Tuesday, June 19 2007
Do Home Health Care Workers Get Minimum Wage? The U.S. Supreme Court Weighs In
By Ronald J. Stolkin and Jessica L. Tom
Must businesses employing home health care workers who provide companionship services pay those employees minimum wage and overtime pay? That is the question the United States Supreme Court answered in Long Island Care at Home, Ltd. v. Coke. On June 11, 2007, the Court unanimously ruled that such employees are exempt from the minimum wage and overtime requirements of the Fair Labor Standards Act ("FLSA").
The FLSA contains an exemption from the Act's minimum wage and overtime pay rules for "any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves." 29 U.S.C. § 213(a)(15). In interpreting this exemption, the Department of Labor promulgated a set of regulations that included two apparently conflicting regulations. On one hand, 29 C.F.R. § 552.3 defines "domestic service employment" as "services of a household nature performed by an employee in or about a private home (permanent or temporary) of the person by whom he or she is employed." (emphasis added). On the other hand, 29 C.F.R. § 552.109 provides that the companionship exemption includes "[e]mployees who are engaged in providing companionship services . . . and who are employed by an employer or agency other than the family or household using their services . . . ." (emphasis added).
Evelyn Coke, a domestic services employee, sued her former employer, Long Island Care at Home, Ltd., for unpaid wages representing minimum wage and overtime pay she was allegedly owed under the FLSA. The District Court determined that 29 C.F.R. § 552.109 controlled and, therefore, employees of third-party agencies, such as Ms. Coke, came within the companionship exemption to the Act. The Second Circuit appellate court reversed, finding that § 552.109 was unenforceable and that only those workers who were employed by the actual household using their services were exempt from the Act's requirements.
The Supreme Court held that the companionship exemption does include employees of third-party employers, pursuant to § 552.109. The regulation did not exceed the Department of Labor's rulemaking authority and filled the statutory gap left by Congress as to the scope of the terms "domestic service employment" and "companionship services."
Under Coke, home care agencies whose employees provide in-home companionship services are not required to pay those employees minimum wage or overtime pay under the Fair Labor Standards Act.
Ninth Circuit Strikes Down Another Employment Arbitration Agreement
In Davis v. O'Melveny & Myers the Ninth Circuit Court of Appeals dealt yet another blow to trying to enforce arbitration agreements in the federal court.
The agreement at issue in Davis, challenged by a paralegal formerly employed by the O'Melveny & Myers law firm, governed the majority of employment-related claims by and against firm employees. The agreement contained several notable clauses: an arbitration provision for "all claims and controversies, past, present or future . . . in any way arising out of, relating to, or associated with [the employee's] employment with the Firm;" a prohibition against the pursuit of any lawsuit or administrative action associated with employment-related claims, with the exception of discrimination claims; a notice provision requiring within one year written notice of any claim against the Firm along with a demand for mediation; a confidentiality provision governing all claims, defenses, proceedings, pleadings, orders, hearings and awards in arbitration, including the existence of a controversy and an arbitration; and a non-mutual provision exempting the firm from mandatory arbitration of claims for equitable relief against employees for violations of the attorney-client privilege, the work-product doctrine, or the disclosure of other confidential information.
Applying California state law, the court determined the agreement was unenforceable because it was both procedurally and substantively unconscionable. The agreement was procedurally unconscionable because it was a "take it or leave it" contract (i.e., the only meaningful choice for someone who refused to sign the agreement was to look for employment elsewhere); and because the agreement was a condition of employment, drafted by an employer with overwhelming bargaining power as compared to the employee. The court did note, however, that arbitration agreements that allow employees to opt-out of the agreement without placing their jobs at risk are not considered procedurally unconscionable.
The court found the other provisions of the contract to be substantively unconscionable: (1) the notice provision, requiring claims to be filed within one year, effectively functioned as a one-year shortened statute of limitations, which would nullify a "continuing violations" theory and would preclude employees from bringing claims against the firm for related acts of discrimination beginning prior to the one-year limitations period; (2) the confidentiality provision unconscionably favored the firm because the firm would be a "repeat player" in employee arbitrations and, through repeated participation in arbitrations, the firm would accumulate a wealth of knowledge on the topic, which individual employees would lack; (3) the confidentiality provision was unduly broad by preventing employees from contacting other employees, thus inhibiting their ability to investigate the facts and build a case; (4) the non-mutual exclusion, exempting the firm from mandatory arbitration in certain situations, was excessively one-sided, e.g., the firm could provide an exception for injunctive relief to protect confidential attorney-client information and the firm would be allowed a judicial remedy for any equitable relief for the disclosure of any confidential information.
Finally, the court ruled that the provision prohibiting most administrative actions was against public policy, and thus unenforceable. Even though the agreement expressly excluded EEOC and similar state-level agencies from the prohibition, the underlying claims at issue involving the Fair Labor Standards Act and California's Labor Code contain "public rights" analogous to the discrimination laws. Complaints under the FLSA or the Labor Code may not be waived with an arbitration clause because the statutory schemes rely on an employee's willingness to report violations.
Davis teaches employers that employment-related arbitration agreements must, among other things, allow employees to opt out, preserving both a judicial forum and their jobs. Employment-related arbitration agreements should also be free from "factors of adhesion," namely, elements of oppression, surprise, and/or undue pressure. Employees should be given ample notice of arbitration provisions, and the terms of such agreements should be conspicuous, not hidden in the text. Confidentiality provisions, while not per se unconscionable, must be narrowly drawn. The Davis court recognized that the parties may agree to maintain the confidentiality of sensitive employee information or other issue-specific matters, but confidentiality provisions cannot reach across the board. Lastly, although arbitration is a favored mechanism for dispute resolution, whether it is in lieu of an administrative forum or a judicial forum, arbitration agreements cannot require employees to waive recovery for statutory rights enacted for a "public reason," such as fair employment and housing laws, the Age Discrimination in Employment Act, or the Fair Labor Standards Act.
In North Valley Emergency Specialists, L.L.C. v. Santana, the Arizona Supreme Court ruled that the Arizona Arbitration Act does not apply to employment arbitration agreements. As a result, arbitration agreements under Arizona law would have to be enforced under principles of contract law or under the Federal Arbitration Act. After Davis, seeking to enforce employment arbitration agreements under the Federal Arbitration Act may present a problem as the case likely would end up in the federal court system, where the Ninth Circuit already has made its feelings known.
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