One Worker, Two Related Employers

Allegations in a recent lawsuit against several McDonald's franchisees in Monterey County raise an issue about application of the wage and hour laws to employees who work for more than one employer. The complaint filed on behalf of several hundred employees alleges that the franchisees used a "dual-shift" practice whereby a worker would be paid by two employers for the same pay period in an attempt to avoid paying overtime. Garcia v. Forza Management LLC, Case No. GNM 98240 (Monterey County Superior Court Apr. 13, 2009). While we do not know what the evidence in the case will show, we can examine the legal principles used to decide such cases.

The applicable U.S. Department of Labor regulation is found at 29 CFR section 791.2. The California Labor Commissioner does not have a formal regulation, but the Division of Labor Standards Enforcement Enforcement Policies and Interpretations Manual appears to follow federal principles. Under those principles, there are three possible scenarios:

1. If two or more employers act entirely independently of each other, and are completely dissociated from each other, their wage and hour obligations to an individual whom they both employ are treated separately. Assume that Ginnie works an eight-hour shift at McDonald's, takes a nap for a couple of hours, and then works four hours selling hot dogs at Dodger Stadium. Although Ginnie worked 12 hours that day, she is not entitled to overtime pay from either employer.

2. If two or more employers act jointly with respect to an individual employed by both, they are jointly responsible for the total number of hours worked by both. Any overtime hours that the employee works must be apportioned among the employers based on the number of hours worked for each. Assume that ABC Petroleum employed Hector as a security guard eight hours a day. After a one hour break, Hector continued working as a security guard for another four hours, but transferred his attention to the facilities of XYZ Pipeline, which transported ABC's product from the oil fields to a shipping terminal. ABC and XYZ are not related and each issues its own paycheck to Hector, but XYZ relies on ABC to hire all security guards. Hector is entitled to four hours of overtime pay, with two-thirds paid by ABC, and one-third by XYZ. See Mid-Continent Pipe Line Co. v. Hargrave, 129 F.2d 655 (10th Cir. 1942).

3. If two or more employers are not completely disassociated with respect to the employment of a particular employee and may be deemed to share control of the employee, directly or indirectly, by reason of the fact that one employer controls, is controlled by, or is under common control with the other employer, the controlling employer is responsible for all hours worked. Assume that Sammy works eight hours for Janice in her oil fields, and then four hours at other oil fields as an employee of Janice Corp., of which Janice is the sole shareholder, board member and officer. All Janice's employees are also employees of Janice Corp. Sammy is entitled to four hours of overtime pay from Sammy. See Durkin v. Waldron, 130 F.Supp. 501 (D. La. 1955).

FLSA Applies To Retail Business on Indian Reservation

The Ninth Circuit Court of Appeals has ruled that the overtime requirements of the Fair Labor Standards Act apply to employees of a retail store owned and operated on the Puyallup Indian Reservation by members of the tribe. The store owners had argued that their tribe's retained sovereignty barred overtime claims under the FLSA. Solis v. Matheson, Case No. 07-35633 (9th Cir. Apr. 20, 2009). The full text of the decision is available here.

The Ninth Circuit explained that Indians and their tribes are subject to federal statutes of general applicability, just like any other United States citizen. There are exceptions if (1) the law touches exclusive rights of self-governance in purely intramural matters, or (2) if the application of the law would abrogate rights guaranteed by Indian treaties. An example of the first is Snyder v. Navajo Nation, 382 F.3d 892 (9th Cir. 2004), where the Ninth Circuit refused to apply the FLSA to tribal law enforcement officers, because law enforcement was a traditional governmental function. An example of the second is United States v. Smiskin, 487 F.3d 1260 (9th Cir. 2007), where a treaty that granted "the right, in common with citizens of the United States, to travel upon all public highways" barred prosecution for violation of the Contraband Cigarette Trafficking Act (which barred transportation of unstamped cigarettes).

The exceptions did not apply to the store owners. There was nothing sufficiently intramural about the employment of Indians and non-Indians by a retail business engaged in interstate commerce to invoke the first exemption. The tribe's right to occupy and exclude others under the treaty did not exempt the store owners from the FLSA because the tribe did not purport to regulate employment and there was no evidence that non-Indians had agreed to subject themselves to tribal jurisdiction.

By contrast, state laws are generally not applicable to operations on reservations. State law has no effect on the reservation unless the tribe has waived its sovereignty, or Congress has authorized an exercise of jurisdiction. See, for example, Middletown Rancheria of Pomo Indians v. Workers Compensation Appeals Bd., 60 Cal.App.4th 1340, 71 Cal.Rptr.2d 105 (1998), in which the California Court of Appeal ruled that the WCAB had no jurisdiction over a tribal gaming casino.

Office Romance

The Risks

Careerbuilder.com reports that 40 percent of respondents to a recent survey say that they have dated a co-worker. When employees get involved romantically, the employer can wind up getting sued, under several theories:

1. There is the case of the employee who will not take "no" for an answer. He or she pursues an object of affection at the workplace to the point where the object of affection is uncomfortable being at work. The object of affection now has a sexual harassment lawsuit. A Sav-On store manager convinced a Los Angeles Superior Court jury that she was the subject of such attention and of retaliation for resisting her male manager's advances, and recovered $3 million in damages, which was affirmed on appeal. See Clifford v. American Drug Stores, Inc., Case No. B158635, (Cal. Ct. App. Aug. 22, 2005).

2. There is the case of two employees in what at least appears to be a consensual relationship. Eventually, the relationship sours, and one romantic partner makes life miserable at work for the other partner. This is a particular problem when one partner has a higher position at the workplace, as there may be a viable claim of coercion. In one such case, a Los Angeles Superior Court jury awarded a secretary at Northrop Corporation $500,000 in compensatory damages and $250,000 in punitive damages. The case settled for $1.3 million after plaintiff filed a motion for her attorney fees. Darrow v. Northrop Corp., Case No. BC067428 (L.A. Superior Ct. Aug 1, 1997). In another such case, a federal court jury awarded a security guard $827, 500 in compensatory damages and $4,137,500 in punitive damages (which the court reduced to $300,000). Paterson v. California Dept. of General Services, Case No. 05-CV-00827 (E.D. Cal. Apr. 10, 2008).

3. There is the case of a high-level manager who flaunts his or her romantic relationships with subordinates in the workplace. Even if the subordinates who are romantically involved with the manager do not complain, other employees may have claims that they felt demeaned by the conduct. The California Supreme Court recognized the validity of such a claim in Miller v. Department of Corrections, 36 Cal.4th 446, 115 P.3d 77 (2005).

What To Do

To reduce sexual harassment liability risk associated with two employees' being involved in an office romance, some employers have such employees sign relationship agreement, or love contract. Through the agreement, the employees acknowledge that they are in a voluntary and mutual consensual romantic relationship and that no harassment has taken place. The efficacy of such agreements has not yet been validated by any court decision. For an example of what such an agreement might look like, click here.

Whether or not an employer chooses to implement a love contract procedure, it must make sure that it follows accepted anti-harassment procedures. That means (1) have a strong anti-harassment policy written into the employee handbook and posted prominently in the workplace, (2) provide anti-harassment training for all your employees, (3) ensure that the policy includes an effective complaint procedure that all managers and supervisors have been trained in, (4) if a complaint is received, make sure that it is investigated immediately, (5) if an investigation reveals a violation of policy, take prompt and effective action to deal with the wrongdoing.

If an employer acts promptly and effectively when first notified of a harassment situation, it may reduce or eliminate its liability. For a case where an employer escaped liability for an employee dating relationship that went sour, see Forrest v. Brinker International Payroll Company, LP, Case No. 07-1714 (1st Cir. Dec. 19, 2007).

I-9 Revamp Delayed

The Department of Homeland Security's United States Citizenship and Immigration Services has delayed the effective date of its I-9 form revisions until April 3, 2009. Read the full text of the announcement.

The revisions, announced in December 2008, will end authorization to accept expired documents, remove documents that are no longer issued from the list of acceptable documents, and make other technical changes. The original federal register announcement is available here.

For now, you should continue to use the existing I-9 Form, which is available here. After April 3, 2009, you should use the new form.

On The Clock Or On Your Own

A recent decision in a class action by limousine drivers against their employer reminds us that sometimes employers may have to pay their employees for doing nothing. The Second District Court of Appeal in Los Angeles directed the trial court to consider whether the class of drivers should have been paid for gap time, which is what the drivers called their on-call time between assignments. Ghazaryan v. Diva Limousine, Ltd., Case No. B201509 (Dec. 22, 2008).

Although the appellate court did not rule on the merits of the drivers' claims, the facts referred to in the complaint afford an opportunity for exploring the wage and hour aspects of on-call time. In Ghazaryan, the company prohibited the drivers from using their vehicles for personal use, required them to stay near the vehicle and to remain in uniform between assignments. Some drivers were, nonetheless, were able to use gap time for their own purposes. Some drivers were paid on an hourly basis for all their time, including any gap time. Others were paid by the trip. The company's exposure will in large part depend on its obligation to pay for gap time.

An employer must pay for all "hours worked," which Section 3(H) of the California wage orders defines as "the time during which an employee is subject to the control of an employer, and includes all the time the employee is suffered or permitted to work, whether or not required to do so." (Wage Order No. 9 applied to the limousine drivers.) Whether or not an employer must pay for time that an employee spends waiting to be called to work depends upon the degree of control that the employer exercises over the employee's activities during the on call time.

Two advisory letters from the Division of Labor Standards Enforcement may help employers understand the principles. In a March 31, 1993 letter, a writer described the following practice: "Assume a regularly-scheduled non-exempt employee who works at a hospital located in a rural area and is not required to remain at or about the hospital or any premises designated by the employer; during his off-duty hours, but is required to be 'on-call' for designated periods of time and arrive at the hospital within 20 minutes from the time he is called by pager or telephone." The Division declined to say whether such circumstances would never require compensation, because the answer to the question is heavily dependent upon all the facts of each case. It pointed out that geographical restrictions and strict time frames for response will often lead to a determination that the time is compensable.

In a December 28, 1998 letter, the Division was asked about the hours worked of apartment managers who lived in the complexes where they worked. Again, the Division was unable to give a definitive answer as to which hours should be paid for, because the requester of the opinion did not provide enough specifics. However, the opinion letter identifies a number of factors that are important to the determination: geographic restrictions, how quickly an employee must respond to a page on a beeper, how frequently the employee is called to work, whether the employee is free to engage in personal activities, and the consequences of failing to respond within the required time.