The federal Fair Labor Standards Act (FLSA) establishes requirements for minimum wages and overtime pay.  The FLSA’s requirements can be complex, and employers can face significant liability for unpaid wages and liquidated damages by failing to ensure compliance with its myriad requirements.

The FLSA contains a somewhat unique quirk regarding its statute of limitations.  The statute of limitations for FLSA violations is two years.  However, if the plaintiff(s) can show that the violation was willful, the statute of limitations is extended to three years.  In other words, employees who commit willful violations face a potential additional year of damages (if the unpaid wages date back at least three years before the filing of the lawsuit).

In an FLSA case filed against Lackawanna County, the Third Circuit recently clarified what constitutes a willful violation to trigger the third year of liability under the FLSA.  In Souryavong v. Lackawanna County, the County failed to aggregate the hours worked by part-time employees who worked multiple jobs for the County.  For overtime pay purposes, all hours worked by a non-exempt employee for an employer must be recorded and counted.  If the total hours worked in any workweek exceeds 40, the employee is entitled to overtime pay, regardless of whether the hours were worked in one or multiple positions for the same employer.

Thus, it was undisputed that the County violated the FLSA by failing to aggregate weekly the hours worked for these part-time employees.  It also was undisputed that the County was liable for unpaid overtime pay and liquidated damages dating back two years from the date the lawsuit was filed.  What was in dispute was whether the County’s violation was willful, which would trigger a third year of damages.

The plaintiffs claimed that the violation was willful and pointed to testimony by the County’s chief financial officer and HR director that the County had been generally aware of its FLSA obligations since 2007.  The plaintiffs also identified an e-mail from the HR director to two other County officials regarding “wage and hour issues.”

The Third Circuit rejected the plaintiff’s willfulness argument.  Specifically, the Third Circuit found that the evidence did not establish that the County was aware of the specific overtime pay issue (i.e., aggregating hours worked by part-time employees who worked multiple jobs for the County) before or at the time that the FLSA violations occurred.  General awareness of the FLSA’s existence and its general requirements is not enough to prove a willful (i.e., intentional) violation of one of its specific requirements.

There are two important takeaways from the Third Circuit’s Souryavong decision:

  • To prove a willful FLSA violation and get that third year of potential damages, employees will need to prove that the employer actually knew of the specific FLSA requirement at issue at the time of the violation and intentionally did not comply with it. General FLSA awareness is not sufficient to prove a willful violation of a specific requirements.
  • Employers should keep this decision in perspective and understand what it means and what it does not. Even with the Third Circuit’s favorable decision, the County still was liable for two years of unpaid wages for multiple employees, an equal amount in liquidated damages, an additional $56,000 for the plaintiffs’ attorneys’ fees, and an additional undisclosed amount for its own attorneys’ fees.  FLSA violations present significant potential liability for employers, and it is in every employer’s interest to audit its pay practices and ensure compliance before a lawsuit is filed or a Department of Labor investigation begins.  While this decision confirms that it can be hard to establish a willful violation, employees need to prove only a violation of the FLSA (regardless of whether the violation was intentional) to get two years of damages plus their attorneys’ fees paid by the employer.

This post was originally featured on the McNees Labor and Employment Blog.

Employers often shy away from discharging employees for disciplinary reasons when those employees are receiving workers’ compensation benefits, such as in instances where the employee is working a modified duty assignment.  However, such employees can and should be held to the same standards as other employees, including compliance with applicable policies and procedures.  Additionally, so long as the discharge is found to be related to the disciplinary violation, any subsequent loss of earnings will be deemed to be unrelated to the work injury, thus rendering the discharged employee ineligible for reinstatement of workers’ compensation wage loss benefits.

In a recent unreported Commonwealth court case, (Waugh v. WCAB, No. 702 C.D. 2016), the Claimant was employed as a certified nursing assistant (CNA) at a medical center.  She had sustained an accepted work injury to her right arm, when a patient grabbed and twisted her arm in the course and scope of her employment.  She underwent two surgeries and eventually returned to work in a modified duty capacity.

While working modified duty, Claimant was reprimanded for acting outside the scope of her employment for administering medication to a patient.  Several months later, there was a similar incident, in which Claimant applied a tourniquet to a patient while assisting a phlebotomist, who was attempting to draw blood.  Employer’s policy in the event a phlebotomist cannot locate a vein, is to call a specialized IV team to insert the needle and draw blood.  Claimant was terminated for this second instance of acting outside the scope of her employment.  Despite her protests that she was “only trying to help,” the termination was held to be proper, as was the workers’ compensation determination denying reinstatement of benefits.

The Court reaffirmed the longstanding rule that a lack of “good faith” on the part of the claimant, is sufficient to deny reinstatement of workers’ compensation wage loss benefits.  This is so, even where unemployment benefits are awarded, on the basis that the employer had not established a case of willful misconduct under the Pennsylvania Unemployment Compensation Act.

The determination of good faith or bad faith is obviously “fact sensitive,” but in situations where the employer would discharge the employee absent a workers’ compensation backdrop, this factor alone should not discourage the employer from taking the appropriate disciplinary action, including discharge.

As the baby boom generation reaches retirement age, many Pennsylvania municipalities face the potential of substantial knowledge and skill loss.  To confront this challenge, municipalities continue look for ways to keep their seasoned employees long enough for knowledge transfer to occur.  The problem can be finding sufficient incentives.  For these employees, the most important benefit is often their pension.  Therefore, municipalities’ ability to entice these employees to stay is often directly linked to pension distributions. Continue Reading In-Service Pension Distributions Now Simplified in Pennsylvania: Is it Time to Amend Your Pension Plan?

Much like a business corporation, a municipality can only act through its employees. A municipal official may inadvertently (or advertently) make representations regarding municipality business, leading to unintended consequences. Municipalities must keep in mind that their agents and employees, including township supervisors and other officials, can bind municipalities to agreements and subject them to liability for breach of contractual obligations.

The Pennsylvania Commonwealth Court decision of Pezzano v. Towamencin Township recently addressed whether a Township can incur contractual liability stemming from the actions of municipal supervisors. In Pezzano, Towamencin Township entered into a confidential separation agreement with an employee, Kevin Pezzano. The terms of the agreement specified that neither Pezzano nor the Township would divulge any information to a third party about the agreement. The Township Board of Supervisors approved the agreement by a vote of 3-2, and the Township’s solicitor signed the agreement. A few days later, the dissenting supervisors, David Mosseo and Harold Wilson, provided statements to a local newspaper. The newspaper published an article which quoted Mosseo and Wilson as saying the Township terminated Pezzano for cause.

In response, Pezzano filed numerous claims against Mosseo and Wilson, individually, as well as a breach of contract claim against the Township. The trial court found that Mosseo and Wilson were entitled to official immunity because they acted within the scope of their authority as township officials and dismissed the claims against them.   The trial court likewise dismissed the claim against the Township because, since Mosseo and Wilson were not parties to the agreement with Pezzano, their actions could not constitute a breach on the part of the Township.

On appeal, the Commonwealth Court disagreed and ruled that the Township could be held liable for breach of contract because Supervisors Mosseo and Wilson were agents of the Township. Consequently, even though an agent of a municipality, such as a township supervisor, may not be personally liable for his or her actions, the municipality itself may still be held liable if its agent breaches an obligation of the municipality.

Pezzano leaves us with some important takeaways. When a municipality is bound to a contract, it will be held vicariously liable for actions by its agents, servants, and employees which amount to a breach of its contractual obligations. Individuals authorized to act on behalf of a municipality, such as a supervisor, mayor, council member, or manager, will be considered agents if their actions are within the scope of their authority. Accordingly, municipal officials must act and choose their words carefully. To avoid potential problems, officials should keep abreast of their municipality’s contractual and other legal obligations, and think carefully before making statements regarding the municipality.

Liability arising from the actions of officials is only one example of the issues faced by municipalities and other local government organizations. The Public Sector Group at McNees Wallace & Nurick can assist solicitors and municipal officials in navigating the unique legal issues that face governmental entities of all sizes.

The author extends a special thanks to summer associate Logan Hetherington for assisting in preparing this article.

This post was originally featured on the McNees Labor and Employment Blog.

Back in 2015, Pittsburgh enacted a paid sick leave ordinance, following a trend among cities throughout the country. Pittsburgh’s paid sick leave ordinance required employers with fifteen employees or more to provide up to forty hours of paid sick leave per calendar year. Employers with less than fifteen employees were not spared. The ordinance required that those employers provide up to twenty-four hours per calendar year. The impact: 50,000 workers would receive paid sick leave.

But, what authority did Pittsburgh have to impose such a requirement? Continue Reading A Tale of Two Cities: The Demise of Pittsburgh’s Paid Sick Leave Ordinance and the Durability of Philadelphia’s

In January 2015, the Seventh Circuit, recognizing that it was an outlier among the Circuits in holding that pretrial detainees could not sue under the Fourth Amendment but rather instead sued under the Due Process Clause to challenge his/her detention, stated that a request by a detainee to overturn settled Circuit precedent was “better left for the Supreme Court.” In the Supreme Court’s words, it granted cert “on cue,” and on March 16, 2017, overturned the Seventh Circuit’s precedent by holding that pretrial detainees retained the right to sue under the Fourth Amendment over their detention for unlawful search and seizure. The Court held that the Fourth Amendment governs a claim for unlawful pretrial detention even beyond the start of legal process.

Continue Reading Supreme Court Reins in the Seventh Circuit and Reaffirms Fourth Amendment Protections

As if Counties could forget that Court employees are just a little different, the Commonwealth Court of Pennsylvania sent us another reminder when the Court held that the Pennsylvania Whistleblower Law does not apply to judicial employees.

Gregory Thomas was a Juvenile Probation Officer serving with the Washington County Court of Common Pleas until October 2014, at which time he was allegedly forced to quit. Prior to his resignation, Thomas had been a participant in an investigation regarding the misappropriation of funds by the Juvenile Probation Office. During the investigation, it was revealed that the Chief of the Juvenile Probation Office had directed Thomas to email the County’s purchasing office in July 2014 to state that a mixed martial arts training session had taken place on June 6 and 7 in partial satisfaction of the state’s 40-hour annual training requirement. The email sought, and was granted, funding for the training. No such training actually occurred, and Thomas confirmed to the investigating detectives that he had not attended this training; he alleged that he had been told by the Chief Probation Officer to tell the detectives otherwise.

Continue Reading Scope of Pennsylvania’s Whistleblower Law Examined

For government employers, disciplining and terminating employees can be especially difficult. Not only does the public employer face the same challenges in complying with the standard alphabet soup of employment laws that private employers do, including the ADA, ADEA, FMLA, Title VII, etc., they also have the complicated task of considering the application of an employee’s Constitutional rights in making employment decisions. Unfortunately, the protections provided by the constitution to government employees don’t rely on the kinds of “immutable” traits often in issue in the alphabet soup context…which means that determining when constitutional rights could be violated by a government employer’s actions is particularly troublesome.

However, in the recent Supreme Court decision in Heffernan v. City of Paterson, issued on April 26, 2016, the Court brought the analysis applicable to First Amendment retaliation claims closer to your typical alphabet soup case in one small way – focusing on the employer’s intent. In a typical discrimination context, the employer’s intent is key when examining the reason given for the action and the circumstantial evidence that may call that stated reason into question. In short, the question is: was it the employer’s intent to discriminate in disciplining an employee, or was it really the employee’s violation of an employer policy?

In the First Amendment context, employer intent is usually irrelevant or assumed; the focus instead is on whether the speech or activity is personal or on a matter of public interest, whether the employee acted as a citizen or an employee, and how the speech or activity could harm the government’s interests. Heffernan, however, presented the unique situation where the employee contended he didn’t intend to speak or act at all, but the employer punished him for its perception that he had. The Court therefore faced the following question: whose intent is more significant in the constitutional rights context? As in the alphabet soup discrimination case, the Heffernan Court found that it is the employer’s intentions that create the cause of action and violation of the employee’s rights.

In reaching this decision, the Court considered the following facts: Jeffrey Heffernan was employed as a police officer for the City of Paterson in 2005 under Chief of Police James Wittig. Both the Chief and Heffernan’s direct supervisor had been appointed to their positions by the Mayor, who was running for reelection. During the campaign, Heffernan’s colleagues spotted him at campaign headquarters talking with campaign workers and holding a campaign sign for the Mayor’s opponent, who was a known friend of Heffernan. When word reached his supervisors, Heffernan was demoted from a detective position to a patrol officer position, and given an undesirable patrol post, to punish his involvement in the opposition’s campaign. Heffernan denied being involved in the campaign, and denied supporting the candidate, stating that he was only picking the sign up for his mother, who was bedridden and could not do it for herself.

In response to his demotion, Heffernan filed a lawsuit against the City contending that he had been demoted because the City believed he engaged in conduct that constituted protected activity, even though he denied that he had intended to speak or act.

Prior case law is very clear that government employers are prohibited from making an employment decision because an employee supports a particular political candidate. However, Heffernan was contending that he didn’t actually support the oppositional candidate, but the City mistakenly believed he did. The City’s position in the litigation was that, since he hadn’t intended to engage in protected activity, his activity wasn’t protected…and its demotion decision could therefore only violate his rights if in fact he actively supported the candidate.

Ultimately, the Court concluded that “the government’s reason for demoting Heffernan is what counts…When an employer demotes an employee out of a desire to prevent the employee from engaging in political activity that the First Amendment protects (even if the employee did not intend to engage in that activity), the employee is entitled to challenge that unlawful action under the First Amendment…” Whether the employer has correctly or incorrectly deduced the employee’s motives in engaging in particular behavior, the Court opined that the same constitutional harm would result – an employee would be demoted or terminated for appearing to engage in protected activity, thereby discouraging other employees from engaging in what should be protected activity. Because the harm would result regardless of the accuracy of the employer’s belief, the employer’s reason for the employment action must govern in determining if a First Amendment cause of action and violation exists.

Unfortunately for Heffernan, his fight with the City will continue on, as the Supreme Court did not reach the ultimate question of whether his rights had been violated. To the contrary, the Court’s decision remanded the case back to the trial court to determine whether or not Heffernan’s demotion occurred pursuant to an existing neutral policy prohibiting police officers from overt involvement in any political campaign, and whether such a policy complies with constitutional standards generally.

The immediate take-away for government employers and elected officials (and the HR personnel who love them), in light of the Heffernan decision should be on the reinforcement of what we know already from the alphabet soup cases: we must examine the reason for an employment decision before it is made to ensure there is no protected classification or protected activity motivating the decision. Even if the employer is wrong about what the employee intended by his actions, a decision motivated by an intent to punish what would otherwise be protected activity could violate the constitution.

Yeah, I know, crazy right? Here is the story. Apparently the Union did not think so. When the American Federation of State, County and Municipal Employees (“Union”) and the City of Philadelphia (“City”) could not reach terms on a new collective bargaining agreement, they submitted the dispute to binding interest arbitration.

The Union was seeking, among other things, 8 percent annual wage increases! The City countered that it simply did not have the money to fund the Union’s demands. The Union argued that the City’s financial health was irrelevant. Huh? How can you pay for something if you don’t have any money?

The Union’s argument was essentially – cut programs, raise taxes, lay off other workers we don’t care; how you pay for our 8 percent annual pay increases is your problem not ours! Insane, right?

Thankfully, the arbitration panel rejected the Union’s argument and determined that it was appropriate to consider the City’s ability to pay. However, the Union was undeterred. The Union petitioned the court to vacate the arbitration decision, arguing that the panel should not have considered the financial health of the City when rejecting their hefty wage increases. Thankfully, the court disagreed.

The court concluded that the Union’s arguments lacked merit, and that it was appropriate for the arbitration panel to consider ability to pay when making decisions regarding wages and other compensation related items.

Thankfully, the arbitration panel and the court brought some sanity to what seemed like an insane dispute. Ability to pay is obviously highly relevant to consideration of pay and benefit demands. Public employers are facing increasing budget constraints these days and are often on the brink of distressed status. When evaluating union demands, public employers must consider their ability to pay and when appropriate explain to the union early and often that the budget simply cannot tolerate increased expenses. Where appropriate, lay the foundation for demonstrating the financial inability to meet the union’s demands.