Kansas City Employment Lawyer Blog

In the information age, not all information is benign. For example, you probably don't want people to think you are a convicted felon, especially if you are not. In fact, most employers are reluctant to hire convicted felons--some simply won't hire one, and others won't hire people with particular types of criminal convictions.

Congress has decided that because certain types of information can end up costing you, you should have a chance to refute such information before you bear such costs. A recent settlement of a federal lawsuit highlights some little-known rights of employees and job applicants regarding information that can impact their employment opportunities. Specifically, an employer can be liable to employees and job applicants for having a third party run criminal background checks on them without allowing them the opportunity to contest the information therein.

The Fair Credit Reporting Act (FCRA) is a federal statute generally designed to provide consumers with the opportunity to contest or correct inaccurate statements on their credit reports. The protections of the FCRA, however, extend to the employment context. The statute defines a "consumer report" to include a criminal background check performed by a third party agent of an employer regarding the criminal history of employees and job applicants. The statute requires the employer to provide conspicuous advance written notice of such a criminal background check to the person who is the subject thereof. The notice provisions in the statute are designed to provide the "consumer" who is the subject of the "consumer report" the opportunity to correct inaccuracies therein before the report can be relied upon by another party, such as an employer, to the consumer's detriment. Thus, in the employment context, the law is intended to provide an employee or a job applicant the opportunity to correct inaccuracies in a third party criminal background report before the employer relies on it to make an employment decision, such as firing or demoting the employee or not hiring the job applicant.

FCRA provides for the affected employee or job applicant to recover the higher of either "actual damages" or statutory penalties of between $100 and $1000 from the employer. Actual damages could apply where an employee lost wages from being fired or demoted, or where a job applicant lost wages from being passed over for hiring. The statutory penalties apply whether or not the employee or job applicant suffered any actual monetary loss resulting from the employer's violation of the statute.

In the recently-settled consolidated case of Hunter v. First Transit, Inc. and Joshaway v. First Student, Inc., a class action was brought on behalf of employees and job applicants against a transit and bus company for using a third party to perform criminal background checks without proper notice to the members of the class. The case was settled with varying amounts of monetary relief to the class members, depending on whether each member suffered an actual monetary loss stemming from a lost employment opportunity, or was otherwise entitled to a lesser amount as a statutory penalty.

The moral of the story: That old adage, "If you got something to say about me, say it to my face" has actually been codified as an employment right when it comes to an employer using a third party to perform criminal background checks on employees and job applicants.

Unpaid wages and overtime are sought by employees at a Kansas slaughterhouse, Creekstone Farms Premium Beef. The federal lawsuit seeks class-action status for the 700 individuals employed by the Arkansas City plant.

Workers at the plant are seeking monies for uncompensated work and time as well as the legal costs associated with bringing this action. The lawsuit filed in U.S. District Court, claiming unpaid wages for all time worked, names Paz Sanchez and Elvis Posadas as the representative plaintiffs and will endeavor to include any individuals who worked at the plant in the past three years.

Allegedly, Creekstone Farms pays hourly meat processing employees "based on a principle of so-called gang time." The suit contends that workers are paid only for the time that their assigned production lines are running, along with 10 minutes a day to put on their protective clothing. Additionally, the suit also charges that the company failed to pay for overtime.

"The failure of an employer of food processing employees to pay the employees for all their compensable time is a common occurrence," said Mark Kistler, the Overland Park attorney representing the workers. "It seems the employers have an attitude of 'catch me if you can.'"

Source:
Workers file wage lawsuirt against Creekstone Farms, Business Week, April 7, 2011

The federal minimum wage is $7.25 an hour, but federal law allows an employer to take a "tip credit" of up to $5.12 an hour for a "tipped employee." If the employer pays the tipped employee at least $2.13 an hour and the tipped employee effectively receives at least $7.25 an hour in combined wages and tips during the pay period, the arrangement generally will comply with federal law (unless the employee worked more than 40 hours in the workweek, in which case a more complicated formula for the applicable overtime rate would apply).

The employer, however, can lose the right to claim the tip credit if the employer uses an invalid "tip pool." Only employees who directly serve the public may be included in a "tip pool." A tip pool is where tips during a shift are pooled and then redistributed to employees, usually on a pro rata basis. Paying out part of a tip pool to employees who don't directly serve the public nullifies the employer's right to the tip credit, entitling all employees participating in the tip pool to be paid $7.25 per hour by their employer. (For example, some employers unlawfully include "expediters" in their tip pools. An expediter doesn't directly engage with the public, but performs "quality control" prior to food being served to customers, making sure that orders are filled correctly and plates are appetizingly presented.)

Where an employer does not claim a tip credit for its minimum wage obligations, issues have arisen as to whether an invalid tip pool (for example one that "tips out" to employees who don't directly serve the public) or "tip skimming" (where the employer, its owners or its managers keep some of the tips for themselves) violate federal labor laws. Federal courts have split on this issue. Some courts have concluded that the applicable federal statute, the Fair Labor Standards Act (FLSA), only requires the employer to pay the minimum wage and otherwise doesn't prohibit the employer's hand from the tip jar. According to those courts, where the employer directly pays the full minimum wage and claims no tip credit, rules on valid tip pools, which by definition also prohibit tip skimming, don't apply for purposes of violations of the FLSA. Other courts have looked to the purpose and legislative history of the 1974 amendments to Section 3(m) of the FLSA to conclude that the statute was intended to prohibit invalid tip pools or tip skimming whether or not the employer claims a tip credit. Under that view, the statute creates a per se right of tipped employees to keep their tips, and prohibits forcing tipped employees to share their tips, via a tip pool or otherwise, with either the employer or "non-tipped employees" who do not directly serve the public. Under that view, tip skimming is a violation of tipped employees' rights, whether or not the employer takes a tip credit.

On April 5, 2011, the U.S. Department of Labor published final regulations to formalize its long-held position, in agreement with the latter view of the federal courts noted above, that the FLSA prohibits both tip skimming and forcing tipped employees to share tips with "non-tipped" employees period. In explaining its position, the DOL relied, in part, on a Senate Report stating that the 1974 amendment to Section 3(m) of the FLSA was intended to "requir[e] that all tips received be paid out to tipped employees." In conformity with that statutory intent, and pursuant to the DOL's express authority to issue regulations under the FLSA, the DOL explained the effect of the new regulations on this issue as follows: "[T]he Department is amending [its prior regulations] to make clear that tips are the property of the employee, and that section 3(m) sets forth the only permitted uses of an employee's tips--either through a tip credit or a valid tip pool--whether or not the employer has elected the tip credit." [Emphasis added.] The Department explained that the revised regulation is intended to make clear that "an employer in all cases is prohibited from using an employee's tips for any reason other than as a tip credit to make up the difference between the required cash wage paid and the minimum wage or in furtherance of a valid tip pool." Stated conversely, in the DOL's view, any tip skimming or any invalid tip pooling amounts to an employer's unlawful diversion of tips from tipped employees in violation of the tipped employees' rights to receive their tips under Section 3(m) of the FLSA.

In sum, the DOL has taken the view that under federal law, tips belong to tipped employees--no exceptions--and the employer can't convert them for the employer's use. A tip of the hat goes out to the Obama DOL for standing up to corporate lobbyists and weighing in on the side of thousands of hardworking waitpersons, bartenders, carwash attendants, and other tipped employees throughout the nation.

In a new ruling by the Supreme Court workers who complained to their superiors, even verbally, about the way they are paid now have strong retaliation protections that they can exercise. These protections can help them to be compensated if they are fired, or if their employer takes any other adverse employment action against him.

The ruling is significant because the Court clarified the meaning of the phrase "filed any complaint" as it is used in the retaliation provision of the Fair Labor Standards Act. Under the Supreme Court's new ruling, "filed any complaint" includes making a verbal complaint to supervisor, not in writing, and not a formal lawsuit.

Before this ruling, the common wisdom was that employee had to have documented in writing, either by way of formal complaint, or filing a Fair Labor Standards Act lawsuit, to invoke the retaliation provisions of the FLSA. This new standard set by the Supreme Court gives workers substantially increased protection and more comfort to workers in deciding whether or not they should inform their supervisors about being paid properly.

Although the Supreme Court was clear that verbal complaint would trigger the Fair Labor Standards Act retaliation provisions, it is still important for workers to remember that an FLSA lawsuit or formal complaint either to their employer or the Department of Labor is still likely the best method of invoking the retaliation provisions.

However, if an employee only makes a verbal complaint he or she must still meet some standards. The Court stated "a complaint must be sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute," Justice Breyer wrote. This is a key phrase in the holding so that employees know that in order to exercise their rights they still must follow some guidelines and any verbalization or complaint may not necessarily trigger the retaliation provisions.