Employment Law in a Down Economy

1. Employment Law in a Down Economy Carol M. Goodman, Esq. Herrick, Feinstein LLP June 11, 2009

2. Agenda • FLSA • Recent Developments in Employment Law • Avoiding and Minimizing Wrongful Termination and Discrimination Suits • Alternatives to Layoffs • Coming Attractions

3. What Is the FLSA? The Fair Labor Standards Act (FLSA) prescribes standards for the basic minimum wage and overtime pay

4. What Do EmployersNeed to Focus On? • Proper classification of your employees as: • Exempt; or • Non-exempt • Improper classification of employees under the FLSA can have devastating monetary penalties…

5. What’s the Big Deal? Morgan Stanley agrees to $50 million FLSA Settlement (2008) • Class action brought on behalf of Morgan Stanley’s financial advisors and financial advisor trainees • Action alleges improper FLSA classifications

6. What’s the Big Deal? (cont.) Merrill Lynch pays $37 million FLSA Settlement (2005) • Class action brought on behalf of approximately 3,250 of its California stock brokers • Action alleges that Merrill Lynch improperly classified its stock brokers as exempt under the FLSA and—in violation of the FLSA—failed to pay them for overtime that they worked

7. What Are the Exemptions Under the FLSA? • Executive employees • Administrative employees • Professional employees • Outside Sales employees • Computer employees

8. Exempt FinancialServices Employees • Collect and analyze information regarding the customer’s income, assets, investments or debts • Determine which financial products best meet the customer’s needs and financial circumstances • Advise the customer regarding the advantages and disadvantages of different financial products • Market, service, or promote the employer’s financial products

9. Exempt FinancialServices Employees (cont.) • Mortgage originators: employees of finance companies who obtain and solicit mortgages may be exempt outside sales employees, and are therefore exempt under the FLSA • Registered representatives are exempt because: • sales is not their primary duty • their work includes collecting and analyzing a client’s financial information • they advise clients about investment opportunities’ risks, advantages and disadvantages

10. Non-Exempt FinancialServices Employees However, an employee whose primary duty is selling financial products does not qualify for the administrative exemption

11. Penalties Non-compliance with the FLSA can be very costly and can include: • Back pay • Interest • Liquidated damages • Fines • Penalties • Attorney’s fees • Criminal penalties

12. FLSA: How Do I Comply? • Review all job descriptions and classifications with an employment lawyer • Understand that salaried does NOT always mean exempt • Perform a self-audit • Apply exemptions based on the employees’ job duties, NOT the employees’ job titles

13. FLSA: Common Errors to Avoid • Improperly applying an exemption. They grey areas are what are tricky • Failing to pay for all hours an employee is “suffered or permitted” to work • Limiting the number of hours employees are allowed to record • Failing to include all pay required to be included in calculating the regular rate for overtime • Failing to add all hours worked in separate establishments for the same employer when calculating overtime due • Treating an employee as an independent contractor • Confusing Federal law and State law

14. Recent Developmentsin Employment Law • Lilly Ledbetter Fair Pay Act of 2009 • Broad whistleblower protection under the ARRA • NY WARN Act • COBRA premium reductions under the ARRA • Extension of Unemployment Insurance Benefits under the ARRA

15. Lilly Ledbetter FairPay Act of 2009 • New law allows employees more time to assert a claim: • Each paycheck starts a new 180-day clock which runs for purposes of the statute of limitations

16. Lilly Ledbetter Fair Pay Act of 2009:How Do I Comply? • Advise management of all decisions regarding employee compensation • Ensure all decisions regarding employee compensation can be justified based on legitimate and non-discriminatory business factors • Conduct periodic internal “pay-equity audits”

17. Whistleblower ProtectionUnder the ARRA • Prohibits private employers receiving stimulus funds from: • discharging • demoting • otherwise discriminating against an employee for disclosing certain information

18. Whistleblower Protection Under the ARRA – How Do I Comply? • Post a notice of rights and remedies • Document and fully investigate any complaint regarding misuse of stimulus funds • Educate employees and update employee handbooks periodically

19. NY WARN Act • The New York WARN Act requires certain employers to notify employees 90 days in advance of a mass layoff

21. COBRA Premium ReductionUnder the ARRA • Employees who are involuntarily terminated between September 1, 2008 and December 31, 2009, may be entitled to a 65% COBRA premium reduction • Employers will receive reimbursement from the IRS for subsidy

22. COBRA Premium Reduction Under the ARRA – How Do I Comply? • Notify all individuals who become eligible for COBRA coverage on or after September 1, 2008 • All COBRA notices going forward must include information about the COBRA subsidy under the ARRA

23. Extension of Unemployment Insurance Benefits Under the ARRA • Regular unemployment benefits are capped at 26 weeks • Prior to the passage of the ARRA, individuals who had not found employment after exhausting their regular unemployment insurance benefits could apply for 13 weeks of Emergency Unemployment Compensation (“EUC”) • Under the ARRA, an individual may apply for up to 33 weeks of EUC, extending unemployment benefits to a maximum of 59 weeks

24. 35 30 28.7% 25 20 15 14% 10 11.2% 9.7% 5 0 Age Discrimination Sex Discrimination Race Disability Discrimination Discrimination Wrongful Termination and Discrimination Claims and Suits Are On the Rise • EEOC reports a 15% increase in the number of employment discrimination charges filed against employers

25. What Steps Can I Take to Avoid and Minimize Claims or Suits From Employees? • Update employee handbooks • Train managers and employees with supervisory authority on changes to employment laws • Have documentation and record keeping procedures • Have terminated employees sign releases precluding them from asserting employment-related claims upon or after termination • Audit termination decisions prior to implementing the terminations, engage in a “vetting” process • Consider purchasing Employment Practices Liability Insurance (“EPLI”)

26. Alternatives to Layoffs • Across-the-board pay cuts • Mandatory vacations • Mandatory leave • Reduced benefits • Flexible work week • Flex time

28. The Family Leave Insurance Act • Provides employees with 12 weeks paid leave to take time off due to their own illness, or to care for a sick family member or new child. • Creates an employee and employer financed insurance fund to provide for the paid leave. • If enacted, the bill would take effect on January 1, 2011 and would apply to periods of leave that commence on or after January 1, 2012. • Status: The bill has been referred to the House Committee on Education and Labor, Oversight and Government Reform, and Ways and Means.

29. The Healthy Families Act • Guarantees employees one paid hour off for each 30 hours worked, enabling them to earn up to seven paid sick days a year • Employees are entitled to claim their days when they, a child, a parent, a spouse or someone else close to them becomes ill

30. The Family Medical Leave Act (FMLA) • President Obama seeks to expand FMLA coverage to include businesses with 25 or more employees

31. Possible Employment-Related Legislation On the Horizon • The President is expected to seek to: • raise the minimum wage and peg it to inflation; • provide a new tax credit to companies that add jobs in the United States • vigorously enforce the recently-enacted EEOC guidelines on caregiver discrimination

32. Employment Law in a Down Economy Carol M. Goodman, Esq. Herrick, Feinstein LLP 2 Park Avenue New York, New York 10016 (212) 592-5933 cgoodman@herrick.com www.herrick.com