LABOR & EMPLOYMENT UNPAID INTERNS THERE S NO SUCH THING AS A FREE EMPLOYEE

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1 1740 BROADWAY NEW YORK, NY P: IN THIS : As summer approaches, many companies are hiring summer interns, which can prove to be a gray area when it comes to payroll. We have included an article in this issue that reviews guidelines for paid and unpaid interns. Also included are two articles that provide advice and practice tips on protecting an employer from harassment and retaliation claims as well as addressing accommodations for nursing mothers. Unpaid Interns There s No Such Thing as a Free Employee... 1 NYC Employers Have No Defense to Harassment by Supervisors... 2 Federal Protections for Nursing Mothers... 3 D&G Breakfast Seminar Series... 4 D&G Labor & Employment Practice Group Contacts... 5 Our tradition is based on unparalleled client service, individual attention, adding value and a strategic approach to every situation. Previous Davis & Gilbert LLP newsletters can be found at Attorney Advertising UNPAID INTERNS THERE S NO SUCH THING AS A FREE EMPLOYEE As summer approaches, many companies are getting ready for an influx of new personnel summer interns. All too often, summer interns are not paid for their services, as their compensation comes in the form of real-world experience and an entry for their resumes. Many employers assume that as long as the interns receive college credit, they do not need to be paid. This assumption is incorrect. With limited exception, all employees must be paid at least minimum wage under U.S. and state law. However, under guidelines issued by the U.S. Department of Labor (DOL), trainees are not employees and, therefore, do not need to be paid. The DOL and California s Division of Labor Standards Enforcement (DLSE) have recently issued additional guidance on their rules for when interns are not deemed to be employees and therefore need not be paid. While the DOL factors have not changed, the DLSE has changed its factors to fall in line with the DOL s Internship Programs Under the Fair Labor Standards Act In April 2010, the DOL released Fact Sheet #71. In it, the DOL reiterated its six-factor test for whether an internship may rightfully be unpaid. All six of the following criteria must be met for an individual to be a trainee and not an employee: 1. The internship, even though it includes actual operation of the facilities of the employer, is similar to training that would be given in an educational environment; 2. The internship experience is for the benefit of the intern; 3. The intern does not displace regular employees, but works under close supervision of existing staff; 4. The employer that provides the training derives no immediate advantage from the activities of the intern, and on occasion its operations may actually be impeded; 5. The intern is not necessarily entitled to a job at the conclusion of the internship; and 6. The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship. California s DLSE California s DLSE recently modified its rules on unpaid internships. Previously, it used an 11-factor test, which consisted of the six DOL factors and an additional five factors. In April, the >> continued on pg. 2 1

2 UNPAID INTERNS THERE S NO SUCH THING AS A FREE EMPLOYEE >> continued from page 1 Companies should review their internship programs to ensure compliance with the DOL s standards. DLSE announced that it would follow the DOL s six-factor test and eliminate the additional five factors. Also, the DLSE relaxed its interpretation of the third DOL factor, displacement. While previously the DLSE had strictly interpreted the factor to mean that any work performed by an intern that could have been performed by an employee would not satisfy the factor, now, the agency notes occasional or incidental other work by the intern should not defeat the exemption so long as such work does not unreasonably replace or impede the educational objectives for the intern and effectively displace regular workers. Companies should review their internship programs to ensure compliance with the DOL s standards. If interns do not satisfy all six criteria, the company may be subject to an action for violation of the minimum wage laws, which could include double damages and attorneys fees. NYC EMPLOYERS HAVE NO DEFENSE TO HARASSMENT BY SUPERVISORS On May 6, 2010, the New York Court of Appeals held that the Faragher-Ellerth affirmative defense to employer liability for unlawful harassment does not apply to harassment and retaliation claims under the New York City Human Rights Law (NYCHRL). As a result, a New York City employer will be liable for unlawful harassment by supervisors, even if the company takes reasonable steps to prohibit unlawful harassment and even if the company had no way of knowing that the harassment was occurring. However, an employer s anti-discrimination policies and procedures may be considered in mitigation of the amount of civil penalties or punitive damages recoverable in a civil action. The decision, captioned Zakrzewska v. New School, is the latest in a line of cases holding that the protections of the NYCHRL are much more broad than those under Title VII and New York State law. The Faragher-Ellerth affirmative defense was created by the U.S. Supreme Court in It held that an employer is not liable under Title VII for sexual harassment committed by a supervisory employee that did not result in a tangible adverse action if the employer took reasonable care to prevent and promptly correct any sexually harassing behavior and the plaintiff unreasonably failed to take advantage of any preventive or corrective opportunities provided by the employer. The Faragher-Ellerth affirmative defense provides employers with a second chance as long as they take immediate steps to correct harassing behavior. That second chance was taken away by the Zakrzewska decision. The court first noted that according to its text, the NYCHRL imposes liability on an employer in three instances: 1. where the offending employee exercised managerial or supervisory responsibility; 2. where the employer knew of the offending employee s unlawful discriminatory conduct and acquiesced in it or failed to take immediate and appropriate corrective action; and 3. where the employer should have known of the offending employee s unlawful discriminatory conduct but failed to exercise reasonable diligence to prevent [it]. The Zakrzewska court also noted that the legislative history of the 1991 revision of the NYCHRL indicates an intention to impose strict liability in the employment context for acts of managers and supervisors. In addition, the court determined that the city law was >> continued on pg.3 2

3 NYC EMPLOYERS HAVE NO DEFENSE TO HARASSMENT BY SUPERVISORS >> continued from page 2 not inconsistent with state law in that both prohibit unlawful harassment. Therefore, the court concluded that the Faragher-Ellerth affirmative defense does not shield a New York City employer from liability under any of the three instances described in the statute. Because employers should always strive to prevent unlawful harassment in the workplace, the Zakrzewska decision should have limited effect on the way companies conduct business in New York City. However, given that an employer s anti-discrimination policies and procedures may mitigate the damages recoverable under the NYCHRL, employers are well advised to have thorough anti-harassment policies and legitimate and effective complaint procedures, and should conduct regular anti-harassment training for all employees, whether they are supervisors or not. In addition, employers should be more vigilant and aggressive in addressing what may seem to be minor instances of unlawful harassment. Companies may face liability for a simple inappropriate sexual comment by a low-level supervisor. Taking a stronger stance against such an offending managerial employee may both reduce the risk of litigation and decrease damages should litigation arise. Although the damages associated with just one inappropriate comment may be negligible, once the company is on notice of this behavior, the next harassing comment by the same employee could be much more costly. Before Zakrzewska, companies could respond to minor unlawful harassment situation with a warning and rely on the Faragher-Ellerth defense. Now, instead of just issuing a warning or corrective action plan for the offending employee, employers may want to respond to these situations with more severe corrective measures such as unpaid suspensions, reduction or elimination of bonuses or even termination. Employers should be more vigilant and aggressive in addressing what may seem to be minor instances of unlawful harassment. Following the recently enacted health care reform law the Patient Protection and Affordable Care Act (PPACA) all employers covered under the Fair Labor Standards Act are now required to provide reasonable break time for nursing mothers and a private space in the workplace to express milk. As we have reported in the past, New York and California already have laws in place regarding break time and lactation areas for nursing mothers, as do other states, and, therefore, this new law may not have a large impact on many employers. However, while the new federal requirement is similar to the New York and California laws, it is not identical. Specifically, the PPACA requires that employers provide: 1. reasonable break time, which does not need to be paid, for an employee to express breast milk for her nursing child for one year after the child s birth each time such employee has a need to express the milk; and 2. a place, other than a bathroom, that is shielded from view and free from intrusion from coworkers and the public, which may be used by an employee to express breast milk. The new law also provides an exception for small companies. Employers that employ fewer than 50 employees are not subject to the requirements if these requirements would impose an undue hardship by causing the employer significant difficulty or expense when considered in relation to the size, financial resources, nature, or structure of the employer s business. In addition, if a state law has greater protections for nursing mothers than the new federal law, employers must follow the state law requirements. >> continued on pg.4 3

4 >> continued from page 3 Employers should work with nursing mothers to provide the required break time and avoid any discrimination against women who express milk at work. Differences Among the Federal, New York and California Laws While the California, New York and federal laws all require reasonable break time, New York law limits the requirement to three years following birth, the federal law is limited to one year following birth, and the California law has no limit. Importantly, both the New York and California laws require only a reasonable effort to find a private room or other location, while the federal law simply requires a private place (no reasonable effort exception). The federal law, however, does have an exception (to both the break time and private room requirement) for small employers (of under 50 employees) when the requirements would impose an undue hardship. California also has an exception to the break time requirement if to do so would seriously disrupt the operations of the employer. On the other hand, the New York law has no exception and specifically applies to all public and private employers in New York State, regardless of the size or nature of their business. New York Lactation Law Guidelines The New York Department of Labor has issued guidelines for employers to follow in interpreting and complying with the New York law. Of note, New York employers are required to provide written notification of the lactation law to employees who are returning to work following the birth of a child, which may be provided individually or to all employees generally through the employee handbook or posting of the notice in a central location. In addition, the guidelines provide that reasonable unpaid break time is sufficient time to allow the employee to express breast milk, which generally shall be no less than 20 minutes (30 minutes if the lactation room or space is not in close proximity to the employee s work station). In most circumstances, employers must provide unpaid break time at least once every three hours if requested by the employee. >> continued on pg. 5 BREAKFAST SEMINAR SERIES The Fair Labor Standards Act: Demystifying Classifications JULY 2010 Properly classifying your personnel under the The Fair Labor Standards Act (FLSA) is more critical than ever, and the penalties for misclassification are significant. Yet, misclassification remains a prevalent problem. In light of President Obama s infusion of funds into the Department of Labor (DOL) to review and audit companies for FLSA violations and proposed legislation that would heighten employer burden and stiffen penalties for misclassification, it is imperative to review your company s classifications and to take remedial measures where appropriate. To assist you with understanding the ins and outs of this important topic, this program will cover, among other things: > The standards for properly classifying independent contractors, exempt and non-exempt employees, and unpaid interns under the FLSA, > Recent key cases, DOL guidance regarding proper classifications under the FLSA and the risks of and penalties for misclassification, > Proposed legislation, including the Employee Misclassification Prevention Act and the Taxpayer Accountability, and Consistency Act of 2009, and > Best practices for determining how to classify your personnel under the FLSA and reclassify existing employees, where necessary. SPEAKERS: Gregg A. Gilman, Partner/Co-Chair Daniel A. Feinstein, Partner Jessica Golden Cortes, Heath Rosenthal, For details regarding dates and registration, please contact: Jennifer L. Simpson jsimpson@dglaw.com

5 ATTORNEYS AT LAW >> continued from page 4 The guidelines also provide that reasonable effort with respect to providing a room or other space means that a room or other location must be provided so long as it is neither significantly impracticable, inconvenient, or expensive to the employer to do so. Factors used to make such determination include, but are not limited to: > the nature of work performed at the business; > the overall size and physical layout of the business; > the type of facility where the business is housed; > the size and composition of the employer s workforce; > the business general hours of operation and the employees normal work shifts; and > the relative cost of providing a room or other space for the dedicated purpose. Moreover, the room or location provided cannot be a restroom or toilet stall. The guidelines add that an employer who is unable to provide a dedicated lactation room or other location may allow the use of a vacant office or other available room on a temporary basis for the expression of milk, provided the room is not accessible to the public or other employees while the nursing employee is using the room for expression purposes. In addition, as a last resort, an employer who is unable to provide a dedicated lactation room or other location may make available a cubicle with walls at least seven feet tall, provided the cubicle is fully enclosed with a partition and is not otherwise accessible to the public or other employees while it is in use for expression purposes. The room or space provided must contain, at a minimum, a chair and small table, desk, counter, or other flat surface, and employers are encouraged to provide an outlet, clean water supply, and access to refrigeration for the purposes of storing the expressed milk. While many requirements in the health care reform law do not go into effect for months or years, the provision regarding nursing mothers was effective as of the enactment of the law. Employers who have not already done so should designate a room or other suitable private place(s) for use by lactating mothers. Moreover, employers should work with nursing mothers to provide the required break time and avoid any discrimination against women who express milk at work. Finally, employers should take note that the U.S. Department of Labor is expected to issue regulations regarding the federal law in the next few weeks, and they should look for further updates on this subject. CONTACT US 1740 Broadway New York, NY Gregg A. Gilman Co-Chair ggilman@dglaw.com Howard J. Rubin Co-Chair hrubin@dglaw.com Daniel A. Feinstein Partner dfeinstein@dglaw.com Gregg Brochin - Editor gbrochin@dglaw.com Jessica Golden Cortes jcortes@dglaw.com Nordia Edwards nedwards@dglaw.com David J. Fisher dfisher@dglaw.com Shira Franco sfranco@dglaw.com Heath Rosenthal hrosenthal@dglaw.com These summaries are provided for informational purposes only and are not exhaustive. They should not be considered to be legal advice. Accordingly, you should consult an attorney with any questions regarding any of the issues referenced Davis & Gilbert LLP 5