices around the country (EEOC v. Freeman [09-2573] Memorandum Opinion and Order 8.9.13).  The case grew out of the EEOC’s longstanding concern that the indiscriminate use of criminal record information by employers to screen out applicants has a disparate impact and is therefore unlawful under Title VII.  The EEOC believes employers using criminal record information must disregard arrest information and only use conviction information after considering the age of the offense, the seriousness of the offense, and the relationship of the offense to the position being sought.  Applicants also must be given an opportunity, in the EEOC’s view, to explain or correct the information in their records before being rejected.  However, in the Freeman case, the court said the EEOC had failed to show any disparate impact as a result of the company’s hiring practices.  The court tore apart the EEOC’s expert reports, calling them “rife with analytical errors” and “laughable.”  Even if evidence of a disparate impact had been present, the court said that the EEOC failed to link such evidence to any particular practice of Freeman and could not simply rely on the “collective results” of Freeman’s hiring process.  “The story of the present action,” according to the court, was “that of a theory in search of facts to support it.”  The Freeman decision is an embarrassing outcome for the EEOC that will undoubtedly make the agency’s enforcement activities in this area more difficult and provide a road map to victory for future defendants.

Medical Marijuana Legalized in Illinois – Employers Beware

Illinois General AssemblyThis morning Illinois became the 20th state to legalize medical marijuana use, though use is allowed only in very limited circumstances as part of a 4-year trial program.  The law includes a number of provisions specifically relating to employment.

  • Employers can’t discriminate against a person solely for being a “registered qualifying patient” or a “registered qualifying caregiver” (unless federal law requires otherwise).
  • Employers could also face liability if they take action against an employee for using medical marijuana off premises and outside of working hours unless the employee was impaired at work.

The law doesn’t prohibit employers from adopting reasonable rules regarding the consumption and storage of medical marijuana, from enforcing drug testing, zero tolerance and drug free workplace policies (provided they are applied in a non-discriminatory manner), or from disciplining a “registered qualifying patient” for violating a workplace drug policy, but employers will need to take extra care in disciplining employees for violation of such policies.  The medical marijuana law takes effect on January 1, 2014.