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Related video: "Employee Forced Choice Act"
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Employment Law: The Shifting Legal Landscape

The wage-and-hour epidemic, Employee Free Choice Act and downsizing repercussions top the areas of legal concern in the coming year.

HR professionals are about to experience great changes and challenges as we enter 2009. Global HR compliance, downsizing, a new president and Congress, family-responsibility challenges, the rise of "workplace bullying" claims, the need for more aggressive wellness programs and the threat of employment-law class-actions are merely a sampling of what awaits.

While each of these topics warrant review, three mega-trends mandate attention: taming the wage-and-hour class-action epidemic, preparing for the greatest labor-law changes in 70 years and avoiding downsizing legal landmines.

Wading through Wage-And-Hour

No employment-law trend is more certain, universal or important than the total wage-and-hour compliance initiative and stopping the epidemic of wage-and-hour class-actions. It is predicted that manager and employee wage-and-hour training, especially online, will become as common by 2010 as harassment-prevention training.

A crisis exists in workplaces that is as dramatic as the collapse of the housing market and out-of-control gas prices. The Department of Labor reports that seven of 10 employers are still out of compliance with wage-and-hour laws.

Between 2003 and 2006, Fair Labor Standards Act complaints filed in federal court doubled, reaching 4,203. In 2007 alone, complaints increased nearly 60 percent to 7,310. State court wage-and-hour lawsuits also reached epidemic proportions; California and Florida led with more than 1,000 each annually. Average class-action settlements have reached $23.5 million under the FLSA and $24.4 million under state wage-and-hour laws.

The class-action umbrella includes claims regarding overtime, employee misclassification, meal and rest breaks, off-the-clock work, donning and doffing and travel time, expenses reimbursements and tip pools. In Congress, the mood is for greater enforcement of what has been labeled "wage theft."

This is a call the Barack Obama administration will surely embrace. In 2009, the No. 1 mandate for HR professionals will be to end the "wage-and-hour war."

Employers must awaken to the crisis and attack. Legislative reform, revised regulations, new case law, and advanced litigation and settlement strategies are all part of finding solutions. However, at the center of this "war" comes an ear-shattering call to recognize that the best immediate answer is within the employer's control -- dramatic emergency wage-and-hour compliance procedures.

When litigation commences, the "war" is lost every time. No matter how successful the judgment or settlement, the loss of management time and the cost of attorneys' fees injure an organization's bottom line. Litigation weakens employer trust and polarizes people who must work together.

Most employers are committed to doing the right thing and complying with legal requirements. This core value and common-sense reality demands a new age of total wage-and-hour compliance. This is the clear and strong trend that will sweep the nation in 2009.

The goal of a total wage-and-hour compliance initiative is not merely to "win" or do better in the conflicts, as that presumes continuing litigation. The objective is to reach a level of compliance that greatly reduces the likelihood of litigation. With thousands of plaintiffs' attorneys examining every aspect of the payroll process, employers must expect maximum scrutiny. Every employee who is terminated or demoted, or who experiences an unpleasant workplace event, is encouraged by Internet and television advertising to seek the advice of counsel. In almost every intake interview, the attorney's questioning turns to wage-and-hour issues in an attempt to find additional claims. Inspired by the prospect of turning a small individual claim into a multimillion-dollar class-action, the organization's wage-and-hour compliance goes under the microscope.

If the goal is to end the wage wars, a total wage-and-hour compliance initiative is mandatory.

This initiative has seven key elements:

* Audit existing wage-and-hour policies and practices. Decide whether to attempt to make this audit attorney-client privileged. Many good checklists exist, including one published by the Open Compliance and Ethics Group.

* Establish state-of-the art policies and procedures. Create policies that are not only compliant, but easily followed and litigation-ready.

* Carefully plan needed changes. Determine whether your changes will improve compliance without admitting any past wrong and consider new compliance programs from the DOL and corresponding state agencies that make employees whole without penalties.

* Adopt wage-and-hour-complaint procedures. Encourage employee reporting of perceived problems, investigate and make needed corrections; this helps create new affirmative defenses for litigation.

* Train HR, managers and employees. The vast majority of employers fail to do adequate training. Training is essential for compliance and to defend class-actions.

* Use new technology. From audit software and compliance Web sites, to GPS-based time-management systems and e-learning, technology tools are essential for total compliance.

* Verify compliance practices. After implementing the system, periodic verification is essential; many employers with good policies have found that they are not being followed in practice.

Obama's Labor Promise

The elections of Obama and Democratic majorities in Congress herald a new era for organized labor. Strongly supported by organized labor, the newly elected government is expected to enact the Employee Free Choice Act. Indeed, President Obama was a co-sponsor of the bill while a senator. In accepting the endorsement of the SEIU, President Obama vowed to pass the EFCA, stating: "We will pass the Employee Free Choice Act. We may have to wait for the next president to sign it, but we will get this thing done."

Related video: "Employee Forced Choice Act"

EFCA would result in the most sweeping changes to the National Labor Relations Act since the original 1935 Wagner Act.

It would amend the NLRA to: require the National Labor Relations Board to certify a labor union as the exclusive bargaining representative through authorization cards signed by employees, without the benefit of a government-supervised, secret-ballot election; require arbitration if an employer and a newly certified union are unable to reach a first contract in a timely fashion; and expand the NLRB's powers for remedying employer unfair labor practices during union-organizing campaigns and during initial bargaining, including granting it the authority to impose penalties.

Before rushing to abandon secret-ballot elections and impose collective-bargaining agreements through arbitration, the experience of our next-door neighbor, Canada, should be examined. EFCA-like legislation was present in nine of 10 Canadian provinces until the late 1980s. Since then, there has been a steady trend toward secret-ballot elections.

Currently, six Canadian provinces -- British Columbia, Alberta, Ontario, Nova Scotia, Newfoundland and Labrador, and Saskatchewan -- use secret-ballot elections to certify unions, although Ontario and Nova Scotia allow majority-card certification in construction industries. Even many provinces that use card checks require super-majorities for certification.

The reasons for rejecting the card-check process are many, including card falsification, intense pressure to sign and lack of time for an informed decision.

The 2009 agenda for HR professionals must assume EFCA in some form will become law. In anticipation, employers should consider auditing conditions to determine whether they would support an organizing drive; monitoring union-organizing activities within the industry or geographical location; training management about rules associated with union organizing, potentially providing employees with information and arguments about union representation when organizing activity is anticipated and -- in some highly targeted industries -- even before receiving evidence of organizing activity; and, most of all, reviewing overall employment conditions to ensure they are competitive and the needs of employees are being addressed.

Facing Reductions in Force

A third mega-trend is managing the size and composition of the workforce in a time of economic challenges. It is projected a million jobs will have been lost in 2008, with unemployment rates increasing and more reductions in force expected in 2009. What differs from the past is these economic adjustments are happening in smaller groupings, are heavily impacting older workers and are partially hidden within restructurings. To avoid legal landmines, HR procedures need a makeover.

In 2008, many reductions impacted contingent workers. These were less complicated and more expected, and created less legal risk than direct-hire layoffs. In 2009, the downsizings will heavily impact direct-hire employees. To provide the appearance of stability, many of these layoffs are planned as restructurings. Products and services will be eliminated or consolidated, resulting in job eliminations.

Often, these are announced by department or product and appear small. When the numbers are aggregated, however, hundreds of thousands of laid-off employees will be released into a difficult economy.

In dusting off RIF plans, HR professionals properly review the classic issues: justification for the RIF, voluntary exit incentives, position identification, decision-maker identification, ensuring proper selection criteria, reviewing current policies and procedures for compliance, managerial training, adverse impact analysis of protected categories, updating severance and release agreements, checking for Worker Adjustment and Retraining Notification Act implications and controlling hiring during the RIF. These remain important, but are joined by four new legal landmines requiring new approaches:

* The wage-and-hour surprise. Terminated employees will use the Internet to learn about their rights and find a plaintiffs' attorney, even if only to review a severance agreement. In sharp contrast to prior periods of economic contraction, the plaintiffs' attorneys have become part of the wage-and-hour gold rush. An employer's wage-and-hour practices are guaranteed to receive close examination by the courts, although irrelevant to the downsizing.

Many lead plaintiffs in 2008 class-actions were recently laid off. The highest risk of such litigation is now occurring during layoffs and restructurings. This mandates full activation of the wage-and-hour compliance initiative previously presented as part of preparing for an RIF. Moreover, review the language of severance-package releases. Employees usually cannot waive wage claims, but can affirm they have been fully paid.

* WARN Act surprises. Special attention is needed regarding federal and state WARN statutes. Because the reductions are somewhat hidden and in smaller groups, HR professionals must maintain flowcharts showing the number impacted during rolling 90-day periods. Also, check for any new state law requirements (e.g., in February 2009, New York's law becomes effective, requiring 90 days' notice).

* Heightened age-discrimination standards. The demographics of the workplace will increase the number of older workers impacted, and their rights have expanded. In 2008, the U.S. Supreme Court raised the bar on what is needed for employers to defend against Age Discrimination in Employment Act claims.

In Meacham vs. Knolls Atomic Power Laboratory, the court held that if older workers are adversely impacted, the employer must not only show that the selection was based on a "reasonable factor" other than age, but also must persuade the jury or other trier of fact that it was reasonable to rely on this factor. This can be difficult if the criterion was subjective, such as a supervisor's ranking without objective criteria.

The court recognized that placing the burden of persuasion on employers "will sometimes affect the way employers do business with their employees." This is a mandate in 2009 for more objective standards, better documentation and more management oversight, as well as working with a statistician and/or legal counsel to conduct impact analyses.

If an RIF would adversely impact any protected group, work with counsel to ensure such decisions are defensible. If necessary, modify the RIF factors and/or revise the weight assigned to each factor.

* New-release landmines. Release requirements have become more difficult under the Older Worker Benefit Protection Act and other statutes. For group releases, special statistical information is required about the job titles and ages of those in the decisional unit.

Also, some courts have interpreted the OWBPA to require a listing of the "decisional factors." Slight errors could invalidate the entire release. HR professionals must carefully review releases under the new standards -- they must be updated.

- Garry Mathiason is a shareholder, partner and vice chair of Littler Mendelson in San Francisco, and widely recognized as a leading authority on employment-law trends in the United States.


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