Resource for Companies Evaluating Compliance with New Overtime Laws

IMG_5802Many companies are in the process of completing internal audits to prepare for the new salary and overtime rules that go into effect on December 1, 2016. While the changes do not impact the duties-portion of FLSA exemptions, they do change the salary levels for exempt workers and highly compensated employees.

While December sure sounds far away, it is really just around the corner, considering that employees may need to be reclassified, job descriptions updated, and policies modified that could be impacted by the changes (e.g., telecommuting, social media, recording of time).

Recently, I was speaking with a human resources group that had some fantastic questions about the new law and what the changes would require and I came across an equally *fantastic* resource published by the Department of Labor. It answers those burning questions like:

Will the salary level be prorated for part-time employees?  (Spoiler alert: The DOL says, no.  Whether a worker is full-time or part-time, the standard salary level to qualify for exemption will be $913 per week.)

Does the final rule have an impact on the salary basis or hourly rate for computer professionals?  (Spoiler alert: The hourly salary didn’t change but the weekly standard salary has increased.)

When do the “quarterly” catch-up payments take place—is it calendar year? Fiscal quarter? (Spoiler alert: Up to the employer’s discretion to determine the quarter.).

What about a surprise, discretionary holiday bonus, can that be included in a catch-up payment? (Spoiler alert: No.)

Is there still an exemption for outside sales persons? (Spoiler alert: Yes.)

These questions, answers, and more are discussed in detail in this great resource:

Find the Department of Labor’s Handy FLSA Question and Answer Resource here.

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Standard Severance Agreements May Need to Be Revised

employment contractMy colleagues, Bill Hayden and Anne Dwyer, recently published a legal alert addressing two recent cease-and-desist orders issued by the Securities and Exchange Commission (SEC). The lessons learned from the cease-and-desist orders could impact both publicly and privately held employers who may want to consider if their severance agreements need to be revised.

Legal Alert:  Standard Severance Agreements May Need to Be Revised
by William R. Hayden and Anne E. Dwyer

Many employers offer severance agreements to departing employees which, at least in part, are designed to protect the employer from disclosures of confidential information and from any future claims or recovery by the departing employee. Unfortunately, two recent cease-and-desist orders issued by the Securities and Exchange Commission (SEC), which contained both large monetary penalties and burdensome notice requirements, may require employers, both publicly and privately held, to revise the language that is currently contained in most standard severance agreements.

In less than one week, the SEC issued two cease-and-desist orders against publicly held companies finding that the contents of their standard severance agreements violated Rule 21F-17 of the Dodd-Frank Act, which prohibits any person from taking “any action to impede an individual from communicating directly with the Commission staff about a possible securities law violation, including enforcing, or threatening to enforce, a confidentiality agreement.”

First, on August 10, 2016, the SEC announced a cease-and-desist order against BlueLinx Holdings, Inc. finding that the confidentiality and waiver provisions contained in its standard employee severance agreements violated Rule 21F-17. Specifically, BlueLinx’s severance agreements contained confidentiality provisions prohibiting employees from disclosing confidential Company information unless compelled by law to do so and only after notifying the Company’s legal department. For example, some of the Company’s severance agreements required the departing employee to confirm that he or she “has not and in the future will not use or disclose to any third party Confidential Information, unless compelled by law and after notice to BlueLinx.”

Further, in 2015, BlueLinx added to its agreements a provision that is found today in many companies’ severance agreements providing:

[N]othing in this Agreement prevents Employee from filing a charge with … the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Securities and Exchange Commission or any other administrative agency if applicable law requires that Employee be permitted to do so; however, Employee understands and agrees that Employee is waiving the right to any monetary recovery in connection with any such complaint or charge that Employee may file with an administrative agency.

The SEC found these two provisions unlawfully restricted the ability of departing employees to disclose confidential corporate information and “forced those employees to choose between identifying themselves to the company as whistleblowers or potentially losing their severance pay and benefits.” Further, the agreements “removed the critically important financial incentives that are intended to encourage persons to communicate directly with the Commission staff about possible securities law violations.” (often referred to as a whistleblower’s “bounty”).

After the SEC instituted legal proceedings against BlueLinx, the Company settled by agreeing to a cease-and-desist order and the payment of a $265,000 fine. In the SEC’s view, the mere presence of the above discussed provisions in severance agreements was enough to warrant such a monetary penalty, in that there is no indication that the Company ever took any steps to enforce those provisions. In addition, BlueLinx was required to agree to include a provision in all future severance agreements assuring former employees that they were not prohibited from filing a charge, communicating or participating in any investigation with government agencies and further assuring the employees that the severance agreement did not prevent the employee from accepting an award for providing information to the government agencies. Even more onerous, BlueLinx was forced to agree to contact all former employees who had signed a severance agreement with the Company over the past five years and inform them of the SEC’s order and that they were not prohibited from providing information to the Commission or accepting a whistleblower award from the Commission (i.e., “bounty”).

Less than one week later, on August 16, 2016, the SEC announced a second cease-and-desist order that included a $340,000 penalty against a California-based health insurance provider, HealthNet, based upon the same alleged violations of Rule 21F-17. HealthNet’s standard severance agreements contained a provision providing:

nothing in this Release precludes Employee from participating in any investigation or proceeding before any federal or state agency or governmental body … however, while Employee may file a charge, provide information, or participate in any investigation or proceeding, by signing this Release, Employee, to the maximum extent permitted by law … waives any right to any individual monetary recovery ….

Again, the SEC found that this provision “directly targeted the SEC’s whistleblower program by removing the critically important financial incentives that are intended to encourage persons to communicate directly with the Commission staff about possible securities law violations.” In addition to being required to pay a $340,000 fine, HealthNet was also required to agree to contact all former employees who had signed a severance agreement, provide them notice of the SEC’s order, and provide them a statement that HealthNet does not prohibit employees from seeking and obtaining a whistleblower award from the SEC (i.e., “bounty.”). Again, these sanctions were imposed even though it was undisputed that the company had taken no action to enforce these provisions.

While the SEC generally regulates only public employers, the SEC has made it clear that its reasoning in these actions will apply to both private and publicly traded companies. In fact, Rule 21F-17 was specifically designed to encourage employees of both privately and publicly held companies to report possible violations of securities laws.

In summary, in these recent actions, the government held that it is unlawful for severance agreements to contain provisions that:

  1. prohibit the disclosure of confidential company information unless required by law;
  2. prohibit the disclosure of confidential company information without prior notice to the company; and
  3. prohibit the former employee from recovering additional compensation in the form of whistleblower “bounties.”

Considering the large fines ($265,000 and $340,000) and onerous notice requirements compelled by the SEC in these recent actions, both privately and publicly held companies may want to have their severance agreements reviewed in order to decide whether they need revision in light of these recent actions.

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Advocates for Individuals with Disabilities Foundation and Peter Strojnik Have Filed Another Wave of Disability Lawsuits in Arizona

Just as I finished writing about the wave of new Title III Americans with Disabilities Act (ADA) lawsuits in Arizona, ABC15 published an expose on one of the organizations leading the pack in filing thousands of lawsuits– Advocates for Individuals with Disabilities Foundation.  

Shortly after this expose, Advocates for Individuals with Disabilities Foundation and their outside counsel Peter Strojnik filed another wave of lawsuits (almost 150!!) last week in Maricopa County Superior Court against Arizona businesses. 

There are a lot of areas that the ADA Accessibility Guidelines cover, but these lawsuits typically focus on the parking lots. Readers of my blog know how much I love infographics, and ABC15 has a great graphic discussing how to achieve ADA compliance for the parking lot signage and parking space issues that arise in these lawsuits: 



Many local companies that have not yet been sued have been exploring whether their businesses are already in compliance (and patting themselves on the back when they realize they already are in compliance). Once the lawsuit is filed and served, however, companies are learning that achieving ADA compliance is not always the end of the lawsuit. While a company may very well argue that the claims have been mooted, the plaintiff may disagree that the claims can/should be dismissed and the issue is forced to go to the court (where the companies can also assert many other defenses) or the parties will agree to a settlement.


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Serial Plaintiffs Are Filing Waves of Disability Cases

Hotels, restaurants and retail establishments have team of paper peoplebeen flooded with new lawsuits filed by serial plaintiffs that allege that a property (a place of public accommodation) is in violation of Title III of the Americans with Disabilities Act (ADA) or the equivalent state law, such as the Arizonans with Disabilities Act (AzDA).

Nearly identical allegations are filed against businesses throughout the state, and they usually allege that an individual with a disability either visited a business or attempted to visit a business, but was unable to do so due to a barrier on the property. In other words, the plaintiff is alleging that the company/defendant failed to comply with some aspect of the ADA Accessibility Guidelines (ADAAG). Examples of common barriers that are raised in these lawsuits are: (1) that a parking lot does not have a sufficient number of disabled or van accessible spaces or parking signs (or the signs are not high enough); (2) some part of the exterior of the property or the front door is inaccessible or improperly sloped; or (3) the restroom is not accessible—perhaps a stall is not wide enough or there is no disabled restroom at all. Typically, the plaintiff requests that the court provide it with injunctive relief (i.e., the defendant has to fix the property), compensatory damages (not available under federal law but, in limited circumstances, damages may be available under state law), and attorneys’ fees and costs.

The premise of these lawsuits is simple enough, but the complexity becomes apparent as businesses realize there is no one-size-fits-all response.

Why are serial plaintiffs even bringing these lawsuits?

There are a couple of answers here. The law provides a private cause of action to plaintiffs because there are simply too many buildings and places of public accommodation for the government to be able to efficiently monitor each and every one. Individual plaintiffs are able to bring multiple cases under the ADA to ensure that they and others are not harmed by businesses that fail to comply with the law. Even the idea of serial litigation is contemplated under the law. The Ninth Circuit explained that “[f]or the ADA to yield its promise of equal access for the disabled, it may indeed be necessary and desirable for committed individuals to bring serial litigation advancing the time when public accommodations will be compliant with the ADA.”[1] However, the Ninth Circuit includes this caution: “But as important as this goal is to disabled individuals and to the public, serial litigation can become vexatious when . . . a large number of nearly-identical complaints contain factual allegations that are contrived, exaggerated, and defy common sense.”[2]

Some people feel that these lawsuits are an attempt by plaintiffs’ attorneys to cash in on the attorneys’ fees provision under the ADA. Finding one area of noncompliance on a property can arguably permit a plaintiff to bring his or her expert and conduct a full-site inspection to uncover more issues. Unless the lawsuit is groundless or frivolous, plaintiffs know they likely will not be responsible for the defendants’ fees and, in fact, they may have an opportunity to recover fees from defendants in certain circumstances. Because of this, these cases are often settled prior to trial and attorneys’ fees may be a significant portion of that settlement.

Do businesses have defenses when these lawsuits are filed against them?

Absolutely. There are many issues to consider when a lawsuit is filed. The threshold issue is whether the company can make the necessary changes to bring the subject property into compliance so that individuals with disabilities do not encounter any barriers to access. In addition, there are many other issues to consider. When was the subject property built? When, if ever, was it altered? Is it a historic property? Does the plaintiff have standing? Are there non-parties at fault? Are plaintiff’s requests structurally impracticable? Are there equivalent services offered? While there are instances when companies must be in strict compliance with the ADA, there are also exceptions when strict compliance is not feasible or necessary. All these factors, and more, can help build a company’s defense—that it is properly complying with the ADA.

How do businesses know if they are going to be sued?

Sometimes plaintiffs’ attorneys will send out notices in advance—stating that a property is not in compliance. Other times, no notice will be sent. Since plaintiffs often have their experts visit a property and prepare a pre-litigation report before a lawsuit is even filed, it is possible a company representative may notice someone on the property measuring areas or evaluating compliance generally.

Aren’t these issues sorted out in the contract with the landlord—do tenants need to worry?

Both landlords and tenants are responsible for complying with the ADA.[3] Sometimes, landlords or tenants contractually agree that one party is responsible for actually making the changes and has to indemnify the other party if there are any lawsuits brought. However, the plaintiff can still sue both parties. It is then up to the landlord or tenant to collect on the indemnification. However, there are some states, such as Nevada, where indemnification is preempted and prohibited under the ADA because permitting an owner to circumvent responsibility would lessen the owner’s incentive to ensure compliance with the ADA.[4]

If a company is sued, will this claim be covered by insurance?

It depends on the policy. There are some policies that will cover these types of lawsuits and others that will not. Some companies choose not to submit these claims to their carriers out of the concern that the carrier will take over the defense. A company might lose their choice of counsel or perhaps some of the control over the direction of the litigation and potential settlement. However, if there is any possibility of coverage and the company wants to have the insurance company cover the claim, then the company may choose to tender defense to the carrier.

What if a company is sued by an association working on behalf of individuals with disabilities—do these organizations have standing?

An “associational” claim may be brought by an organization when (1) its members would otherwise have standing to sue in their own right; (2) the interests it seeks to protect are germane to the organization’s purpose; and (3) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit.[5] Although, just because an organization can bring a claim on behalf of a disabled individual, does not mean that they have properly pled the claim.

Does Title III cover anything other than construction issues?

Yes. Title III of the ADA also governs how businesses should treat service animals and other accommodations that should be made for guests.

Is it worth even fighting the lawsuit or should a company just “fix” everything?

Some companies are served with a complaint and the first response is—that’s easy, we can fix that. Perhaps they did not know the company was out of compliance and they have the means to quickly and efficiently resolve the allegations in the complaint. There are certainly instances when plaintiffs have been able to resolve and moot a complaint.[6] This issue, unfortunately, is not as clear cut as one would hope in some jurisdictions. Since certain courts treat the issue of mootness differently than others, plaintiffs may dispute that mooting a claim results in the dismissal of the lawsuit.

Each company should evaluate the pros and cons of litigation. A company may have a perfectly valid defense to a claim and be able to demonstrate it is in compliance with the ADA. On the other hand, a company may find that it is prohibitively expensive to implement all the changes that the plaintiff is identifying in the lawsuit. Companies should consider developing a litigation strategy early on so they can maximize their resources, efficiently address these cases, and ensure compliance with the ADA.


[1] Molski v. Evergreen Dynasty Corp., 500 F.3d 1047, 1061-62 (9th Cir. 2007).

[2] Id.

[3] 28 C.F.R. §36.201(b).

[4] Rolf Jensen & Associates v. District Court, 282 P.3d 743, 748 (Nev. 2012).

[5] See, e.g., Concerned Parents to Save Dreher Park Ctr. v. City of W. Palm Beach, 884 F. Supp. 487, 488-89 (S.D. Fla. 1994).

[6] See, e.g., Oliver v. Ralphs Grocery Co., 654 F.3d 903, 905 (9th Cir. 2011); Brooke v. Elite Hosp., LLC, No. 4:15-CV-0425-HRH, 2016 WL 3213223, at *4 (D. Ariz. June 10, 2016).

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The last time Employment and the Law went on a blogcation, the blog was just over a year old. Now, over four years later, I think it’s about time to give my blog another blogcation (and it just so happens this will occur while I am out of the office and about to welcome a new baby).

beach image

No… I am not at the beach. But it’s a nice thought anyway, don’t you think?

Thanks to all my loyal readers and—for those who notice the posts are few and far between for the short term—know that the blog will be back soon!

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