Wage & hour class action waivers

It's old news, but it is news to me.

From the  Bingham Greenbaum Doll LLP blog, April 16, 2013

" . . . . Many wage and hour claims pose little risk when they are brought individually by a single employee. This is because most employees proceeding alone will have relatively small damages and, thus, it might not be cost-effective for them to pursue legal action. These same claims, however, can give rise to major litigation when many similarly situated employees join together as a group. For this reason, many wage and hour claims never get filed unless they can proceed as class or collective action lawsuits. Employers now may be able to block these group lawsuits.

"Approximately two years ago, the U.S. Supreme Court held that states could not prohibit parties from waiving their rights to pursue class and collective actions. This left the question of whether federal labor law could prohibit these ‘class and collective-action waivers;’ however, over the last year, many courts have held that it does not. (Kentucky courts have not addressed this topic, but there is a good chance they will find these employer-friendly decisions persuasive.) These courts effectively opened the door for employers to require class and collective waivers as a condition of employment, and thus bar employees from pursuing large-scale wage and hour claims, and also prevent many smaller claims from being filed in the first place.. . . "

The Supreme Court reference is likely to AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740, 563 US 4, 179 L. Ed. 2d 742 (2011).

Also, on June 20, 2013, the Court ruled in American Express Co. v. Italian Colors Restaurant, 133 S. Ct. 1236 (2013) that class action waivers contained in mandatory arbitration clauses were valid even if plaintiffs prove that it would not be economically practicable to maintain these actions individually.

Neither of these cases involved wage and hour disputes. Neither case involved employment agreements. Each of the Supreme Court cases arose in the context of binding arbitration agreements. In AT&T Mobility LLC v. Concepcion the court praised not only the benefits of arbitration in general, but also the ease and efficiency of the alternate dispute resolution procedures actually in place under the circumstances of the case.

The Amreican Express case discounted the relevance of economical and practical alternatives.

There seems to be a big difference between waiving the right to pursue a class action in the context of an arbitration agreement, and the use to class action waivers as a condition of hourly employment, outside a collective bargaining agreement.

I never though about it before today, but  I am not as optimistic as Bingham Greenbaum Doll with the use of class action waivers for wage & hour claims in employment agreements. I have doubts.

Note to self: Look deeper.

Limits on criminal background checks in employment applications

On Wednesday, Nebraska Governor Dave Heineman (R) signed a bill that bars employers from asking prospective employees if they have a criminal record. The prohibition is a provision in a law designed to reduce prison overcrowding. Nebraska is the 11th state to pass such a law.

Last month, in March, 2014,the City of Louisville passed a similar city ordinance limiting the the use of a prior criminal conviction as a screening question for many city jobs, and for venders doing business with the city.

Louisville Metro Ordinance No. 46-2014, approved 3-25-2014, Metro Code § 112.30(B), provides in part:

(1) Except as otherwise provided by state and federal law, the City shall not inquire about an applicant's conviction history until after it has been determined that the applicant is otherwise qualified for the position. City job applications shall not contain a "box" or inquiry regarding an applicant's prior convictions and applicants shall not be required to check or otherwise fill in a "box" or inquiry regarding an applicant's prior criminal conviction(s).

(2) If an applicant reaches the final stages of consideration for hire, the City shall notify the applicant that a criminal background check will may be conducted, at which time the applicant will be given an opportunity to inform Louisville Metro of any criminal background history that the applicant may have.

(3) In making a determination concerning a previous criminal conviction, the City shall consider the following factors:

(a) The nature of the crime and its relationship to the job for which the person has applied;

(b) The information pertaining to the degree of rehabilitation of the convicted person;

(c) The time elapsed since the conviction or release;

(d) Any information produced by the person, or produced on their behalf, in regard to their rehabilitation and good conduct;

(e) The age of the person at the time of occurrence of the criminal offense or offenses;

(f) The gravity of the offense(s);

(g) The probation or parole status of the applicant; and

(h) The public policy of the City, as expressed in this section, to encourage the employment of persons previously convicted of one or more criminal offenses.

Code § 112.30(D)(1) applies to venders doing business with the city:

Vendors who apply for business with the City must follow the practice that initial vendor employment applications not contain a "box" or a question of inquiry on the initial application regarding an applicant's prior criminal history and applicants shall not be required to check or otherwise fill in a "box" or respond to an inquiry regarding an applicant's prior criminal history on the vendor's initial employment application, unless as otherwise provided by or required by state and federal law.

EEOC has previously (4/25/2012 )issued Enforcement Guidance on the consideration of arrest and conviction records in employment decisions under Title VII of the Civil Rights Act of 1964.

In the early 2000s, grassroots organizers in San Francisco and Boston began urging local governments to remove questions about convictions from job applications so that people can be judged first on their qualifications.

The National Employment Law Project (NELP) is a champion of this "ban the box" campaign. The "box" refers to a check box on any initial employment application that asks about the applicant's criminal convictions. It is also a project of Legal Services for Prisoners with Children (LSPC), "All of Us or None."

The NELP website states, "Conservative estimates indicate that roughly 70 million people in the United States have some sort of criminal record, and nearly 700,000 people return to our communities from incarceration each year. Supporting the employment opportunities of people with records creates safe communities, reduces childhood poverty, and strengthens families."

Wage Assignments in Kentucky

A simple general definition of a wage assignment is the voluntary transfer of a debtor's future wage payments, usually as security for a specific debt.

A Kentucky statute, KRS  §337.060 makes it illegal for an employer to withhold any part of an employee's wages unless,

1. The withholding is specifically authorized by local, state or federal law, or;
2. The employee expressly authorizes the wage deduction in writing.

A  voluntary written wage assignment may commonly be used when an employee obtains a loan from his or her employer and  repays the loan by a payroll deduction. An employer who makes such a loan cannot take it out of the employee's pay without a proper written assignment from the employee. In this type of wage assignment, standard principles of contract law are sufficient to legitimize the transaction. The employer is the lender, the employee is the borrower and both are parties to the agreement.

Some states, such as Illinois, have enacted statutes for third-party wage assignments in a consumer lending context. See, 740 ILCS 170 for the Illinois Wage Assignment Act. Kentucky has nothing similar to this Illinois statutory third-party wage assignment mechanism. On the contrary, KRS  §190.100(c) specifically prohibits wage assignments in retail installment sales contracts:

"No provisions for confession of judgment, power of attorney therefor, or wage assignment contained in any retail installment contract shall be valid or enforceable."

There are many other contexts apart from retail installment sales contracts in which a voluntary wage assignment would be a valid contract provision under Kentucky law. But, if the debtor's employer is not a party to the agreement, standard principles of contract law would not obligate the employer to honor the wage assignment. Without statutory law provision imposing such an obligation on the debtor's employer, a voluntary wage assignment could be legal but impossible to enforce and therefore worthless to the creditor by itself.

An example of a Kentucky statutory wage assignment provision with teeth can be found in KRS 405.465(4), regarding child support wage assignments.

"The [child support wage assignment] order shall be binding upon the employer or any subsequent employer upon the service by certified mail of a copy of the order upon the employer and until further order of the court."

KRS § 286.4-570, — Wage purchases -- Assignment of compensation, offers us a somewhat puzzling level of ambiguity. A "wage purchase" is commonly known as a payday loan, and KRS § 286.4-570 validates payday loan wage assignments, while limiting them. If the employee expressly authorizes a payday loan wage assignment in writing, KRS  §337.060, supra, would not make it illegal for an employer to honor the wage assignment, but there is no Kentucky statutory provision which requires an employer to honor a payday loan wage assignment.