• Overtime Update: New Cases May Provide Clarity on Key Wage and Hour Issues
  • June 6, 2012 | Author: Jimmy F. Robinson
  • Law Firms: Troutman Sanders LLP - Atlanta Office ; Troutman Sanders LLP - Richmond Office
  • As we mentioned in our last newsletter, even the most diligent employers are finding it difficult to keep track of emerging wage and hour issues.  Your inbox is likely bombarded by wage and hour updates, decisions, articles, alerts, and reminders.  We hope that our Overtime Update feature provides a helpful way for you to identify the most important new wage and hour issues that are currently affecting employers.  In this edition, we identify three topics that have recently emerged as need-to-know issues.

    New Lawsuits Are Targeting Unpaid Interns

    As the job market for recent college graduates remains difficult at best, more students are turning to internships to gain job experience.  Certain internships with prestigious or well-known organizations can be so valuable that students are willing to take unpaid positions.  Yet, even interns are subject to the Fair Labor Standards Act ("FLSA"), which requires employers to pay minimum wage and overtime to non-exempt employees.  Some industries, including the media and entertainment industry, derive significant value from unpaid interns.  However, three recent multi-plaintiff lawsuits against Fox Searchlight Pictures, the Charlie Rose Show, and the Hearst Corporation may change employers’ views on unpaid interns.  In these lawsuits, the interns allege that their employers took advantage of their intern status to essentially obtain free labor, in violation of the minimum wage and overtime requirements of the FLSA.

    So, what can employers with unpaid interns do to avoid liability?  According to the Supreme Court, employers should consider the following criteria:

    • The internship should be similar to training that would be given in a vocational school;

    • The internship should be set up for the benefit of the intern;

    • The internship should not displace regular employees;

    • The employer should not derive immediate advantage from the activities of the intern, and on occasion, the internship may actually impede the employer’s operations;

    • The intern is not necessarily entitled to a job at the end of the internship; and

    The intern must clearly understand that he or she is not entitled to wages for the time spent in the internship.

    Do your unpaid interns meet the above criteria?  If not, you should consider paying your interns (at least minimum wage) to avoid potential future claims.  Employers may wonder whether any unpaid internship at a for-profit company will satisfy the fourth item, which requires that the employer "derive no immediate advantage" from the internship.  Stay tuned for more guidance on this issue as these new lawsuits work their way through the courts.

    Internal Complaints Regarding Wages Are Protected

    Can you legally fire an employee for making internal complaints about overtime?  In two recent decisions, the Fourth Circuit Court of Appeals answered "no" because internal complaints are protected by the anti-retaliation provisions of the FLSA.  According to the FLSA, employees are protected only when they "file a complaint."  In the past, federal courts held that an employee’s oral or informal complaint to management about wage and hour issues did not constitute a "filing" within the meaning of the statute.  However, in two recent decisions (Minor v. Bostwick Labs and Jafari v. Old Dominion Transit Management) the Fourth Circuit made clear that internal complaints constitute protected activity under the FLSA.  In both cases, the Court found that the employees gave "fair notice" to their employers that they were making protected statements under the FLSA.  Employers should keep these decisions in mind whenever an employee makes a complaint about working conditions - including wage and hour issues.  Internal complaints should always be taken seriously and investigated, and employers are prohibited from terminating employees for making internal complaints about wages, alleged discrimination or harassment, safety issues, or any other topic that may be protected by federal or state law.

    Arbitration Agreements Remain a Hot Topic

    In our previous installment of Overtime Update (http://www.troutmansanders.com/overtime-update-supreme-court-decisions-play-pivotal-role-02-23-2012/), we explained how the National Labor Relations Board ("NLRB" or "Board") decided in In re D.R. Horton, Inc. that employees have a statutory right to file class action lawsuits against their employers regarding conditions of employment.  As a result, the NLRB decision invalidated certain anti-class action provisions in arbitration agreements.  However, the Board’s opinion in D.R. Horton appears to conflict with AT&T Mobility v. Conception, a recent Supreme Court decision that was generally seen as reinforcing the validity and power of arbitration agreements.  Now, lower courts are attempting to reconcile these two decisions.  In Wisconsin, a federal judge rejected arguments that the D.R. Horton decision conflicts with Conception.  Yet in California and Georgia, courts have recently reached the opposite conclusion, holding that the Supreme Court’s broad language in Conception should prevail over the Board’s decision in D.R. Horton.  We expect to see more court decisions (and more clarity and guidance for employers, we hope) this year regarding the viability of D.R. Horton and anti-class action agreements.

    As you can see, recent lower court cases and decisions have a significant impact on how employers should approach wage and hour issues.  In some cases, the court decisions have provided helpful guidance for employers dealing with issues such as internal complaints regarding wage issues.  On the other hand, employers are still waiting for direction on how to treat unpaid interns and whether federal labor law prohibits anti-class action arbitration agreements.