July 15, 2015 - Labor and Employment News on Paying Interns, Monitoring Workplace Computer Use and Updated Guidelines for Women's Preventative Care
SO, DO I HAVE TO PAY MY INTERNS OR NOT?
Some see unpaid internships as a great way for people to gain real world experience that they could not otherwise get. Others see unpaid internships as taking advantage of workers with little bargaining power and undermining the nation’s wage and hour laws. A recent high profile decision by the United States Court of Appeals for the Second Circuit was a win for the employers involved in that particular case, but did little to clarify the issue for New England employers looking for clear guidance on whether they need to pay interns minimum wage.
The case involved interns who had worked for Fox Entertainment Group on the motion picture The Black Swan as unpaid interns. Several of the interns brought a lawsuit alleging that they were actually employees and should be paid. The trial court agreed, ruling that they were employees. The trial court also allowed the plaintiffs to turn their lawsuit into a class action on behalf of a much larger group of employees.
The trial court relied on a test that the federal Department of Labor had developed, itself based on a Supreme Court case from the 1940s, to help guide employers in determining whether to pay interns. The Appeals Court rejected this test and instead adopted a somewhat vague standard in which it analyzed which party was the "primary beneficiary" of the relationship – the intern or the employer. As the Court described the test "an employment relationship is created when the tangible and intangible benefits provided to the intern are greater than the intern’s contribution to the employer’s operation." The Court came up with a "non-exhaustive" list of factors to be considered, noting that "no one factor is dispositive and every factor need not point in the same direction."
As a result of this "more nuanced" test, the Court concluded that there needed to be a more complete examination of each of the plaintiffs’ individual situation, and sent the matter back to the trial court. The Appeals Court also held that, given the individualized inquiry that will be required, the case was not appropriate for class action status, and therefore held that the claims should proceed only on an individual basis.
While in some ways the test benefits employers by conducting an individualized review of each employment relationship, the fact-intensive inquiry will make it costly to defend a potential lawsuit and more difficult to predict who will prevail. Therefore, to avoid liability, employers should be exceedingly cautious when offering unpaid internships. The new guidelines will likely benefit larger employers because individualized inquiry of each intern’s situation will cause variation and render class actions difficult to certify. Higher certification standards will likely deter individuals from bringing lawsuits in large numbers.
Employers offering unpaid internships should be mindful to avoid assigning clerical tasks that have no educational benefit and are removed from training. Just as important, announcements and agreements related to unpaid internships should state explicitly that there is no expectation of compensation or a full time position at the conclusion of the internship. Furthermore, the internship should possess educational aspects including ties to a formal educational program and hands-on training similar to the classroom. The program should run alongside the intern’s academic calendar and the program should be limited to providing beneficial learning to the intern.
State laws can differ from federal labor laws, making it important for employers to be vigilant about state laws related to internships. Massachusetts laws pose a tougher standard, defining "employee" broadly, as "an individual performing any services." Such an expansive definition makes it far more likely for an intern to be considered an employee. Furthermore, Massachusetts wage laws consider anyone performing services while undergoing training in an industry trade or business to be an employee subject to the state’s minimum wage laws, unless they are working in a charitable, educational, or religious institution. Connecticut recently passed a law extending the protections of anti-discrimination laws generally applicable to employees to "interns" and used the Department of Labor’s test to define "interns" in that statute. While not inconsistent with this decision on paying interns, this new law does add a bit to the confusion around legally classifying interns.
Ultimately, the new federal guideline provides a highly subjective test for unpaid internships that leaves significant grey area. Employers should remain very cautious about providing unpaid internships. The better practice is to pay minimum wage. While disgruntled interns may be deterred from bringing lawsuits as a result of the new guidelines, state and federal regulators will likely to continue strictly enforcing the law. Federal labor laws impose significant penalties on employers found to have failed to pay minimum wage to their employees, including heavy fines, back pay, and attorney’s fees. For employers offering unpaid internships, the potential cost of a lawsuit could be substantial.
DON'T ASK FOR THAT FACEBOOK PASSWORD: NEW LAW RESTRICTS EMPLOYERS’ ACCESS TO EMPLOYEES’ PERSONAL ONLINE ACCOUNTS
Connecticut’s Electronic Monitoring Act ("EMA") allows employers to monitor employees’ workplace computer use. The law requires only that employers give written notice to all employees who may be affected and post a notice in a conspicuous place, outlining the types of electronic monitoring that may occur.
The New Law
In a recent limitation to the EMA, the Connecticut Legislature passed "An Act Concerning Employee Online Privacy." Effective October 1, 2015, employers cannot request or require an employee or applicant seeking employment to (1) provide access to his or her personal online accounts, (2) access a personal online account in the presence of the employer, or (3) require an employee or applicant to join, or invite the employer to join, a group affiliated with the employee's personal online account. This means that employers cannot demand access to an employee’s Facebook, Gmail or Twitter passwords, and the like.
Employers can be penalized if they discharge, discipline, discriminate or retaliate against an employee who refuses to provide such access or who files a complaint regarding such a request. Employers cannot deny applicants employment because of failure to provide access to a personal online account.
The Act applies to private and public employers. It applies to personal online accounts including e-mail, social media, or internet websites used exclusively for personal purposes. It excludes online accounts used for the employer’s business purposes.
The law allows employers to obtain access (including a password) to a service or device for which it paid, or which the employee uses for business purposes. If the employer conducts an investigation to ensure compliance with federal or state laws or regulations or work-related prohibited misconduct, and the employer receives specific information that the employee’s personal account is involved, the employer can require that the employee provide access to the account. It cannot require that login information or passwords be turned over. For instance, if an employee complains that a co-worker has racially or sexually harassed him/her on Facebook, the employer can require the alleged harasser to provide access to his/her Facebook account. Similar rules apply to situations where an employee allegedly steals proprietary or confidential information. The law also allows employers to monitor, review, access, or block electronic data that is stored on or traveling through the employer’s network or employer-paid device.
An employer found to have violated an employee’s rights under the Act will be charged a civil penalty of $500 for the first violation, $1,000 for each subsequent violation, and the employee will be awarded relief including rehiring, back pay, reestablishing employee benefits, or any other remedies deemed appropriate. Violations against a job applicant can result in a civil penalty of $25 for the first violation and $500 for each subsequent violation.
Given the increased use of social media and e-mail through workplace computers and handheld electronic devices, Human Resources and related personnel should review their current policies and advise supervisors and managers of the new law.
FEDERAL AGENCIES RESPOND TO HOBBY LOBBY AND ISSUE UPDATED GUIDELINES FOR WOMEN'S PREVENTATIVE CARE SERVICES
Last year, the United States Supreme Court invalidated federal regulations mandating that almost all employers provide access to contraceptives under their employee health insurance plans. The Court held that Hobby Lobby, a closely held corporation whose stockholders’ religious beliefs prohibited contraceptive use, deserved a reasonable accommodation under the Affordable Care Act. Previously regulations offered that accommodation only to churches and houses of worship with religious tenets prohibiting contraceptive use. The government then expanded those regulations to allow non-profit religious employers to opt out of contraceptive coverage after providing a self-certification to its insurance provider or third party administrator (TPA). Those entities would then provide the coverage without charging the employer. The agencies expanded the exemption to allow the employer to notify HHS, which would then notify the insurer or TPA.
The agencies have expanded the exemption yet again to closely held corporations. They use a test for “closely held” based on the IRS definition. Stock ownership must be in the hands of five or fewer individuals. The organization's highest governing entity must adopt a resolution setting forth the organization's objection to contraceptive coverage based on the owners’ sincerely held religious beliefs. Notification can then be given to the insurer, the TPA or HHS.