Here are some of the things we regret that we did not blog about in the past few weeks because of  the Coronavirus coverage that’s been keeping everyone so busy: 

U.S. Department of Labor Opinion Letters 

The U.S. Department of Labor issued some Wage and Hour opinion letters that applied some of its new “regular rate of pay” regulations. 

Length of Service Bonuses and Regular Rate – First, in FLSA2020-3, the Wage and Hour Division explained that a “longevity payment” would be included in the regular rate, when it was not discretionary. 

Employee Referral Bonuses –  In FLSA2020-4, the Division opined that a two-installment, employee referral bonus, paid to non-HR workers for referring new hires, was not included in the regular rate of pay. The first installment was earned when the new employee began work and fell within the exclusion from the regular rate for referral bonuses unrelated to normal work activities.  However, the second half of the referral bonus required the referring employee to remain with the company for a year (not the new hire).  As such, the second half of the referral bonus was a longevity payment and likely was properly included in the regular rate, unless additional facts proved otherwise.  If the candidate had to stay with the employee for a year for the referring employee to receive the second half of the bonus, it probably would have been excluded from the regular rate. 

Payment of Life Insurance Premiums – In FLSA2020-5 the Division clarified that the employer’s payment of life insurance premiums for non-exempt employees’ insurance policies did NOT have to be included in the regular rate even if the IRS would say the premiums were taxable as income.  So, the employer was paying for the employees’ premiums on policies worth greater than $50,000.00 in benefits.  These premiums had to be included in gross income to the employee. The DOL, however, said it is immaterial how the IRS treats the benefit. Rather, the question for whether benefits are included in the regular rate depends on the Fair Labor Standards Act, in particular, section 7(e)(4) (excluding “contributions irrevocably made by an employer to a trustee or third person pursuant to a bona fide plan for providing old-age, retirement, life, accident, or health insurance or similar benefits for employees”).

Attorney- Client Privilege

A person who files a charge with the Department of Fair Employment and Housing (Charging Party) is not a “client” of the DFEH’s lawyers.  Therefore, communications between the charging party and the DFEH’s lawyers are not privileged by the attorney-client privilege.  That’s what the Court of Appeal held in Wood v. Superior Court (here).

Fair Credit Reporting Act

Time to make sure your credit check  /  background check forms are legal again.

The Court of Appeals for the Ninth Circuit decided in Walker v. Fred Meyer, Inc. that the employer may have violated the Fair Credit Reporting Act by including “extraneous” information in its disclosure document. The Ninth Circuit wants a very limited disclosure statement under the statute, as its precedents in recent years have made clear.  

beyond a plain statement disclosing “that a consumer report may be obtained for employment purposes,” some concise explanation of what that phrase means may be included as part of the “disclosure” required by § 1681b(b)(2)(A)(i). For example, a company could briefly describe what a “consumer report” entails,7 how it will be “obtained,” and for which type of “employment purposes” it may be used. [fn] See 15 U.S.C. § 1681b(b)(2)(A)(i). Such information would further the purpose of the disclosure by helping the consumer understand the disclosure.

The Court looked at Fred Meyer’s simple disclosure statement and held that the following was legal under the above standard:

We ([t]he Kroger family of companies) will obtain one or more consumer reports or investigative consumer reports (or both) about you for employment purposes. These purposes may include hiring, contract, assignment, promotion, reassignment, and termination. The reports will include information about your character, general reputation, personal characteristics, and mode of living.

We will obtain these reports through a consumer reporting agency. The consumer reporting agency is General Information Services, Inc. GIS’s address is P.O. Box 353, Chapin, SC 29036. GIS’s telephone number is (866) 265-4917. GIS’s website is at www.geninfo.com.

To prepare the reports, GIS may investigate your education, work history, professional licenses and credentials, references, address history, social security number validity, right to work, criminal record, lawsuits, driving record and any other information with public or private information sources.

Of note, the Court held it’s OK to combine investigative consumer report and consumer report disclosures.  

So, \what was illegal?  The part of the disclosure that explained the employee’s right to inspect files and other matters unrelated to the company’s “obtaining” the report:

You may inspect GIS’s files about you (in person, by mail, or by phone) by providing identification to GIS. If you do, GIS will provide you help to understand the files, including communication with trained personnel and an explanation of any codes. Another person may accompany you by providing identification.

If GIS obtains any information by interview, you have the right to obtain a complete and accurate disclosure of the scope and nature of the investigation performed.

This information is accurate and also part of FCRA.  But it’s not supposed to be part of the disclosure.  So…

while we understand Fred Meyer’s reason for providing this information to job applicants, we hold that it should have been provided in a separate document, because the information cannot reasonably be deemed part of a “disclosure . . . that a consumer report will be obtained for employment purposes.” 15 U.S.C. § 1681b(b)(2)(A)(i).

Because this additional information means that the Disclosure does not “consist[] solely of the disclosure,” we hold that the fourth and fifth paragraphs of the Disclosure violate the FCRA’s standalone disclosure requirement.

 

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