Saudi Prince and Security Company are Liable For Overtime as Joint Employers Fourth Circuit Rules

The issues in Schultz v. Capital International Security, were: (1) whether a Saudi Prince and a Security company were joint employers for purposes of the FLSA; and (2) whether the security guards were employees or independent contractors.

According to the Fourth Circuit, because both Prince and the Security Company ("CIS") shared control over the guards, they should be considered a joint employer

Both the Prince and CIS were involved in the hiring of agents.. . CIS advertised for agents and screened responses, which were forwarded to the detail leader. The detail leader, who was on the CIS payroll and reported to [the Prince's representative], interviewed selected applicants; the Prince's representative]had the final word on hiring. [The Prince's representative]generally handled agent work schedules, compensation, discipline, and terminations, but CIS played some role in these matters. CIS maintained the authority to discipline agents and change the terms of their employment.

With respect to the independent contractor issue, the Court easily determined that the guards were employees because the Prince and CIS "exercised nearly complete control over how the agents did their jobs."

This decision, while not creating new law, is important because it clarifies when two entities can be considered a "joint employer" for overtime purposes, even if one entities has no responsibilities for payroll. The Court's reasoning could certainly be applied to a temporary agency/employer relationship.

Employment Law: News of the Weird

It is the week before school starts. The Courts are not writing opinions; Maryland Employment Law is not developing (this week). So I give you this:


People With Issues

In July, Cory Neddermeyer, 42, was turned down for unemployment benefits in Iowa, after a judge ruled that he was fired for cause. His employer, the Amaizing Energy ethanol plant, suffered a massive spill that created a pond of fuel alcohol, and Neddermeyer (a recovering alcoholic), after resisting as long as he could, gave in and started drinking from the pool (causing him to pass out and later register an 0.72 blood-alcohol reading). [Des Moines Register, 7-9-06]

Q: Which Overtime Law applies -- Maryland or Federal? A: The Law That Most Benefits the Employee.

• There is a Maryland overtime law. There is a Federal overtime law. Which one applies? The one that is most favorable (or provides a greater benefit) to the employee.
  
  So, the Maryland law carves out employers in certain industries, such as:
  
  

  Trucking companies which operate interstate
  Hotels or motels
  Restaurants
  Gasoline service stations
  Private country clubs
  Not for profit
  temporary home care services
  Not for profit concert promoter or theater
  Some amusement or recreational establishments, including seasonal swimming
  pools (However, companies which manage such establishments may still be required
  to pay overtime)
  Food processing companies engaged in canning, freezing,
  packing, or first processing of perishable or seasonal fresh produce, poultry,
  or seafood.

• But the Federal law may nevertheless apply. For example, the Federal law does not carve out Restaurants. If you have any doubt as to what law applies, you should contact an attorney.
  
  

On Reconsideration: Court of Special Appeals reaffirms that Statute of Limitations Bars Workers Compensation Claim

I wrote here that the Court of Special Appeals denied a workers compensation claim because the employee waited too long to file it. I stated:

On January 2, 2002, Randolph Griggs was injured while working construction. On February 20, 2004, Mr. Griggs filed a workers compensation claim. Maryland Law requires employees to file such claims within two years of the accident. Because Mr. Griggs's claim was untimely, the Court of Special Appeals affirmed the dismissal of his case. The Court did not buy the argument that Griggs's employer -- by promising to file a claim for him -- actually induced Mr. Griggs to wait more than two years to file with the Workers Compensation Commission.

On reconsideration, the Court of Special Appeals affirmed its decision and had this to say:

Our opinion was first filed on June 1, 2006. Griggs asks us to reconsider our decision, arguing that we erred by “shift[ing] the burden of producing undisputed facts” from appellees to him. In his view, it is “inconsistent to hold that a reasonable person could have relied on the letter to his or her detriment but refuse[] to draw the inference that [Griggs] did actually have such a reliance.” He argues that, because “there is no evidence refuting appellant’s actual reliance on the letter,” he cannot be required to produce evidence of actual reliance in order to survive the motion for summary judgment. We do not agree.

Estoppel under LE section 9-709(d)(1) requires proof of actual reliance. . . Although appellees had the summary judgment burden of establishing that Griggs did not rely on them to file his claim, they satisfied that burden by pointing to established law that an employer is not obligated to file a worker’s compensation claim on behalf of its employee. . . Griggs did not present any evidence that he construed the December 15, 2003 letter as an offer to file his claim and that he did not file the claim because of that offer. We therefore deny the motion for reconsideration.

Fourth Circuit Re-Affirms Decision in "Black Monkeys" Case

"They should put those two black monkeys in a cage with a bunch of black apes and let the apes f--k them."


I wrote here that an employer was free to retaliate against an employee for reporting the above comment to his employer. A majority opinion (Judge Niemeyer joined by Judge Widener) held that the employee could not have reasonably believed that above single outburst constituted a civil rights violation. This is so because a single racially derogatory remark does not rise to the level of actionable racial harassment


I then wrote here the Fourth Circuit panel vacated it decision for reconsideration.

The Fourth Circuit re-issued its opinion and reached the same result as the original decision. (Judge King dissented.)

I am sure the plaintiff will seek re-hearing en banc.

Maryland District Court Rules Waiver-For-Severance Deal Violates ADEA and Title VII

In a shocker, Judge Titus ruled in EEOC v. Lockheed Martin Corp, that Lockheed Martin's offer of severance in exchange for a full waiver of claims violated the ADEA and Title VII as a matter of law. Lockheed eliminated several positions as a result of a merger. It offered those losing their jobs severance benefits in exchange for a complete release of claims. Judge Titus ruled that Lockheed's could not "provide [severance] only to employees who refrain from protected activity."

Washington Post and Baltimore Sun Cover Steffen's testimony

Ehrlich Adviser Details Firings


Steffen, From Ehrlich's Transition Team in 2002 to Yesterday's Testimony

Taciturn 'Prince of Darkness' Leaves Assembly in Just That

Steffen's testimony raises perjury issue

Steffen Ordered to Testify

Following up on yesterday's posting, a Harford County Circuit Court Judge ordered Joseph Steffen to testify today before the Committee examining Governor Ehrlich's employment practices. Given his colorful personality, no matter what your political affiliation, what Mr. Steffen says should be interesting.

"Prince of Darkness" Moves to Quash Subpoena

I wrote here and here about the Special Committee on State Employee Rights and Protections. The Committee is looking into Governor Ehrlich's employment practices, including whether he terminated employees based on their political beliefs. The Committee leaders allege that Joseph Steffen, nicknamed the "Prince of Darkness," served as Governor Ehrlich's hatchet man. In the past few months Steffen (1) agreed to testify (2) left the jurisdiction avoiding a subpoena; then (3) reemerged and stated again he wanted to testify. Today's Baltimore Sun reports that Steffen has changed his mind again. He filed suit yesterday contending the Committee lacks the power to issue subpoenas.

Maryland District Court Dismisses Sexual Harassment Claim But Allows Retaliation Claim to Proceed

Carole Sraver's boss, Dr. Jeffrey Owen, allegedly made the following comments:

"Good morning/afternoon Carole, did you get laid last night?"

"How's the sex life?"

"You'll get a bonus when I get a blow job."

I have a present for you that is "about six inched long with a gold tip . . . "

"Your boobs are bigger than my wife's."

"I am on a liquid diet to make my dick look bigger."


Sraver complained about her Owens's comments, but continued to perform her job. In fact, she prospered earning raises and bonuses.

Shortly after Sraver complained about one of her Owens's comments, her employer, Surgical Monitoring Services (SMS) terminated her employment. The company gave no explanation for its decision to terminate Sraver at the time it took the action. It later claimed that she made an administrative error that cost the company $5 million.

Sraver sued for: (1) sexual harassment; and (2) retaliatory termination. After discovery, SMS moved for summary judgment. The Court dismissed Sraver's sexual harassment claim finding that the alleged harassment was not severe or pervasive enough to create an abusive working environment. The Court noted that Dr. Owens never threatened Sraver, many of his comments were directed to several people, and that despite the alleged harassment, Sraver thrived at SMS.

The Court allowed Sraver's retaliation claim to proceed. The Court relied on SMS's failure to mention the alleged $5 million mistake at the time of Sraver's termination. Also, Sraver claimed that SMS's attorney and management directed her to take the actions the company now claimed were erroneous.

NLRB issues opinion invalidating broad arbitration clause

The NLRB issued a decisionthat may have an effect on Maryland employees facing mandatory arbitration clauses (discussed here).

The policy at issue states that it:

. . . applies to all . . . employees. . . and covers all disputes relating to or arising out of an employee’s employment . . . or the termination of that employment.

The Board invalidated the provision because it tended "to inhibit employees from filing charges with the Board." Employees facing a similarly broad clause now have an arrow in their quiver: filing an unfair labor practice charge with the NLRB.

Court of Appeals Resolves Procedural Issue in Employment Law Case

In St. Mary's County v. Lacer, the former CEO of the County government sued for breach of an employment contract and violations of the Maryland Wage Payment and Collection Law. After cross-motions for summary judgment, the Court granted Lacer's motion in part and also permitted him to depose the County Commissioners regarding closed deliberations about Lacer's employment. The Circuit Court certified the decision as final, despite the fact that none of Lacer's claims were resolved. The County appealed.

The Court of Appeals quickly determined that the Circuit Court's order was not final and did not fall within any of the exceptions to the final judgment rule. Because the order was not final, the County's appeal was not ripe. The Court of Appeals remanded the matter to the Circuit Court for a trial.

The Court of Appeals also reserved judgment on Lacer's right to offer the Commissioners testimony into evidence, finding appellate review of their privilege claims would be appropriate after trial.

New U.S. DOL Opinion Letter: Acquisition, Relocation, and Property Management Agents are Exempt Administrative Employees Not Entitled to Overtime

Who is an exempt administrative employee? A new US DOL opinion letter answers that question for three employee classifications in the government contracts and real estate industries. Notably, the Acquisition, Relocation and Property Management Agents had fairly sophisticated responsibilities involving purchasing and regulatory compliance.

Fourth Circuit Vacates Decision in Jordan v. Alternative Resources Corp.

I recently wrote about Jordan v. Alternative Resources Corp. There, the Fourth Circuit held as a matter of law that a plaintiff did not reasonably believe that the following comment violated our anti-discrimination laws:

"they should put those two black monkeys in a cage with a bunch of black apes and let the apes f--k them"

The Fourth Circuit recently granted rehearing and vacated its earlier opinion. The next chapter in this case will be soon be written.

Why The Maryland Wage Payment and Collection Law Benefits Commissioned Employees: The Fourth Circuit Rejects Virginia Employee's Claim to Commissions

The Maryland Wage Payment and Collection Law grants employees a special right: once an employee earns wages or benefits and employer cannot impose arbitrary conditions that require the employer to forfeit those wages. This issue arises most often with: (1) accrued vacation (see here and here); and (2) commissions earned but not paid before an employee's termination (see here, and here). Once an employee does the work to earn the commissions or accrued vacation, an employer cannot take those benefits away.

Why is this important? The law is very different and less favorable to employees in other states. Take for example, Jensen v. IBM, a decision issued by the Fourth Circuit yesterday. Applying Virginia Law, the Court interpreted a provision in an employee's compensation plan. The plan stated: "No one becomes entitled to any payment in advance of his or her receipt of the payment." In other words, IBM reserved the right to change the terms of the plan up until the point that it decided to pay the commissions. The Court found this language (as well as other clauses in the plan) "did not invite a bargain or manifest a "'willingness to enter into a bargain.'"

I am quite confident that this portion of Jensen would have been decided differently had the Court applied the Maryland Wage Payment and Collection Law, rather than Virginia state law. Maryland employers cannot change the terms of a plan or require an employee to forfeit compensation once the employee has earned the compensation.

(Note: there are other aspects of Jensen not discussed here that indicate that the Court was correct in deciding that the employee was not entitled to the commission he was seeking.)

Governor Ehrlich's Statement on decision striking Wal-Mart Law

Following up on my last article, Governor Ehrlich issued a press release following the decision striking down the Wal-Mart law. He pulled no punches, stating:

"I am very pleased with the decision of the Baltimore City Federal District Court to invalidate the Fair Share Health Care Fund Act. . . ."

"The District Court's decision to strike down this unfair mandate on one Maryland employer is further validation that the General Assembly overstepped its bounds in an effort to demonize that employer for political gain. This is yet another example of the General Assembly's reckless approach to legislating that threatens families, jobs, including nearly 1,000 of them on the Eastern Shore, and any positive gains Maryland has made in creating a healthy business climate."

Maryland District Court Declares Wal-Mart Law Preempted (and therefore Unenforceable)

In January 2006, the Maryland General Assembly enacted a bill (over Governor Ehrlich's veto) that requires employers with 10,000 or more employees to spend 8% of their total wages on health insurance. The bill was deemed "the Wal-Mart Lill" because the only qualifying employer in this State is Wal-Mart. (Johns Hopkins, Giant, and Northrop Grumman are either exempt or paid the 8%).

A trade association, which includes Wal-Mart as a member, sued the State to stop it from enforcing the Wal-Mart law. The trade association claimed that law related to employee benefit plans was therefore preempted by the federal law governing such plans: ERISA.

The Court agreed with Wal-Mart and its trade association. At bottom, Congress has decided that it is the only body that can regulate employee benefit plans. As such, States are completely preempted from legislating in this area. Hence, the Court effectively stopped Maryland from enforcing the Wal-Mart law.

The trade association also claimed that the law violated equal protection. The Court rejected that argument.

Maryland District Court Declares Wal-Mart Law Preempted (and therefore Unenforceable)

In January 2006, the Maryland General Assembly enacted a bill (over Governor Ehrlich's veto) that requires employers with 10,000 or more employees to spend 8% of their total wages on health insurance. The bill was deemed "the Wal-Mart Lill" because the only qualifying employer in this State is Wal-Mart. (Johns Hopkins, Giant, and Northrop Grumman are either exempt or paid the 8%).

A trade association, which includes Wal-Mart as a member, sued the State to stop it from enforcing the Wal-Mart law. The trade association claimed that law related to employee benefit plans was therefore preempted by the federal law governing such plans: ERISA.

The Court agreed with Wal-Mart and its trade association. At bottom, Congress has decided that it is the only body that can regulate employee benefit plans. As such, States are completely preempted from legislating in this area. Hence, the Court effectively stopped Maryland from enforcing the Wal-Mart law.

The trade association also claimed that the law violated equal protection. The Court rejected that argument.

The Intersection of Employment Rights and Maryland Politics

I wrote here about the Special Committee on State Employee Rights and Protections. The Committee apparently was going to issue a report in September, which happens to be when Maryland has its primary election. However, the Committee's work may be extended because the main target of the investigation, Joseph Steffen, recently became available to testify. This link collects The Baltimore Sun's coverage of the committee's work, including Mr. Steffen's reemergence and the suit filed by several legislators seeking to compel executive department employees to testify about Gov. Robert L. Ehrlich Jr.'s hiring and firing practices.

Maryland Court Issues Preliminary Injunction Enforcing Non-Competition Agreement Ancillary to Business Contract

In Corporate Healthcare Financing Inc. v. BCI Holdings Co. the United States District for the District of Maryland issued a preliminary injunction enforcing a restrictive covenant that two businesses had entered ancillary to a business contract. The non-competition agreement states that the parties agreed not to solicit each other's customers. Although not an employment case, the Court for the most part applied the law as it has developed in the employment law context.

An interesting part of the opinion discussed the so called "blue pencil" rule. Under the rule, which I discussed here and here, some Courts have claimed to have broad authority to revise an otherwise overbroad non-compete agreement to make it enforceable. Judge Blake noted that there is some doubt about the extent of the Court's blue pencil authority:

Finally, even if the court does find that the covenant is unreasonable in one or more respects, there is an open question whether Maryland law would allow it to enforce the covenant only partially. If limiting enforcement of the covenant . . . could not be accomplished by merely deleting words in the provision, such a change might not be permissible under the traditional "blue-penciling" doctrine. . . . If, however, the "flexible" approach is valid under Maryland law, at least under the specific facts of this case, then such limited enforcement might be permissible. . . (citations ommitted)